Developers will be forced to help fund the construction of social housing in Victoria through a new levy that has been described as “fantastic” by advocates for homeless people but which the property industry says will worsen housing affordability.
From 1 July 2024, new Victorian developments of three or more dwellings and lot subdivisions of three or more must contribute 1.75% of the as-if-complete market value to a social housing growth fund.
Victoria’s treasurer, Tim Pallas, said the contribution would affect fewer than 30% of all residential planning permits but would 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.
“This is a big, generational reform,” Pallas told reporters on Friday.
On a house valued at the median Melbourne price of $1.1m, the levy would equate to about $19,600.
Jenny Smith, chief executive of the Council to Homeless Persons, described it as a “fantastic” initiative.
“As the population grows, the demand also for social housing grows, and that’s what people forget – that as a state, as we become richer as more and more people contribute to our economy, we have to do more to take care of people who are priced out of the market at the bottom of the scale,” Smith said.
But with developers likely to pass the cost on to buyers, and house prices already at record highs, the property industry has questioned why homebuyers have been targeted.
Matthew Kandelaars, chief executive of the Urban Development Institute of Australia’s Victorian branch, said homebuyers should not be responsible for the historical underinvestment in social housing by successive state governments.
“We do appreciate the urgent and critical need for greater funding for social housing, but what disappoints us is ultimately it is shifting the cost from the government’s balance sheet to homebuyers,” he said.
Kandelaars said first home buyers and young families would be most affected by the levy, given they are more likely to be buying new properties, including apartments in metropolitan Melbourne and house and land packages in growth areas.
“It’s a missed opportunity. We think that there should have been a broader base to this tax, it shouldn’t have to fall solely to the feet of Victorian new homebuyers,” he said.
While some local councils in New South Wales and South Australia require developers to pay a contribution towards the cost of providing social or affordable housing, this is the first state government scheme to be introduced.
The Victorian government on Friday also announced social housing properties would be exempt from paying council rates from mid next year.
The rates reform will be phased in over four years from 1 July 2023 and will only apply to social housing properties.
Housing minister Richard Wynne said the $54m currently spent on public housing rates will be reinvested into public housing maintenance, upgrade works and better open spaces.
Both initiatives will apply to all local government areas in metropolitan Melbourne, as well as the regional cities of Ballarat, Greater Bendigo and Greater Geelong.
“Today really is about the biggest reform to social housing since the formation of the Housing Commission in the 1940s,” Wynne said.
It follows the $5.3b “big housing build” announced by the government in 2020 to fund 12,000 new social and affordable homes in four years.
Katelyn Butterss from the Victorian Public Tenants Association said the rates exemption would be a “huge relief” to those who live in old public housing stock, which is in “desperate need” of modification.
She welcomed the additional funding for the social housing growth fund but noted it traditionally has funded only community housing projects.
“We call on the government to ensure that at least a portion of these new homes are publicly owned and managed,” Butterss said.
The Property Council of Australia’s Victorian executive director, Danni Hunter, said it was the 10th new property-based tax introduced by the Andrews Labor government.
“At a time where other jurisdictions in Australia are discussing tax reform, Victoria remains the only state in Australia that is implementing tax increases,” she said.
“This is yet another wrong tax at the wrong time.”
The state’s opposition leader, Matthew Guy, described the reforms as “completely unfair” for first home buyers and maintained he would introduce “no new taxes” if elected in November.
Smith, however, said the measures would make “very little difference to developers or homebuyers in the fullness of time”.
“We pay for it anyway in our hospitals and psych hospitals and prisons. There are so many people using those very expensive beds, who really just need a home and the support to keep them,” she said.
“The international evidence shows that it actually settles house prices down when there’s enough social housing in the community.”
