Reduce it or replace it: Property industry urges changes to housing tax bill

The industry body representing residential property developers says it was “utterly offensive” for Premier Daniel Andrews to suggest the property sector supported a new $800 million housing tax based on an “agreement” with just one part of the industry.

Property industry leaders will urge senior Victorian government ministers in a meeting on Monday to either reduce the tax rate or replace it with a broad-based community funding model, in an effort to resolve a dispute over a proposal to tax developers 1.75 per cent of the end value of developments with three or more dwellings.

Victorian Treasurer Tim Pallas will meet with industry leaders on Monday.Credit: Joe Armao

The revenue would help pay for an extra 1700 social and affordable homes each year, but its announcement blindsided some major industry groups — including the Urban Development Industry Association and Housing Industry Association — which reacted angrily to the proposal.

The tax applies to residential developments. The association represents solely residential developers of apartments and greenfield sites. The Property Council’s membership consists of some companies who do not build residential properties.

Last Wednesday, five days after the Social and Affordable Housing Contribution was announced, the Premier said the government would not introduce the bill to Parliament because developers did not “honour” an agreement to support the tax in exchange for boosting developer profits by speeding up planning approvals.

The government believed the Property Council would not attack the proposal publicly. But the council went on the attack because the 1.75 per cent rate was higher than what it told the government it would accept.

“Any suggestion that agreement between the government and any one individual could bind an entire industry is utterly offensive to our members who represent hundreds of thousands of Victorians,” Urban Development Institute of Australia Victorian chief Matthew Kandelaars told The Age.

It was revealed on Saturday that a group of Labor MPs urged the government to shelve the bill because of the potential for developers to increase house prices to offset the effect of the tax. The government’s decision was also spurred by a major left-wing union’s decision to campaign against the housing package, a component of which would have deprived councils of millions of dollars of rates paid by the government for public houses it owns.

Government insiders hope to come to an agreement with industry leaders to avoid a scare campaign on housing affordability before November’s state election. The Coalition has confirmed it will campaign against the tax, and the opposition’s messaging would be bolstered if respected industry bodies campaigned by the opposition’s side.

Property Council of Australia Victorian chief executive Danni Hunter, whom the Premier accused of backtracking on a deal to support the policy last week, said her aim was for the government to bring its proposal in line with the council’s recommendation of a tax between 1-1.5 per cent.

“We have been consistent in our messaging that we are committed to working with the government and the position we put forward in December,” she said.

Urban Development Institute of Australia chief Matthew Kandelaars, the Victorian executive director of the Property Council of Australia Danni Hunter, and Victorian executive director of the Housing Institute Association Fiona Nield.Credit: Wayne Taylor

All property industry bodies support the component of the government’s housing package that streamlines the planning process to speed up the building process.

The government has sought to link the cutting of red tape to the tax but, Mr Kandelaars argues a speedier planning system is a boon for the entire economy and requires no subsidy or loss on the part of the government.

His association will not support the tax, no matter what rate it is levied at. Instead, it will propose a broad-based community levy similar to the fire services levy which costs Victorian property owners about $115 per year. “[The need for social housing] is a community-wide problem and it deserves a community-wide solution,” Mr Kandelaars said.

Assistant Treasurer Danny Pearson did not answer whether the government would consider lowering the tax rate to win support from the sector. Instead, he reiterated Labor’s belief that it was fair and reasonable for property developers making higher profits due to planning changes to help pay for shelter for vulnerable Victorians.

“All that we’re asking in return is that they make a modest contribution in the order of millions of dollars to provide social housing to some of the most vulnerable and isolated members of our community,” he said. He emphasised the importance of government housing for victims of domestic violence, Indigenous Victorians and refugees. Victoria has the longest public housing waiting list in Australia.

“The government’s considering its position and we’ll have more to say about that in due course.”

Opposition emergency services spokesman Brad Battin said the Coalition would axe the levy if the government legislated it and the opposition won the election. “First home buyers deserve the opportunity to get into the market … and live the dream that we’ve all wanted here in Australia,” he said.

“The only person preventing that now is Daniel Andrews as he pushes tax to 40 per cent of every new home in the state.”

The Morning Edition newsletter is our guide to the day’s most important and interesting stories, analysis and insights. Sign up here.