It was launched with great fanfare as a “generational reform” that would fund 1,700 new social and affordable homes in Victoria each year.
But just five days later, the Victorian government’s proposed social housing levy on developers is in doubt, with the premier accusing the building and property sectors of reneging on a deal to allow them to make “super profits” in exchange for paying the contribution.
The levy, announced on Friday, would see all newly built developments with three or more dwellings or lot subdivisions forced to hand over 1.75% of the expected project value to a social housing growth fund from July 2024.
Victorian treasurer, Tim Pallas, said the contribution would affect fewer than 30% of all residential planning permits but raise more than $800m each year, paying for up to 1,700 new social and affordable homes and supporting 7,000 jobs in the construction sector every 12 months.
The announcement was immediately met with criticism by the building and property sectors, who said the associated costs were all but guaranteed to be passed on to new homebuyers. On a house valued at the median Melbourne price of $1.1m, the levy would equate to about $19,600.
Pushing back against the criticisms on Wednesday, Victoria’s premier, Daniel Andrews, said industry had been extensively consulted on the proposal.
He said a deal was struck to introduce the levy in exchange for reforms to Victoria’s planning system, which are expected speed up planning permit applications for major developments by up to six months and make it easier for homeowners to renovate their properties.
The government expects the reforms to the planning system will deliver $7bn in benefits over 10 years.
“The development industry said to us, ‘Look, if we can get these approvals done much, much faster, then that’s a great thing for us and that’s what we want’. We then quite fairly said, ‘Well that will mean very significant profits for you, how about we share some of those profits to build more affordable housing?’” Andrews told reporters outside parliament on Wednesday.
“That was a deal that was done. It was an agreement.”
He also hit out at Property Council CEO, Danni Hunter, claiming that her position on the matter had changed.
“We’ve now seen that despite the CEO of the Property Council (having) called for these exact measures when that person worked at a different property peak, despite the fact that an agreement had been reached and the outcome of that long dialogue, that deep engagement was they’d support such a profit-sharing model, they now oppose that profit-sharing model,” he said.
“So I think it’s fair to say the future of this bill is very, very uncertain. I’m not in the business of creating super profits for developers if they are unwilling to support sharing those profits with those who need more affordable housing.”
Chief executive of the Urban Development Institute of Australia’s Victorian branch, Matthew Kandelaars, said he was surprised by the premier’s comments.
“There was consultation around planning system reform, improvements to the planning system that were ongoing and constructive. There was never any comment or proposition that was put to me that suggested in any way, shape or form there was a trade off between the development industry and homebuyers funding social housing and securing other planning reform,” Kandelaars said.
“The last substantive consultation on social and affordable housing and the industry’s role in that, as far as I’m aware, occurred in late 2019. A lot has changed since 2019 and to see an announcement last Friday and for legislation to be planned … was a big shock to the UDIA and of course to our members.”
Kandelaars said he recognised the need for greater funding for social housing but said there needed to be a broader contribution base for the levy.
“I’m a homeowner and there’s no reason why I shouldn’t be paying for some of this as well as new homebuyers. It just doesn’t make sense,” he said.
“There’s roughly three million ratepayers in Victoria. If you look at a modest contribution on top of rates that’s a lot smaller per person, the impact is going to be significantly less and of course it will be significantly less on a cohort, first time buyers who are already struggling.”
Shadow treasurer, David Davis, said a government briefing on the reforms planned for Wednesday evening had been cancelled.
“Nobody wants to pay another $20,000 for their home, nobody thought it was fair. The state government has miscalculated on this occasion and wants to take it off the agenda before the election,” he said.
“Make no mistake if Daniel Andrews is reelected he will bring this tax back.”
Without the support of the opposition, the government needs the votes of five crossbench MPs for the reform to pass the upper house. Four crossbenchers, including Greens leader Samantha Ratnam, have publicly indicated their support, though they hold some reservations.
Ratnam said the government had “bowed down to pressure” from developers not to legislate mandatory inclusionary zoning in new developments and instead have introduced a levy that won’t pay for nearly enough housing.
“This levy is a compromise. It will go some way to funding more social and affordable housing, but won’t go far enough,” she said.
“With a waiting list of 100,000 people, with 25,000 people on any given night experiencing homelessness, we need to build at least 10,000 new public housing homes a year for the next decade to actually meet the current demand for public housing in this state.”
Ratnam also described the government’s decision to stop paying council rates from mid next year for social housing properties as a “disaster”.
The reform would be phased in over four years from 1 July 2023 and mean the $54m the government currently spends on rates would instead be reinvested into public housing maintenance, upgrade works and better open spaces.
Municipal Association of Victoria president, David Clark, urged the government to reconsider the rates exemption.
“There are 85,000 social housing dwellings located across the state, many located in a small number of municipalities, and these are bearing an unfair share of the cost burden,” he said.
“The cumulative impact of this exemption on rates and charges, coupled with other cost-shifting measures and the ongoing rate cap, places council budgets in a no-win position when it comes to just maintaining, let alone enhancing, much needed community services. As a result, rates will increase.”
Both the levy and the rates exemption will apply to all local government areas in metropolitan Melbourne, as well as the regional cities of Ballarat, Greater Bendigo and Greater Geelong.
In a statement, the Property Council of Australia said it remained committed to working with the Victorian government to deliver planning reform and to support social and affordable housing.
“All our members are concerned about the flow of effects of new taxes on housing affordability and will to work with government to put in place appropriate reforms.”
