Victorian Labor delays vacant land tax vote after Greens demand change

Victorian Labor has been forced to delay a vote to expand taxes on vacant homes and undeveloped land without support from the Greens, as analysis by the Parliamentary Budget Office revealed that forcing homeowners to declare who lives in their residences could bring in an extra $300 million over four years.

New analysis requested by the Victorian Greens and provided to The Age asked the independent PBO to model the impact of making the state’s tax on vacant residential properties enforceable – as is done in Canada.

A vacant parcel of land in Sunshine.Credit: Chris Hopkins

It comes after Treasurer Tim Pallas announced the tax, which applies to homes empty for at least six months a year, would be expanded outside Melbourne’s inner and middle rings. Doing so would broaden its reach from about 900 homes to an additional 600 or 700 across the state.

The upper house was expected to vote on the bill on Thursday, but the Greens withheld support to push for tougher rent controls and changes to Labor’s plan to rebuild 44 public housing towers. The government adjourned the vote on Thursday afternoon to continue negotiations and seek the necessary votes to pass the bill.

Labor needs the support of either the opposition or the Greens and two other crossbench MPs to pass its agenda through the upper house.

The Greens had previously warned they would not support the changes, or any other part of the government’s landmark housing policies, unless it made concessions to the minor party.

“To ensure our support for any housing plan bills before parliament, the government will need to commit to reforms that will work – such as rent controls, and building more public housing – instead of privatisation and selling off public land,” Greens leader Samantha Ratnam said.

In its analysis, the PBO estimated the number of vacant homes caught by the expanded residential vacant land tax could be significantly boosted if it were enforceable.

The office was asked to model what would happen if the tax adopted the same rules as the Empty Homes Tax in Vancouver, Canada. That tax has similar rules to Victoria’s vacant residential land tax, but also requires homeowners to declare the occupancy status of their property every year – including who resides in it.

Canadians who lie about this information face heavy penalties and can be charged as much as $10,000 a day for providing false details.

The PBO estimates that adopting a similar policy in Victoria could force 10,000 properties to pay the tax, instead of about 1500, but did acknowledge there was “significant uncertainty” surrounding this figure. Reform could also boost state revenue by $300 million between the 2023-24 and 2026-27 financial years and $1 billion over the next decade, according to the PBO.

The figure of 10,000 properties was based on publicly available data on activity at homes, including water and electricity usage.

Ratnam said the figures showed thousands of homes could be freed up as potential rentals, part of the justification for the scheme.

“Labor’s housing plan will make the housing crisis worse,” Ratnam said. “There’s nothing in it to prevent renters from continuing to face unlimited rent increases.”

The vacant residential land tax is 1 per cent of the improved value of the property, which includes the buildings and other additional features. The charge will apply across the entire state from January 1, 2025. Holiday homes and properties under renovation will remain exempt.

When announcing the tax’s expanded scope earlier this month, Pallas said it was designed to change behaviour and free up properties rather than improve the budget’s bottom line.

“What it does is, it tries to send a message to people who have underutilised assets to think about utilising them, making them available, for people to move into as homes,” Pallas said at the time.

“We would much prefer not to get $1 out of tax that seeks to change behaviour. We’d prefer behaviour to change so that we can get people into homes.”

In a statement on Thursday, Pallas said the government would continue to engage with the opposition and crossbench on the bill.

“We’re getting on with delivering the housing statement because it will provide homes for Victorians who need them. It’s that simple.”

Shadow treasurer Brad Rowswell said Victorians should be concerned about the Greens dictating government policy.

“These measures will only further punish Victorians at a time they can least afford it, drive critical investment interstate and worsen Victoria’s housing affordability crisis.”

”

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