Dr Cameron Murray is an economist whose interests are environmental economics, rent-seeking and corruption, and property markets. At the Cracks in the Concrete conference he spoke about his research, which examined the characteristics of landowners whose lands were rezoned by the Queensland government agency, the Urban Land Development Authority, and landowners whose proposals were rejected..
The rezoning of their land by the authority very generously gifted successful landowners, increasing the value of their holdings by hundreds of millions of dollars. Dr Murray discovered that you were far more likely to be rezoned if you had connected relationships – common business connections, membership of lobby groups, or had directors with business connection to the regulating board.
In the successful group, 90% were clients of professional lobbyists. The lobbyists had a 100% success rate, with no landowners who employed lobbyists missing out on the rezoning. And 70% of rezoned landowners were political donors. These donors special mostly donated to both sides of politics – they were “equal opportunity” donors.
Dr Murray concluded that success depended on how well you played the Game of Mates, which was a process of joining the club of insiders who were connected to the regulators. He identified three core ingredients in the political favouritism that contributed to the Game of Mates.
The first was that there must be a honeypot; a valuable economic gain able to be given to private entities with a degree of discretion about who receives it, and in his study, this was the untaxed wealth gained through the process of rezoning.
The second ingredient necessary is that there must be loyal group of mates who are able to sustain an implicit system of trading favours, a powerful club, which other powerful players can join, and which has a revolving-door relationship with the regulating authority.
Thirdly, there must be a plausible story to let the public believe that this trading of favours is in the public interest.
The Honeypot
The honeypot arises from the many discretionary decisions in the planning system. Councils have a massive amount of discretion over the interpretation where developers seek to exceed codified limits, such as height and density restrictions. Worse, under the new planning laws recently passed in Queensland, the person making these interpretations can now be chosen by the developers themselves.
Dr Murray argues that we can remove the honeypot by charging for additional rights given to landowners and developers through the planning system.
Such a system has been successfully implemented in the Canberra since 1971. They charge landowners 75% of the value gains from the higher value uses they undertake. They also do not allow private developers to convert land from rural to urban uses, ensuring a public agency captures these value gains as well.
The ACT raised $183 million from these systems last year. Scaling up, that could be $1.8 billion in revenue in a single year to the Queensland government and councils that is currently given away to landowners through planning decisions.
Loyal group of mates
The second ingredient the Game of Mates needs is a loyal group of mates. Handing out favours is only politically expedient when you get something in return.
By establishing a loyal group through common membership of clubs and industry groups, family and business connections, and by signalling your intention to reciprocate with political donations, politicians and other group members are able to give favours, knowing they will receive them in the future. The code is simple: mates look after mates. Instead of taking direct bribes for each decision, they simply give favours to other group members, who later reciprocate, ensuring that any wealth diverted to the group is eventually widely shared amongst all members.
The property mafia
Dr Murray describes this as a Mafia-like system, and argues that it must be tackled by making it more difficult to return favours, such as extending cooling-off periods for politicians. At present Queensland politicians are able to walk out of the government office on Friday, and start work f a develope r on Monday. The independence of the planning system needs to be policed.
