ACT News

Government expects to pay an average $642,000 for Fluffy homes

The ACT government expects to pay home owners an average of $641,800 each for the 1021 Mr Fluffy contaminated homes in its $1 billion buy-back scheme.

ACT Treasurer Andrew Barr says actual costs would depend on the cost of buying houses, the cost of demolition and ...
ACT Treasurer Andrew Barr says actual costs would depend on the cost of buying houses, the cost of demolition and clean-up and proceeds from the resale of land. Photo: Jay Cronan

The figure includes the stamp duty waiver for the owners' next house purchase.

The homes will cost an average of $158,500 each to demolish, according to Treasury's assumptions on the costs of the scheme. The demolition figure includes cleaning the land and dumping the waste.

The detailed figures have been released to the ACT Assembly's inquiry into the buyback, a scheme set to plunge the territory's budget further into deficit by $600 million over two years.

The inquiry, which received 58 submissions in a short space of time, holds a second day of hearings on Monday, when 12 families will appear. It will report before the Assembly sits on Thursday to debate and pass the government's $762 million appropriation bill to pay for the costs this year, with another $250 million to be appropriated next financial year. If passed, the money will start flowing to homeowners from Monday, December 8.

Owners are being paid the mid-point of two valuations for their land, and the detailed figures reveal Treasury has assumed $641,800 per house (the figure is an average; some are worth a lot more, being in blue-chip suburbs such as Red Hill and Forrest).

The figures reveal not only the scale of the buyback, but the huge costs of maintaining properties while they stand empty, waiting for demolition.

Treasury estimates an average of $10,700 for maintaining each property for an average of 2.3 years before it is demolished, and another $2700 for security for each property. Together, that adds to nearly $14 million in maintenance and security.

All up, with purchase, demolition, security and maintenance, valuations and legal fees, the government expects to spend an average of $817,350 on each house.

It expects to make back an average of $518,754, leaving it $298,596 out of pocket on average for each of the Fluffy houses.

The income side of the equation reveals an assumption that the cleaned blocks are worth an average $520,000, which includes a $94,000 value increase as a result of subdividing the blocks for dual occupancy. The figure is based on the assumption that 88 per cent of properties can be subdivided or unit titled, making them worth much more than if they were sold as single-house blocks.

The figures assume that over the life of the scheme, the government will end up $366 million out of pocket – most of that in the first year. If everyone took up the buyback offer in the first year, the government would be down $700 million. It starts clawing back some of the loss in 2016-17 and beyond through property sales.

Treasurer Andrew Barr said the figures were based on a range of assumptions and the actual costs would depend on the cost of buying houses, the cost of demolition and clean-up and proceeds from the resale of land.

Owners have pleaded with the government to let them keep their land, arguing that the government would save not only on upfront purchase costs, but also on interest, maintenance and security. The equation for the government is whether those savings would be enough to make up for not being able to sell the clean land at an average $94,000 profit.