The Victorian state government has scrapped a controversial $800 million (US$580 million) tax scheme to build social housing over fears that a “mischievous” scare campaign on housing affordability would do damage in this November’s state election.
The Victorian government on Feb. 18 announced the introduction of a 1.75 percent housing levy on all new developments with three dwellings or more from July 2024 to raise funds for building thousands of social and affordable homes.
It said that less than 30 per cent of residential planning permits would be subject to the levy, and each year the government could gain $800 million to erect about 1,700 new social and affordable homes.
However, leading industry bodies raised concern that the new tax would directly hit home buyers despite the government saying it had struck an agreement with the property sector to slash red tape in exchange for levy support.
After a meeting on Feb. 28, Victorian Treasurer Tim Pallas announced that the government would no longer proceed with the levy and adjoining planning reforms in the parliament.
“They are done, they are dusted, they are finished,” he told reporters on March 1.
He said the complete change in the government’s attitude was due to the negative response of the property industry and the dissemination of “misinformation” as part of a mischievous scare campaign.
“They’ve sought to mislead and confuse the community into this being a net cost on housing,” he said.
“It’s total nonsense, and the government is not going to put up with the scare campaign of that nature.”
The Andrews government also said it would not revisit the reforms package and levy after the upcoming state election, and Pallas acknowledged there were internal concerns in the Labor government that the disinformation campaign would cause damage at the ballot box.
“We’re not interested in playing those games. We’ll get on and deliver social and affordable housing,” he said.
“A great opportunity, I think, has been squandered here for people in most need who needed this industry to step up to the plate and think beyond their own immediate self-interest.”
In the meantime, Danni Hunter, the Victorian executive director of the Property Council of Australia, a national lobby group representing property developers and owners, said it was incredibly disappointing for the government to abandon the reforms. However, she also refuted the criticism that the sector had gone back on its words on a pre-arranged agreement.
“The property industry and the Property Council has engaged with government in good faith this whole way through,” she said.
She said the peak body would have consented if the levy had been more reasonable at one percent to 1.25 percent.
The Urban Development Institute of Australia (UDIA), an industry association that had previously noted that it had not been informed of the proposed tax before the government announced it, welcomed the government’s decision to dump the levy.
UDIA Victoria’s chief executive Matthew Kandelaars on March 1, said while the organisation hailed the decision to scrap the levy, but not the planning reforms.
“It’s frustrating that the government has chosen to hold to ransom the improvement of inefficiencies within a state-sponsored planning system that would help to accelerate the Victorian economy out of the pandemic,” Kandelaars said in a statement.
“The ultimatum was put to us, but it is a position we could never accept.”
Meanwhile, opposition leader Matthew Guy stressed that the government should have never put forward a new levy during the COVID-19 pandemic.
“Victorians don’t want more taxes,” he said.
On the other hand, Victorian Greens party leader Samantha Ratnam said the government had shown that it considered the need of developers more important than solving the housing and homelessness crisis.