The state government has dumped a plan that would have seen new housing developments in Geelong taxed to fund social housing.
Treasurer Tim Pallas announced the state government would not proceed with legislation to introduce the social and affordable housing contribution, after the plan received opposition from the property sector when it was announced two weeks ago.
The plan would have seen all newly built developments with three or more dwellings or lot subdivisions will be taxed 1.75 per cent of the completed project value after in came in from 2024.
It would have applied in Greater Geelong, as well as Melbourne, Ballarat and Bendigo.
The tax would have been put into the Social Housing Growth Fund, which was expected to pay for up to 1700 new social and affordable housing properties each year.
However the national lobby body for property developers, the Property Council of Australia estimated the tax would increase median house prices by the same amount as a 28.8 per cent increase to the rate of stamp duty.
It said the tax would mean homebuyers in Armstrong Creek would pay an extra $11,725 in tax on average.
Mr Pallas said the government would not go forward with the plan, even if it was re-elected.
The tax was part of a larger package of reforms for the property sector, most of which was endorsed by industry bodies.
The reforms were designed to cut red tape, slash approval times by speeding up planning processes, support local councils, create jobs and bolster construction.
The government estimated it would have provided $7 billion in benefit and created more than 10,000 jobs over 10 years.
However Mr Pallas said none of the reforms would be going forward.
“This package would have delivered massive benefits for the development sector while ensuring a modest and reasonable contribution was returned to social and affordable housing for Victorians,” he said.
“We won’t create super profits for a sector that will not share a portion of the profits with Victorians.”
Victoria’s peak residential housing body, the Housing Industry Association, welcomed the dumping of the tax.
“We have vigorously opposed the government’s proposed 1.75 per cent impost on new housing since it first came to light because it creates yet another barrier to home ownership for Victorian families,” HIA executive director Fiona Nield said.
“Victorian home buyers already pay a range of taxes when they buy a new home, contributing half of Victoria’s tax revenue now … this new tax would have seen land and house prices being pushed further out of reach of new home buyers.
“It was bad policy that likely would have seen young Victorians join an ever-growing queue for social housing, rather than helping them.”
