The Victorian government is on the verge of an embarrassing backdown over a new property tax, after Premier Daniel Andrews said an industry overhaul had an "uncertain future."
Councils and the property industry have slammed the reforms because of the new tax and a planned cut to state government payments to councils.
Last Friday, the government announced a major reform of the planning system that would speed up developments, increase profits and boost social housing.
As part of the reforms, the government planned to slug a 1.75 per cent levy on the value of all new developments of three or more dwellings in Melbourne, Geelong, Bendigo and Ballarat from July 2024.
The property industry fears those costs could be passed on to homebuyers.
The tax is estimated to raise $800 million a year, with the funds to be used to expand social housing.
Housing Minister Richard Wynne said it would create, on average, an extra 1,700 social housing units a year.
But the opposition and property developers are opposing the levy, meaning the government needs to rely on the crossbench in the upper house to make the tax law.
"It's fair to say the future of this bill is very, very uncertain," Premier Daniel Andrews told reporters on Wednesday morning.
Government accuses industry of reneging on support
The Premier hit out at the property industry who he accused of supporting the reforms before they were publicly announced.
"We had an agreement. It seems that that agreement is not going to be honoured, and therefore the future of that bill is most uncertain," he said.
In a statement, the Property Council said 59 per cent of Victorian taxation revenue came from the sector.
"This is the 10th new tax this government has introduced, the second in the last 10 months,'' the Property Council said.
"We remain committed to working with government to deliver planning reform and to support social and affordable housing.
"All our members are concerned about the flow of effects of new taxes on housing affordability and will work with the Government to put in place appropriate reforms."
The Property Council claims the levy would see the median house precise in Wyndham in Melbourne's west increase by $21,525 and prices in Armstrong Creek in Geelong rise by $11,725.
Shadow Treasurer David Davis said a planned briefing between his office and the government on the new housing bill has been cancelled and was not rescheduled.
The government will be required to table modelling and documents relating to the impact of the new tax on housing affordability to parliament in 14 days, after a motion introduced by Mr Davis was carried in the Upper House.
"The government is taking this off the table at the moment, the Premier is crab walking backwards from this tax," he said.
The Urban Development Institute rejected suggestions the sector had agreed to the new tax.
Chief executive Matthew Kandelaars said the sector had no choice but to pass the cost of the new levy onto home buyers.
"There was absolutely zero consultation that tried to link any planning system reform with a new tax on home buyers," Mr Kandelaars said.
Council to Homeless Persons chief executive Kate Colvin said the bill would be a step forward for people having a hard time in the housing market.
She said the levy was a small contribution from developers to fix a big problem and more social housing was desperately needed.
"The fact is this is a charge on developer's profits, it is not a charge on homebuyers," she said.
"Of course they are not keen on having less profit, but we've got to keep in mind developers have been making huge profits as house prices increase and life gets more difficult in the housing market for ordinary Victorians."
The policy may open the Labor government up to a scare campaign about housing affordability and rate increases, and some in the party were scratching their heads at the wisdom of the policy in an election year.
Despite the Coalition’s opposition in the Upper House, there are likely enough members of the crossbench to support the reforms in some shape to get the bill passed.
Councils lose out on income
As part of the reform, the government also said it would stop paying council rates on social housing properties, with the payments to be phased out from July next year.
Councils warn that this will lead to millions of dollars of shortfall, forcing them to increase rates for residents.
Modelling done by Yarra City Council estimates rates will increase by 3.6 per cent once the plan is fully implemented and could cost ratepayers an extra $79 per year.
Moonee Valley Council Mayor Samantha Byrne estimated a proposed rate cut would cost the council $2.8 million dollars a year.
"We will have to make decisions, do we raise rates? Do we cut services? Or do we cut infrastructure?" she said.
"We are not the only council in this position, there are many councils in Victoria who are really disappointed with where this is potentially heading."
Victorian Greens Leader Samantha Ratnam said she would support the bill when it was introduced but she had concerns about the impact it would have on local councils.
"We must ask why the government isn't funding its own public housing maintenance — it is its asset and its responsibility and it should be paying its bills," she said.
"We've been hearing so much from social housing residents who are so frustrated because they can't get their basic maintenance requests met — yet it is passing on the buck to councils and outsourcing its responsibility to them."
