Andrew Barr's terse warning over botched buy of public housing
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Andrew Barr's terse warning over botched buy of public housing

It was a terse warning, written in the neat hand of Chief Minister Andrew Barr after the territory was forced to shell out millions of dollars more than it planned on houses it originally did not want.

“Some lessons should be learnt here," it read. "Keep me informed on the process please.”

Chief Minister Andrew Barr said lessons should be learnt after the Public Housing Renewal Taskforce had to buy out an entire complex of townhouses.

Chief Minister Andrew Barr said lessons should be learnt after the Public Housing Renewal Taskforce had to buy out an entire complex of townhouses.

Now, almost two years after the ACT's public housing renewal taskforce was forced to buy out an entire complex of townhouses due to a heavy-handed application of the territory's salt-and-pepper policy, documents released under freedom of information documents have revealed the extent of the bungle.

The transaction drew the ire of the Auditor-General, as it defied advice from Housing ACT which warned against buying public housing in bodies corporate because of volatile ongoing fees and the possibilty of tenants being stigmatised by other residents.

The ACT government initially bought 11 townhouses in a complex of 17 in Palmerston, as part of the first tranche of housing bought from the private sector in 2015 to replace the 1288 homes sold off under the asset recycling program.

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The Northbourne Flats in Canberra: replacing the ACT's ageing public housing stocks has been quite the saga.

The Northbourne Flats in Canberra: replacing the ACT's ageing public housing stocks has been quite the saga.

Photo: Rohan Thomson

Only 17 of the 34 proposals they received were found fit to proceed to the negotiation stage.

One of those proposals was one for the sale of the 11 townhouses in Palmerston, which were built by Victory Homes in the early 1990s and owned by Martin Crnevic.

It has never been made public what the territory paid for the 11 houses, but in August 2015, Economic Development director-general David Dawes sent a letter to Mr Crnevic saying the evaluation panel had assessed his proposal and determined it “may meet the needs of the taskforce”.

“The taskforce is now undertaking due diligence including independent valuation advice. Following this process the task force will instruct the appointed agents Colliers International to progress negotiations with an intent to secure your development," Mr Dawes wrote.

The taskforce recommended the townhouses for purchase in Sepember 2015, although noted the need for some remedial works.

The sales settled between December 2015 and February 2016.

But soon after the properties were handed over, residents in the rest of the complex caught wind that public housing tenants were being moved in - and they weren't happy.

Later that month, Colliers International land marketing general manager Shane Radnell emailed  Public Housing Renewal Taskforce director Paul Lewis, executive director David Collett and senior manager Franco Frino saying three of the complex's remaining owners had been in touch.

“One of the unit owners, [redacted], has sent through the attached letter offering to sell her two-bedroom unit although at a price some [redacted] above the price we paid Victory Homes for a refurbished unit," Mr Radnell wrote.

“It should be noted that she is looking to be somewhat compensated for moving costs as they believe that they have no choice but to sell now that Housing is taking over the development.

"I assured them they are under no pressure to sell and if they do wish to sell it is their choice and Housing will consider the purchase accordingly based on the same value for money proposition as the other purchases."

He asked that the taskforce look at purchasing the remaining units in the next tranche.

However it appears negotiations broke down. Days later, Housing Minister Yvette Berry’s office received a letter from one of the owners in the complex threatening legal action.

The letter said the taskforce had failed to consult the rest of the owners about the sale and they'd only found out about it "through grapevine gossip".

"The [taskforce's] website states the taskforce works closely with the community on the location of replacement public housing and lists various methods of community engagement," the letter reads.

"None of this engagement occurred in Palmerston, particularly with the remaining owners.

“This information is misleading and deceptive and I will be continuing with legal action in relation to this matter."

The owner said the sale of nearly two-thirds of their complex to the taskforce meant they would not be able to sell their home down the line, which had caused them "great stress".

"These circumstances along with those experienced by my neighbours would be taken into account should legal action proceed further, which would outweigh the cost associated with purchasing our property," they said.

The letter was forwarded onto Andrew Barr's office, as the taskforce sits in his directorate.

In a brief to Mr Barr, the taskforce said the other owners in the complex were not contacted during the process, as it was considered to be a private purchase.

It said the process for the second round of expressions of interest would be amended to notify bodies corporate when more than half the units in a complex were being considered for purchase by the taskforce.

The taskforce later decided that they would buy no more than 10 per cent of properties in any given complex.

The brief said given the "reputational risk" and possibility of further negative media coverage, the government should negotiate to buy the six other townhouses through a single select process.

It admitted while Housing ACT had nearly 800 properties in bodies corporate across the city, "it could have been anticipated that the number of units purchased and the number of private units remaining would have led to a reaction".

That brief prompted the comment from Mr Barr that "some lessons should be learnt here".

In a separate memo to David Dawes, the taskforce said it recognised the procurement "could have been more effectively coordinated" and that the situation had caused a "level of uncertainty and concern for the four residents".

The government used an exemption in procurement laws to buy the townhouses without going to tender.

The taskforce wrote there was a "benefit" to the territory and the six private owners by procuring the townhouses without going to tender, as the houses had already been assessed as suitable through the first round of expressions of interest.

It said while there would likely be a "modest difference" between the six townhouses and those already required by the taskforce, it could be accommodated within the existing budget and would help them meet the 1288 target faster.

Each property was valued twice by two independent valuators - CBRE and Opteon Property Group - and owners were offered the higher of the two.

However at least one owner pushed back for money to compensate them for the expense of moving.

“If I sell to you now and buy again in the same market price I will need $15,000 to $20,000 for all the expense, duties and fees of moving," they wrote.

However the taskforce replied that the offer was "reasonable and fair" and was in fact higher than the average price paid for the two-bedroom units bought in the complex initially.

The document trail doesn't detail whether the owner got extra compensation, but last year, it was revealed the government ultimately paid between $350,000 and $400,000 for each of the townhouses.

The townhouse episode was another twist and turn in the saga of replacing Canberra's ageing public housing flats.

The homes have to be replaced before June 2019 to get a 15 per cent cash bonus from the Commonwealth, under its asset recycling scheme.  Proceeds from the land sales will fund the construction of the light rail project.

The ACT now only has to build and buy 18 more properties to meet the deadline, with more than $288 million spent on the project in total.