Cabinet plan to boost social housing dumped in favour of developers

The Andrews government dumped an ambitious cabinet-approved plan to lift the proportion of social housing in Victoria by almost two-thirds, opting instead to respond to the housing crisis with a voluntary, developer-led delivery of so-called affordable housing.

Leaked cabinet-in-confidence documents from 2021 reveal the government had developed a detailed plan for a “universal requirement” – later known as a levy – imposed on developers as part of a bold push to restore social housing from about 2.9 per cent currently to 4.5 per cent of all housing by 2036.

For decades, public housing in Victoria has been neglected.Credit: Penny Stephens

“The universal requirement will apply from 1 July 2024 and will provide ongoing support for the government target to grow social housing in Victoria to 4.5 per cent of all housing by 2036,” says the cabinet brief.

It would have delivered an extra 50,000 social and affordable houses over 12 years, underpinning a historic turnaround for social housing after decades of decline under both Labor and Coalition governments.

Victoria currently has the lowest percentage of social housing in Australia, with every other state and territory boasting a higher figure.

Ultimately, the government scrapped the plan in favour of this week’s housing statement, which instead aims to boost general housing supply by speeding up planning approvals, transferring planning powers from local councils to the planning minister, freeing up surplus government land for housing development and replacing Melbourne’s 44 public housing towers, among other reforms.

Amid fanfare on Wednesday, the government signed an “affordability partnership” with all major property industry lobby groups, including the Property Council, Master Builders and the Housing Industry Association. It is being viewed by the industry as a major win for developers, with little clarity for social housing.

Premier Daniel Andrews pitched the housing statement as part of a “grand bargain with our property industry friends”, promising to provide faster approvals for developers who offered a proportion of ‘affordable housing’ in their projects.

The leaked documents reveal that cabinet signed off in March 2021 on the idea of a universal requirement (which later became known as a social housing levy) for affordable and social housing. The ‘universal requirement’ was effectively a form of what is also known as mandatory inclusionary zoning.

Under the plan, developers would be charged a “uniform percentage” of the value of housing projects to deliver growth in social and affordable housing.

The briefing warns that if the universal requirement (the levy) for social housing is not introduced “this will prevent the creation of … affordable and social housing”.

It was drafted in the lead-up to the government’s proposal to the property industry last year of planning reforms in return for a social housing levy of 1.75 per cent of the expected value of all housing projects with three or more dwellings. The government expected the levy to generate $800 million a year for social housing.

But Labor withdrew both the planning package and the levy idea in February 2022 after failing to strike a deal with the Property Council over the level of levy and amid fears of a property sector scare campaign about the impact on house prices in a state and federal election year. At the time, Andrews said he was “not in the business of creating super profits for developers if they are unwilling to support sharing those profits”.

The cabinet brief cites modelling by economic consultants Deloitte Access Economics that shows a 2 per cent levy would be easily absorbed by the property industry with minimal, short-term hit to developer profits.

It notes that any reduction in profits would be easily outweighed by billions of dollars worth of planning reforms, including a $1.5 billion reduction in costs to developers through streamlined approvals and a $3.4 billion drop in construction costs.

The modelling also says the impact on house prices and rents would be “negligible”, adding just 0.05 per cent to the cost of dwellings.

Since that work was undertaken, the housing sector has gone through a tumultuous period that included an aggressive interest rate tightening cycle by the Reserve Bank, soaring construction costs and shortages of raw materials and labour.

About a year-and-a-half after Andrews said he would not be returning “super profits” to developers without getting something for social housing in return, social housing advocates have raised questions as to why this week’s housing statement appeared to have done just that.

“Mandatory inclusionary zoning is what Victoria needs to build enough social and affordable housing to end housing stress, overcrowding and homelessness,” Community Housing Industry Association Victoria acting chief executive Jess Pomeroy said.

Council to Homeless Persons chief executive Deborah Di Natale said the housing statement fell short on social housing commitments.

“The state government appears to have missed a critical opportunity to consider the needs of people without homes,” Di Natale said.

“Behind the big headline numbers, there’s little by way of increased social housing.”

The government this week announced plans to demolish Melbourne’s 44 public housing towers and redevelop the land.Credit: Chris Hopkins

After the release of the housing statement this week, Property Council Victorian executive director Cath Evans said it would pave the way for the delivery of up to 2.2 million homes by 2051.

“This ambitious and comprehensive plan will enable our industry to activate all types of housing, providing choice to Victorians while also enabling delivery of the volume of new dwellings that the market needs in order to address the affordability crisis,” Evans said.

Asked if the government had abandoned its target to increase social housing to 4.5 per cent, a spokesperson said it had announced the biggest shake-up to planning and housing reform in generations.

“The Housing Statement sets a bold target to build 800,000 new homes – 80,000 a year – across the state over the next 10 years, including rebuilding all 44 ageing high-rise public housing towers, with an uplift of at least 10 per cent,” the spokesperson said.

“On top of the statement, we’re delivering the historic $5.3 billion Big Housing Build, the biggest ever investment in social housing by any state or territory – creating more than 12,000 new homes across Victoria, more than 7,600 of which are already complete or underway.”

Get the day’s breaking news, entertainment ideas and a long read to enjoy. Sign up to receive our Evening Edition newsletter here.