Should real estate agents and property developers be prohibited from being councillors? Every democratic bone in me says no. But can this stand against a realistic appraisal of the complex issues involved?
Local councils, that is, councillors, have direct responsibility for zoning, development plans and development approvals. After recommendations from officers, they decide on height and floor space ratios through local environmental plans, and on setbacks, car space ratios, streetscape issues and much more, through development control plans.
Councillors can also decide much of the minutiae of individual developments in development control committees and the approval process.
Additionally, most decisions relating to road and traffic changes, park and street upgrades, cleaning, maintenance, and infrastructure work is overseen and voted on by councillors. All can have significant impacts on the values of a property, a street or an area.
Councillors exercise these responsibilities as representatives of the community, entrusted by the voter franchise through election to public office. The enfranchisement for council includes residents, property owners, long term occupiers (leaseholders), and ratepaying lessees.
There are many opportunities for corruption and these cannot be ignore
Given this, the conflict of interest and opportunity for corruption posed by developers and real estate agents as councillors cannot be ignored.
Conflicts of interest must be declared. But the rules are confusing
Do the current regulations for declaration of conflict of interest provide sufficient protection?
Councillors operate under codes of conduct specific to each council but which must be consistent with the regulations defined in the State Model Code. This Code manages, among other matters, conflicts of interest and requires councillors to declare interests that are:
- pecuniary
- significant non-pecuniary
- not significant non-pecuniary
The Model Code says:
A pecuniary interest is an interest that a person has in a matter because of a reasonable likelihood or expectation of appreciable financial gain or loss to the person.
Non-pecuniary interests are private or personal … [and] commonly arise out of family, or personal relationships, or involvement in sporting, social or other cultural groups and associations and may include an interest of a financial nature.
and
As a general rule, a non-pecuniary conflict of interest will be significant where a matter does not raise a pecuniary interest but it involves […] other relationships that are particularly close, such as friendships and business relationships.
Pecuniary and significant non-pecuniary interest require a councillor to stand down, not involve themselves in, and not influence decision making.
Simple, hey?
What happens with less honourable councillors?
In the hands of honourable councillors driven by belief in a greater good, it is. In hands of less honourable ones, those driven by a greater greed, you get the local council scandals we’ve seen in recent times.
How do residents feel when a developer or a real estate agent councillor is deciding on re-zonings, development applications, road and traffic changes, park and street upgrades? Is trust in councils eroded by the presence of developers and real estate agents on council?
When considering what councils do, many if not the majority of actions have a potential impact on property values and development potential.
There are huge advantages and temptations in foreknowledge
Having foreknowledge of zoning, road changes, civil upgrade works, changes to budgets, all the “insider information” that comes with being a councillor cannot but be seen as “manna from heaven” to agents and developers in their business activities.
How should an estate agent or developer respond to this deluge of information and decision-making? At what stage in the council process do they stand down? When is the conflict so clear that they have to stand down? How often does this occur?
The level of dysfunction in the everyday processes of council when material and information must consistently be withheld from individual or even groups of councillors because of the nature of their profession is unsustainable.
How does staff judge when and how to withhold information from councillors?
It is important to note that there are requirements for council officers to provide all councillors fair and equal access to information. The tension between these two poles – an agent or developer councillor and council staff required to provide information – could easily become untenable.
Under section 44 of the Constitution of Australia public servants, members of the military and police force are disqualified from nominating as candidates for election as they hold “an office of profit under the Crown”.
Maybe developers and agents are so steeped in potential conflicts of interest that they should be disqualified
It is not too long a bow to believe that developers and real estate agents are so steeped in potential conflicts of interest due to their private “office of profit” that they should be disqualified from standing as councillors.
After too many years of participating in the machinations of local council I now believe that it is necessary for the state government to legislate to disqualify both real estate agents and developers from being councillors.
This, though, is only one part of the problem. Election expenditure and political donations must also be considered.
Parties and candidates for state election already have spending limits defined in law, but the current state government has ignored every opportunity to honour the parliamentary pledge by former Liberal leader Mike Baird that council campaign spending limits also be introduced.
Dishonouring that commitment leaves another avenue open for corruption. Currently, developers and agents, their children, and associates and those they back can outspend every other candidate to get a seat on council. They see it as business investment.
A very adequate campaign can be run by a candidate for local council election for under $20,000. Many run with expenditure significantly less than that. But it is also not uncommon to see candidates spend hundreds of thousands of dollars to become a councillor. These candidates are very unlikely to have been self funded. It’s reasonable to assume these large sums of money have been sourced through political donations.
Keeping track of donations difficult and complex, and often hidden
Under current regulations council general managers are required to keep a register of political donations of each individual councillor to be assessed against development, planning and re-zoning applications.
This is a well intentioned idea but a large number of councillors consistently lodge “nil returns” to the Electoral Funding Authority even during election periods. These councillors maintain that all donations are made to their state party even though they may have been received at local functions and fundraisers from local entities and individuals.
Likewise they maintain that all their election campaign expenditure is undertaken by their state office.
One can only conclude that there is a systemic attempt to avoid public scrutiny of the connection between political donations and decision making at councils. Given we know now that a large amount of donation money is washed through organisations, “forums”, and entities like foundations, this systemic duplicity is well established.
Legislating to ban real estate agents and developers from becoming councillors, capping the amount of money that can be spent by candidates for local council election, and ensuring that reliable and transparent registries of donations are maintained for councillors will help re-build public trust in local councils.
John Wakefield was councillor for Bondi Beach ward on Waverley Council 2004-2017. He has been mayor of Waverley and has held chairs in a number of committees at the council.