What property tax backflip reveals about Daniel Andrews

The Premier’s decision to kill his new property tax last week, rather than force it through state parliament, was remarkable and revealing.

Daniel Andrews’s decision to kill off his own new property tax last week rather than ram it through state parliament was remarkable and revealing.

This was a Premier who has repeatedly crashed through roadblocks or criticism raised
by industry during his time in government, and who routinely wrangles numbers needed to pass legislation with a social dividend.

But with the prospect of a sustained campaign about potential extra costs for first-home owners, Andrews quickly capitulated.

There are probably many reasons for this, including a looming federal election where extra taxes would potentially tarnish the ALP brand.

It also points to the impact a concerted campaign around house prices and cost of living can have in a state election year.

The state opposition was quick to seize on the fact “another new tax” had been created by Labor, as it also stepped up attacks on the almost $200bn in debt the state faces later this decade.

Daniel Andrews’ decision to kill off the property tax is revealing. Picture: David Crosling

For those who missed the detail during the furore, the government wanted to add a 1.75 per cent levy on the value of developments with three or more dwellings, in order to pay for an extra 1700 social and affordable homes every year.

The property industry’s savage response to the new cost hit focused on the potential for it to pass through to young families trying to crack into the market.

This is sensitive territory for Andrews, whose popularity is strongest among younger voters and women – demographics the Liberals will have to pry free from him in order to be a chance at winning the November state election.

When it comes to younger Victorians, the cost of living and the challenge of home ownership has become an even more vexed issue due to the impact of the pandemic and perpetual property price increases.

This situation does, in theory, provide an opportunity for the Coalition.

It has the chance to clearly articulate how a Matthew Guy-led government would address such dilemmas and provide hope for the future.

One imagines the opposition is currently working on policies it would introduce before the November poll to show how it would repair the damage done to the state during the pandemic.

This situation has given the Coalition an opportunity, in theory. Picture: Andrew Henshaw

It has the slogan already, “recover, rebuild”, but it needs to put a lot more meat on the bones. In doing this, the Coalition could do worse than look towards NSW.

Up north the issue of home ownership – and affordability – has been percolating for many years.

Premier Dominic Perrottet, while he was treasurer, proposed phasing out the hefty upfront tax in favour of annual land tax payments.

Perrottet argued it would stimulate home ownership and property transactions by removing a prohibitively large upfront cost.

What was politically clever about the proposal, which has been the subject of much debate, was that it was presented as a “choice” – an opt-in change.

If people wanted to pay the upfront stamp duty if settling in to their forever home, they could.

No one would be double-taxed or taxed on existing homes, as the new annual fee would only be for future purchases.

For many people who struggle to contemplate saving about $50,000 – for a $900,000 property – to add to their deposit for a new home, it sounded like a revelation.

Whether the devil in the detail means the NSW option is a good, bad or indifferent policy, I don’t profess to know.

What I do know is that it gets into the heads of younger people and offers hope, especially if interest rates start rising or they fear interest rate rises.

As Perrottet has seen first-hand, the political sell for this alternative land tax has been difficult, and the reforms are still in limbo.

Housing affordability continues to be a pressing issue for young Australians. Picture: Alex Coppel

Whether it moves beyond a proposal to reality is yet to be seen.

But it has provided an opportunity to speak to people who may dream of owning a home, even if they can’t yet afford to.

Given the scare campaigns that began in an instant over the Andrews government’s $800m-a-year development tax, it wouldn’t be an easy ride towards reform.

The government has stubbornly resisted tackling stamp duty in any meaningful way, preferring to fiddle at the edges with changes to concession rates and increasing fees at the top end.

This means the opportunity is there for an opposition leader who is bold enough.

With the aftermath of the pandemic set to linger for years, and having caused economic pain for so many, the challenge for both major parties from now until November will be to articulate their vision for our recovery.

What the Covid-19 experience has also triggered is the work-from-home phenomenon.

Many families now want to shift to larger properties with a study or another bedroom but, if they’re lucky enough to be able to afford a bigger home, the prospect of finding the stamp duty on top of that kills the dream.

The trend of hybrid work models, where people head into the office for a few days a week and work from home at other times, will continue. In some industries, there is probably no going back.

Housing affordability is going to remain a core issue in Victoria for a lot longer than this election year.

Matt Johnston is the Herald Sun major projects editor