ACT Chief Minister Andrew Barr and Opposition Leader Alistair Coe have clashed over rising unit rents, after Treasury officials revealed they had not considered the impact on rents prior to the changes
Senior Treasury staff flanked Mr Barr at the fourth public hearing into the rates changes on Wednesday.
The Treasurer rejected calls for a root-and-branch review of the territory's tax system and said average unimproved value would always be the method of determining rates in a government he led.
However, Under-Treasurer David Nicols' admission that no modelling had been done to predict the impact of rates rises on rents, sparked a back-and-forth between Mr Barr and Mr Coe that dominated much of the hearing.
Mr Nicols said the modelling was not done because of the difficulty in drawing a direct link between a single input and rent rises.
"In my view such modelling would not have provided significant evidence either way of the impact of this change on rents," Mr Nicols said.
"In our view if a rental market is tight that will put upwards pressure on rent. If a rental market has high vacancy rates rental rates will tend to come down."
Mr Coe seized on the admission, questioning how a major policy decision could be undertaken with no modelling.
"It's not a major policy decision," Mr Barr replied.
"It’s certainly a major policy decision for all the people we’ve heard from and from the thousands of Canberrans who are struggling with the cost of living mainly because of charges you’re imposing on them,” Mr Coe said, his voice lilting theatrically.
"The rates for units are not quite 60 per cent of the rates for an average house. They’re $1000 a year cheaper than the average house, $1400 versus $2400 now on average. I would remind the committee rates and land tax on rental properties are fully deductible," Mr Barr said.
"Not if you’re an owner-occupier," Mr Coe interjected.
"Well that’s not going to impact on rents is it," Mr Barr retorted.
"But it’s a major policy decision," Mr Coe cried.
Committee chair and Liberal politician Vicki Dunne called the hearing to order, however it soon deteriorated into debate again after Mr Coe accused Mr Barr of creating a regressive tax system.
Mr Nicols was howled down as he tried to explain the progressivism was in the value of the rates bill compared to the value of the property.
"So it’s not actually about the ratings factor," Mr Coe interrupted.
"In relation..." Mr Nicols began.
"It’s not actually about a progressive bracket," Mr Coe threw in.
"Let Mr Nicols answer the question," Mrs Dunne said, placing her head in her hand.
Mr Barr jumped in, accusing Mr Coe of arguing for a flat tax rate.
Mr Nicols gulped water and Labor politician Michael Pettersson stared at the ceiling as Mr Coe and Mr Barr traded barbs.
Mrs Dunne again called the hearing to order, and handballed a supplementary question to Mr Pettersson.
"Thank you. That was wild," Mr Pettersson said.
Minutes later, the leaders resumed sparring over Mr Barr's observation that the old rates system was inequitable because properties that rented for the same amount paid very different rates.
That doesn't suggest as to why this is a more progressive system," Mr Coe said.
"It’s a fairer system," Mr Barr said.
"So it’s not a more progressive system, it’s a fairer system. Is it more progressive or not," Mr Coe probed.
"It’s more progressive since tax reform and the changes we have made ensure that high-value units in very good locations that rent for very high amounts are paying a greater contribution than they were previously. Why should the three-bedroom house in Crace be paying three times the rates of the million-dollar penthouse in Kingston?" Mr Barr said.
Mr Pettersson wheeled his chair over and whispered to Mrs Dunne, who called the hearing to order again.
However, the Under-Treasurer set Mr Coe off again after he revealed densification was part of their rationale for raising rates for unit owners.
Mr Nicols said if rates for units remained far lower than those of houses, it would have been an incentive to keep expanding the city as greenfields estates would be worth more in taxes to the government than units.
Mr Coe asked if the government wanted more people to live in apartments.
"The government is happy for people to live in whichever housing choice suits their needs,” Mr Barr replied solemnly. "The government has no preference."
"That’s a change in policy," Mr Coe remarked.
"No it’s not a change in policy, we can’t and never have direct people that they must live in apartments," Mr Barr said.
"But is it your preference?" Mr Coe asked.
"No and as I say the government has no preference," Mr Barr said.
"We provide housing across a variety of different types, the market provides housing across a variety of different types.
"In the end it will be the market and consumer preference that will determine the types of dwelling people live in, noting that consumer trends have changed over time."
Mr Barr also disputed that it was cheaper to deliver municipal services to units than houses.
"Some areas of municipal services you will get economies of scale, in others for example road maintenance will cost more if you’ve got more road users on the same piece of road," Mr Barr said.
Ultimately municipal services accounted for only 13 per cent of territory budget, while rates - after the abolition of stamp duty and insurance taxes - would also have to cover hospitals, schools and community services.
The inquiry continues.