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Legislative Council - Fifty-Third Parliament, Second Session (53-2)
2015-09-08 Daily Xml
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Shack Sites

The Hon. J.A. DARLEY (14:58): I seek leave to make a brief explanation before asking the Minister for Sustainability, Environment and Conservation questions about crown shack rentals.

Leave granted.

The Hon. J.A. DARLEY: In recent questions about rental determinations for shack sites the minister indicated that a rate of return of 2.75 per cent, recommended by the Valuer-General, was applied to unimproved valuations provided by private sector valuers to ascertain the rent payable. My questions to the minister are:

1. Why does your department waste money engaging valuers from the private sector when the Valuer-General already determines land values for all crown shack sites on an annual basis for other government purposes, such as land tax?

2. Can the minister advise the total number of valuations and the amount of money spent on private sector valuations used for the purposes of reviewing rents on crown land shack sites for each of the past four financial years?

The Hon. I.K. HUNTER (Minister for Sustainability, Environment and Conservation, Minister for Water and the River Murray, Minister for Climate Change) (14:59): I thank the honourable member for his ongoing engagement with me on this issue. I have spoken about shacks in this place a number of times, and I would like to remind the chamber that there are now fewer than 300 life tenure shack leases on crown land and about 100 or so in national parks reserves.

Crown land subject to shack leases has been assessed a number of times—most significantly, as I said previously, in 1994 under the then Liberal government's shack site freeholding policy. The intention of this policy was to permit freeholding—that is, the purchase of land—wherever possible. 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.

The sites that met the criteria were sold to the occupant if they were agreeable and those that did not meet the criteria were issued with non-transferable life tenure leases, which means that the lease expires when the last lessee passes away. That is all very familiar to honourable members; we have gone over that territory previously. Periodic re-evaluation of the annual rent for these leases is undertaken as indicated by the honourable member in his question.

Shacks rents are set by obtaining a land value from an independent valuer and applying a rate of return to that value. In 2010, the former minister agreed to seek independent advice from another jurisdiction regarding the rent-setting method. I can only imagine that at that time there was some question about utilising the Valuer-General's evaluation and so to put the question beyond doubt, I imagine, the minister agreed to seek some independent advice, and that is a process that has continued to this day.

At the time, the New South Wales Valuer-General and a New South Wales valuer in private practice provided this advice. I am informed that after consideration of the advice the rate of return was set at 4 per cent for rents effective from 1 January 2012. For rents effective from 1 July 2013 the rate of return was set at 2.75 per cent. I am advised that this was based on advice from the South Australian Deputy Valuer-General noting that it was normal for the rate to change. Again, we have been over that territory previously, as well.

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 seems reasonable as well. This has led to waterfront sites attracting particularly high land values and has resulted in potential rent increases—and that is no surprise.

Also, the chamber may recall that I determined to provide relief for leaseholders last year, I think, should land values increase quite significantly between revaluation periods. This policy places a cap on rent increases. This equates to a $2,000 cap on rent increases at each revaluation cycle for leases revalued on a three-yearly basis and a $3,500 cap on rent increases at each revaluation cycle for leases revalued on a five-yearly basis.

I am advised that in August 2014 the department wrote to the Valuer-General requesting advice on the rate of return to be applied to shack rent revaluations due between 1 July 2015 and 30 June 2017. The Valuer-General's office advised that an appropriate single rate of return on the Crown's interest in the land is 2.75 per cent. On 18 November 2014 I approved 2.75 per cent as a single rate of return for life tenure shack lease rentals due for revaluation between 1 July 2015 and 30 June 2017.

DEWNR will continue to seek advice on an appropriate rate of return for shack sites every two years. It is important to note that lessees will still have the opportunity to lodge an objection to any new rent within one month of being notified as part of their lease conditions. DEWNR conducts a review of the objections received. The review checks the processes undertaken by the department to set the rent and assesses any supporting evidence provided by the lessees. DEWNR seeks advice from the Valuer-General to determine some shack lease rent objections.

In all reviews completed to date, the shack rents were upheld, I am advised. Again, I would like to assure the chamber and honourable members that the government has and will continue to ensure that rent setting is fair, consistent and transparent.

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