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Social housing in Victoria is getting a funding boost from a proposed tax on newly built developments with three dwellings or more.
The state’s government will introduce the levy from July 2024, imposing a tax of 1.75 per cent of the as-if-complete project value. Lot subdivisions of three or more will also fall under the parameters of this program.
Payments will go directly to the Social Housing Growth Fund, which is expected to raise on average $800 million a year in the first 10 years. The government estimates this will, in turn, create roughly 1,700 new social and affordable homes each year, boosting construction to create an average of more than 7,200 direct and indirect jobs annually.
The government has also proposed a rates reform to exempt social housing – but not affordable housing – from paying rates, treating them more like government assets such as schools or hospitals.
The new initiatives will apply to all local government areas in metropolitan Melbourne, as well as the regional cities of Greater Geelong, Ballarat, and Greater Bendigo. Other regional councils will determine how they accommodate the rate reform.
While the Victoria government estimates that the tax will apply to less than 30 per cent of all residential planning permits, it’s attracted some strong opinions from the housing industry.
The Housing Industry Association (HIA) and Property Council of Australia have both come out against the tax, stating that it will only serve to increase the already high cost of housing for consumers.
“The cost of new homes after July 2024 will increase with this tax being passed through in the land prices for all new lots in these areas,” said Fiona Nield, HIA’s executive director of Victoria.
“Victorian home buyers already pay a range of taxes when they buy a new home, contributing half of Victoria’s tax revenue now. In Melbourne 38 per cent of a new home build is made up of taxes, fees and charges. This new tax will see land and house prices being pushed further out of reach of new home buyers.
“Ultimately it is new home buyers who will lose out as the taxes must be passed on in higher land and house prices,” she said.
Property Council of Australia’s Victorian executive director Danni Hunter called it “yet another wrong tax at the wrong time”.
“The new Social and Affordable Housing Contribution is a tax by another name. This is the 10th new property-based tax this Victorian government has introduced,” she said.
“At a time where other jurisdictions in Australia are discussing tax reform, Victoria remains the only state in Australia that is implementing tax increases”.
The Andrews government said the plan is needed to avoid a fallback in the construction of social and affordable housing once the government’s current social housing spending project, the $5.3 billion Big Housing Build, winds down.
“Our landmark Big Housing Build is changing lives, putting a roof over the heads of people in need and creating jobs – but we’ll need to continue building more homes beyond 2024 and these reforms deliver exactly that,” Minister for Housing Richard Wynne said.
“We’re establishing a stable funding stream to provide the dignity of housing to thousands more Victorians now and into the future, while locking in social and economic benefits for years to come.”
ABOUT THE AUTHOR
Juliet Helmke
Based in Sydney, Juliet Helmke has a broad range of reporting and editorial experience across the areas of business, technology, entertainment and the arts. She was formerly Senior Editor at The New York Observer.
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