First Nations people deserve better deal on development rights

Posted January 27, 2022

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SGS Economics and Planning First Nations poeple deserve better deal on development rights
By Dr Marcus Spiller, first published in the Sourceable.

I am not a lawyer, but my understanding of the Mabo High Court decision (1992) is that it put paid once and for all to the proposition of Terra Nullius. Delusional invocation of this idea had allowed the British Crown to extend its law over this continent with no legal consequence in terms of the infringed sovereignty of those already in possession of the land.

Subsequent codification of the Mabo and, later, the Wik (1996) decisions acted to corral and contain the principle of prior ownership under laws, customs and governance systems separate from, and pre-dating by millennia, British law. Nevertheless, the unshakeable truth remains clear; if the Crown has not used its power to alienate land by way of granting freehold titles and the like, it is reasonable to expect assertion and control of the land in question by those who were here before. This accepts two co-existing realities – that of the established Australian nation with its cherished customs and laws and that of continuing nationhood(s) of the indigenous peoples.

The legacy of Mabo, then, is that if the Crown retains possession, the just and reasonable default is that the land is recognised as the quasi-sovereign property of those who owned it before the Crown imposed itself on the continent. I do not pretend this to be a validated legal principle under the jurisdiction of the Crown. Such matters are beyond my competence. But it seems to me to be the inescapable outworking of tearing down the fiction of Terra Nullius. I cannot see how the parallel realities I described above can otherwise exist with some measure of harmony and justice.

Seen through this lens, the role of the Crown in land use planning and development reflects a structural injustice. Under planning laws which operate throughout the country, the Crown retains certain rights to land even when supposedly ‘absolute’ ownership is granted to other parties as in the issue of freehold title in our towns and cities. The Crown always retains ownership of development rights on land. These rights do not automatically attach to freehold or most other forms of land title granted across Australian jurisdictions. Rather, they must be secured through the planning system and the Crown may give or withhold development permission at its absolute discretion.

Land may be zoned for certain purposes and development types. And it may be traded privately in anticipation of development rights foreshadowed by these plans. But, until a permit is issued, no compensable right exists. Moreover, the Crown may change the planning rules at any time, again at its absolute discretion.

Leaving aside the arbitrary limitations imposed by statute, if the Crown has not alienated property development rights, a logical consequence of Mabo is that these rights default to their original owners. Or, at the very least, the original owners have a clear claim to co-sovereignty over these rights.

Every time a development approval is issued, and the associated uplift in land value is captured by governments, or far more commonly, by private land holders, one could say that the injustice embedded in Terra Nullius is given fresh voice.

What might we expect were custodianship of development rights by First Nations peoples to be factored into urban planning systems?

At one level, not much would change. Development rights are capitalised as an uplift in residual land value after the proponent has allowed for all costs, including their requirement for profit and risk. So long as enough of the residual land value is shared with the holders of development sites to maintain their incentive to sell the land to bona fide developers, we should, in principle, get the same quantum and composition of investment in city building that we would otherwise have seen under current arrangements.

However, the distributional effects would be enormous. Instead of the capitalised value of development rights being captured by private land holders and traders as windfalls, this value would flow to First Nations’ custodians of the land. To get a sense of how this would work, consider the ACT’s leasehold land tenure system under which the Territory Government explicitly retains ownership of development rights. Development proponents must pay a charge geared to 75% of the uplift in lease value once planning permission has been secured. If you substituted the traditional Aboriginal owners of land in the ACT for the Territory Government in that jurisdiction’s Lease Variation Charge scheme, the First Nations people of the district would benefit from an annual funding flow of around $25 million. Scaled to the national level on a pro-rata basis, such arrangements would generate revenues of the order of $1.5 billion per year.

Recognition of First Nations ownership and stewardship of development rights would also enable the production of better plans for our towns and cities.

Basic economics tells us that property will be more valuable in a city with a good town plan versus a city with a poor or average plan, other things equal. This is because good planning identifies and reinforces market externalities that boost value, for example, efficient roll-out of infrastructure, access to parkland, provision of quality public realm and conservation of heritage, while mitigating negative externalities in urban development, such as co-location of incompatible land uses.

On the assumption that First Nations will want to optimise the value of development rights, there will be an inbuilt impetus to produce the best plan. This is in some contrast with current arrangements under which much of the value created by planning is privately captured, undermining faith in the system, promoting rent seeking behaviour and, on occasion, leading to outright corruption.

Plans would also improve by virtue of the incorporation of additional ‘market externalities.’ These would be drawn from a co-existing conceptualisation of utility and sustainability and loosely referred to as ‘connection to Country.’

The creation of better settlements for all Australians requires that these wider considerations be hard wired into the formulation of our town plans. This should occur, not just out of respect for ancient traditions and wisdom, but also in due recognition of First Nation ownership of development rights.

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SGS Economics Planning Marcus Spiller
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