Melbourne council votes to probe doubling rates for landlords

A “bold” proposal from a council in Melbourne’s northern suburbs has passed its first hurdle but critics say it’s “ridiculous”.

Landlords who own two or more homes in Melbourne’s trendy inner-north could be slugged with doubled council rates in a plan designed to make the area less appealing for property investors.

City of Merri-bek councillors last night voted in favour of a motion to seek advice on whether the move is possible, which proposes to subsidise costs for other ratepayers.

The motion put forward by Councillor James Conlan was passed seven votes to five, with Mayor Adam Pulford supporting the investigation into “differential rates”.

“We’re in a housing crisis and we want to find ways we can make housing more affordable and accessible for people,” Cr Pulford said in a statement following the vote.

“Last night’s decision is about exploring a bold idea to see what may or may not be possible.”

James Conlan put the motion forward. Picture: Merri-bek Council

Melbourne is facing a rental crisis. Picture: NCA NewsWire / Ian Currie

In his motion, Cr Conlan said higher fixed rates for property investors put downward pressure on house prices at a time where Australia was facing a housing crisis.

“Anyone owning two or more properties may in the vast majority of cases have a greater capacity to pay (higher rates),” he said.

“Unlike owner-occupiers and renters, investors can sell at least one residential property without making themselves homeless.

“Ratepayers unable to keep up with expenses associated with maintaining an investment property may sell their investment properties.”

Merri-bek takes in suburbs including Brunswick, Coburg, Pascoe Vale, Glenroy and a small part of Fitzroy North – some of the most sought after areas for homebuyers in Melbourne.

Currently the average rates for a home in the area is $1800 per year, or $2700 for businesses.

Merri-bek mayor Adam Pulford (left) supported the motion, while councillor Oscar Yildiz voted against it.

One of the five councillors voted against the plan, Oscar Yildiz slammed it as “half-baked” and “knee-jerked” in an interview with ABC Melbourne on Thursday.

“I think it’s just a ridiculous idea to punish landlords, to punish mum and dad investors and then … say to others well, ‘we’re going to reduce your rates’,” he told Raf Epstein.

“I think there’s other strategies we could possibly consider rather than just. You know, come out and say let’s just double the rates for landlords, because we think they’ve got money.

“I mean these people have worked very hard, and all this is going to do is push hardworking mums and dads out of the municipality and to be honest, people are already leaving.”

Cr Yildiz questioned who would buy the properties landlords could be forced to sell, and whether it would really open the market to more first-home buyers.

He also said rate caps would make any changes in the real proposed very unlikely.

“I think people are just sick and tired of counsel telling them how they should live their lives,” he said.

“I think we just need to focus on our call services and get those right.”

‘Unlikely’ to be feasible

The council released a statement following Wednesday night’s decision saying any changes to rates would have to meet strict Victorian government guidelines.

“Council has resolved by a majority on 12 June to request an investigation by Council staff about whether it’s possible to increase rates for property investors who own two or more residential properties in Merri-bek, and decrease rates for other ratepayers,” it said.

“Council staff have previously advised it is very unlikely that it is feasible to apply a differential rate for property investors who have more than one residential property in Merri-bek.”

Sydney Rd, Coburg is in the Merri-bek council area. Picture: NCA NewsWire / David Geraghty

The council’s statement said legal advice would be sought as to whether the proposal could be legally implemented, and careful analysis would probe any potential implications or “unintended consequences”.

“Council staff initial considerations have also indicated it is unlikely that doubling the rates charged to property investors with two or more properties would fund the halving of rates for owner-occupiers, commercial and industrial ratepayers,” it said.

Victoria’s landlords angry

Landlords in Victoria have been up in arms recently over proposed changes to minimum standards for rentals relating to energy efficiency.

It would include installing ceiling insulation, droughtproofing, four-star shower heads, new electric hot water systems and three-star efficiency cooling for systems in the main living area.

“I reckon a mass exodus by landlords from the rental market,” one investor said online.

“They are making a serious rental problem even worse. Timing is appalling.”

People queue up to inspect a rental property in Melbourne. Picture: NCA NewsWire / Diego Fedele

Commissioner for Better Regulation Cressida Wall said it was “likely that at least some of the costs will be passed on to tenants”.

It comes as economists predict that any drop to interest rates won’t come until early 2025 amid persistent inflation and a resilient jobs market.

The Australian Council of Financial Regulators said while most borrowers were meeting their increased mortgage repayments, the number of people failing behind has continued to rise.

Treasurer Jim Chalmers noted that measures including in the recent budget and slated to come into effect on July 1 would ease the pressures faced by households.

“People are under the pump and that’s why our budget and our economic plan is all about easing cost of living pressures with tax cuts for every taxpayer and energy rebates for every household and for a million small businesses,” he said.