Victorian Government dumps $800m housing tax on property developments

An $800 million housing tax on property developments to fund social housing has been dumped by the Victorian Government, blaming a ‘mischievous’ scare campaign.

The Andrews Labor government on February 18 announced plans to impose a 1.75 per cent levy on new developments of more than three dwellings to pay for building thousands of social and affordable homes from 2024.

It argued the tax would affect less than 30 per cent of residential planning permits and could raise more than $800 million per annum to fund up to 1700 new social and affordable homes each year.

An $800 million housing tax on property developments to fund social housing has been dumped by the Victorian government (pictured, stock photo)

Several key industry groups immediately expressed concern the levy costs would be passed onto home buyers, despite the government claiming they reached a deal to secure support for the levy alongside reforms to cut red tape for the sector.

Treasurer Tim Pallas confirmed the tax and adjoining reforms would be dumped after meeting with sector leaders on Monday.

‘They are done, they are dusted, they are finished,’ he told reporters on Tuesday.

The Andrews Labor government on February 18 announced plans to impose a 1.75 per cent levy on new developments of more than three dwellings (pictured, Victorian premier Dan Andrews)

He attributed the decision to the industry’s ‘negative’ response and the spread of ‘misinformation’ as part of a ‘mischievous’ scare campaign.

‘They’ve sought to mislead and confuse the community into this being a net cost on housing,’ he said.

‘It’s total nonsense and the government is not going to put up with the scare campaign of that nature.’

The reforms package and levy will not be revisited by the Andrews government after the November state election, with Mr Pallas admitting some fellow Labor MPs expressed concern about the impact of the ‘disinformation’.

‘We’re not interested in playing those games. We’ll get on and deliver social and affordable housing,’ he said.

‘But, of course, a great opportunity I think has been squandered here for people in most need who needed this industry to step up to the plate and think beyond their own immediate self interest.’

The tax could fund up to 1700 new social and affordable homes each year (pictured, a couple walks past a real estate agent’s window in Melbourne)

One of the main industry bodies, the Urban Development Institute of Australia, said last week it was not informed about the levy during government talks on the reforms before it was announced.

UDIA Victoria’s chief executive Matthew Kandelaars welcomed the decision to bin the levy, citing figures it would cost home buyers up to $20,000, but not its planning reforms.

‘It’s frustrating that the government has chosen to hold to ransom the improvement of inefficiencies within a state-sponsored planning system that would help to accelerate the Victorian economy out of the pandemic, with a $20,000 tax on homebuyers,’ Mr Kandelaars said in a statement.

‘The ultimatum was put to us, but it is a position we could never accept.’

Opposition Leader Matthew Guy said the government should not have been considering a levy amid the COVID-19 pandemic.

‘Victorians don’t want more taxes and now is the last time they can afford new taxes,’ he said.