Victoria set to bring in social housing ‘contribution’

The Andrews government has announced that, from July 2024, all newly built developments with three dwellings or more, or of three or more residential lot subdivisions, will need to contribute 1.75 per cent of the market value of the completed project to the Social Housing Growth Fund. 

All funds raised will be transferred to the Social Housing Growth Fund and allocated through a grants process to community housing agencies to deliver social housing projects.

In order to bring in the new cash contribution, payable on eligible planning permits from 1 July 2024 onwards, the Victorian government is proposing amendments to the Planning and Environment Act 1987.

Legislation to support this measure is yet to be passed by Parliament.

If passed, the tax will apply to all local government areas in metropolitan Melbourne, as well as the regional cities of Greater Geelong, Ballarat, and Greater Bendigo.

Individual councils will reportedly determine how they accommodate the rate reform.

However, it is expected that payment will be required prior to the issuing of a building permit for developments, or prior to the issuing of a statement of compliance for a subdivision.

According to the Victorian government’s estimates, the change will affect less than 30 per cent of all residential planning permits but will raise about $800 million a year over its first 10 years.

It is estimated that it will fund the delivery of up to 1,700 new social and affordable homes a year and create an average of more than 7,200 direct and indirect jobs per year.

The new “contribution” is being brought in to help “deliver a stronger and more sustainable social and affordable housing sector, while creating thousands of jobs and putting a roof over the head of people who need it most”.

Social housing won’t need to pay rates

As well as bringing in the new tax, Minister for Housing, Richard Wynne, announced that the government will exempt social housing properties from paying rates.

The rates reform will be phased in over four years from July 2023 and will only apply to social housing properties (but not affordable housing properties).

The $54 million currently spent on public housing rates will reportedly be reinvested back into public housing maintenance and upgrade works, delivering kitchen and bathroom upgrades and better open spaces. 

Community housing providers will also reinvest $11 million back into the services they provide. 

Speaking of the changes, Mr Wynne said that the “game-changing initiatives” complement the state government’s $5.3 billion Big Housing Build and will help provide a “secure and ongoing funding stream for social and affordable housing”.

“Our landmark Big Housing Build is changing lives, putting a roof over the head of people in need and creating jobs – but we’ll need to continue building more homes beyond 2024 and these reforms deliver exactly that,” he 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.”

Treasurer Tim Pallas added: “Access to safe, affordable and energy efficient social housing benefits all Victorians – these changes will add further momentum to the delivery of social housing across the state.”

Contribution could ‘hurt Victorian home buyers’

While several social housing groups have welcomed the proposal, there have been concerns raised that the new tax would cost first home buyers more.

Michael Sukkar, the federal Assistant Treasurer and Minister for Housing, Homelessness, Social and Community Housing, said this latest tax increase would punish first home buyers and restrict the supply of housing.

“Make no mistake, this is a tax on first homebuyers that will make it harder and more expensive for Victorians who are trying to get into the housing market,” Minister Sukkar said.

“Not only will this latest tax hurt first homebuyers, but it will also put downward pressure on housing supply in Victoria and push up housing prices.

“We are seeing the results of Victorian Labor’s poor financial management of their Budget. First homebuyers should not be penalised for decades of chronic under-investment in social housing by the Victorian Government.

“The Federal Labor party needs to urgently condemn yet more housing taxes by their state Labor counterparts. If Anthony Albanese is serious about cost of living pressures and helping Victorians into their first home, he needs to publicly denounce this new tax hike.

“Labor’s refusal to denounce new taxes on first homebuyers is damning, and is further evidence that higher taxes are in Labor’s DNA at both a state and federal level.”

He outlined that the new contribution is the 10th new property-based tax the Victorian government has introduced, following the windfall gains tax (WGT) announced in December 2021.

Together, Mr Sukkar suggested that they would add an additional $63,000 to the cost of a new home in Geelong (excluding other Victorian taxes, fees and charges).

The Housing Institute of Australia (HIA) also said that the new tax would be “another hit to housing affordability for all Victorians”.

Fiona Nield, HIA’s executive director, Victoria, said: “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. 

“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.” 

The HIA suggested that the new contribution could add over $6,600 to the cost of land for new homes.

“Add stamp duty and GST along with many more costs and this tax could cost more than $20,000 for a new home buyer, adding to their mortgage repayments,” it added. 

“Funding for social and community housing is a critical role of government. But this is a community need and the response should be an equitable one. It simply doesn’t make sense to suggest that making houses for those that can afford to buy a new house cost more is the right solution to support those that can’t afford to buy one.” 

“This tax will perversely make the problem of affordability for all Victorians worse, not better,” Ms Nield said. 

“The Government should be funding social housing from general rates and taxes as well as working in partnership with the housing industry and the community housing sector to identify feasible and effective actions to support the delivery of long-term solutions for public housing needs.

“The Government must stop shifting the burden of funding social and community infrastructure onto a select group of Victorians each year that choose to buy a new home. This tax is inequitable and unfair.”