SHACK LEASES

The Hon. J.A. DARLEY (14:42): I seek leave to make a brief explanation before asking the Minister for Sustainability, Environment and Conservation questions regarding shack rents.

Leave granted.

The Hon. J.A. DARLEY: As previously outlined, the minister is maintaining that a 4 per cent rate of return on shack sites was appropriate in 2009. This was following the global financial crisis of 2007-08 which was widely regarded as the worst economic crisis the world has seen since the 1930s and saw property prices tumble, particularly for holiday waterfront locations. In an interview with the ABC yesterday, the minister said that the overall market was currently down but that beachfront shacks still attracted a premium. I understand that the minister is now calculating shack rents on a 2.75 per cent rate of return based on advice from the Valuer-General who advised that the rate of 2.75 per cent applied from 2009 to now in 2013. My questions are:

1. How can the minister possibly justify that these shack sites would have attracted a higher rate of return immediately after the global financial crisis compared to now which is three years after federal Treasury chief Ken Henry said that the global financial crisis was over in 2010?

2. Will the minister accept that a mistake was made in calculating the rents using a 4 per cent rate of return and immediately refund the overpaid rents to lessees?

The Hon. I.K. HUNTER (Minister for Sustainability, Environment and Conservation, Minister for Water and the River Murray, Minister for Aboriginal Affairs and Reconciliation) (14:43): I thank the honourable member for his very important question and his ongoing interest in this area. In the answer I am about to give I need to correct some aspects of his opening explanation in which he made a few errors, but we will get to that in a moment. I have spoken about this shack issue in this place many times before and I am happy to do it again.

It is important to acknowledge that there are fewer than 300 life tenure shack leases on crown land and 100 in national park reserves. As many people understand, the crown land subject to shack leases has been assessed a number of times, most significantly in 1994 under the then Liberal government shack site freeholding policy. The intention of this policy was to permit freeholding—that is, the purchase of the land—wherever possible. Following on from this policy, most shacks on crown land were sold to the occupants under this process. Six criteria had to be met for shacks to be eligible for freeholding, I am advised.

All shack sites were assessed to identify those suitable for freeholding, taking into account criteria including public health requirements, continued public access to the waterfront, flood and erosion issues, and planning requirements. Again, as I previously stated in this place, sites that met the criteria were sold by the then government to the occupant. Those who did not meet the criteria were issued with non-transferable life tenure leases, which means that the lease will expire when the last lessee passes away.

As you can see from the then Liberal government's own policy, shacks, where possible, were offered to occupants for freeholding. Those that were not and were issued with life tenure leases were so issued for a particular reason, the reason being the greater good, as stated by the then Liberal government's policy, that is, not meeting public health requirements or continued public access to waterfront or flood and erosion issues and planning requirements, as I have outlined.

I note that the Crown Land Management (Life Lease Sites) Amendment Bill was introduced by the Hon. Michelle Lensink into this place, she having also introduced the National Parks and Wildlife (Life Lease Sites) Amendment Bill, to provide for a long-term tenure over shack sites. The government quite responsibly opposes these bills, which in many respects expose the Liberal Party at its privatising best. The Liberal Party wants to hand out prime chunks of crown land to benefit a few people. The Liberal Party should be ashamed of this blatant electioneering, which blatantly contradicts its own government's policy, a policy based on good advice.

The Hon. R.I. Lucas: That was 20 years ago.

The Hon. I.K. HUNTER: Well, the issues haven't changed. The Hon. Mr Lucas says that that was 20 years ago; the issues have not changed. If anything, access to these sites is more problematic in some areas. If anything, coastal erosion is more problematic in some areas and the public health issues are still related to some of these shacks sites.

The Hon. J.S.L. Dawkins interjecting:

The Hon. I.K. HUNTER: As honourable members may know, if they have been to some of these sites, some have long-drop toilets that drop on to public beaches. That is what they continue to do. It is clearly an issue of public health. As I have said many times, periodic revaluation of the annual rent for these leases is undertaken in an appropriate way. Shack rents are set by obtaining a land value from an independent valuer and applying a rate of return to that value.

I am informed that for rents effective from 1 January 2012 the rate of return was set at 4 per cent. As I have previously advised, this was based on independent advice from the New South Wales Valuer-General and a New South Wales valuer in private practice. For rents effective from 1 July 2013, the rate of return was set at 2.75 per cent. This was based on advice from the South Australian Deputy Valuer-General (not the Valuer-General, was my advice).

We must all understand—I think we do—that the markets change, values change, they go up and down over time, and hence the rate goes up and down over time. I can recall from previous briefings that the rates were sometimes set at 8 per cent; now they are down to 2.75 per cent. I am pleased to share with the house, however, that I recently adopted a variation to the shack rent-setting policy. Land valuers have consistently advised my department that, while the overall market is somewhat depressed, investigations reveal that absolute beachfront properties attract a premium over land located beyond the beach frontage (that is common sense, I imagine).

This has led to waterfront sites attracting particularly high land values and resulted in potential rent increases in some cases of up to $7,000 post 1 July 2013 under the current policy. This level of increase does seem challenging and quite high for those in the community who pay shack rents. This is why I have determined to provide relief for leaseholders should land values increase quite significantly in this situation.

This new policy will place a cap on rent increases. This cap will equate to $2,000 per revaluation cycle for leases revalued on a three-yearly basis, and $3,500 per revaluation cycle for leases revalued on a five-yearly basis. Letters, I am advised, will be sent to each lessee and the Shack Owners Association detailing this new rent-setting policy and how it will impact them.

If a lease is subject to the cap, the rent notification will set out the rent that would be payable without the application of a cap, and the rent is adjusted under the cap to clearly demonstrate the reduction in rent under the policy. I am advised that the next set of rent notifications will be sent out later this month—late October 2013. I am further advised that of 37 revaluations approximately 14 will be impacted by the cap. I understand that an earlier set of rent notifications went out in July this year. There were 53 revaluations, I am told, and of these 25 will be impacted by the cap, and this cap will apply to those earlier rents as well.