illustration of houses
Image: Development Victoria

The Victorian government’s plans for a long term funding mechanism to support social and affordable housing has been slammed from the predictable quarters.

The plans, under proposed amendments to the Planning and Environment Act 1987 are for some new developments to make a of 1.75 per cent of the market value of:

  • New developments of three or more dwellings; or
  • The subdivision of land that results in three or more new residential lots

The proposed legislative reform will contribute to new social and affordable housing development across Metropolitan Melbourne, Greater Geelong, Ballarat and Greater Bendigo, the government said. 

The introduction of the Social and Affordable Housing Contribution to take effect in 2024 builds on the government’s Big Housing Build investment of $5.3 billion which aims to deliver over 12,000 new dwellings.

The contribution would provide a clear and consistent mechanism for increasing affordable housing in Victoria, the government said and it will also remove the need to negotiate affordable housing on individual sites.

Victorian treasurer Tim Pallas claims the levy would affect less than 30 per cent of all residential planning permits, raising upwards of $800 m each year and deliver $7 billion in benefits over 10 years, paying for up to 1700 new social and affordable homes and supporting 7000 jobs in the construction sector every 12 months.

The Planning Institute of Australia (PIA) welcomed the reform. 

“This a momentous moment for housing policy in Victoria, which will create a sustainable funding mechanism to help house people on very low to moderate incomes across the state”, said PIA Victoria president Gabby McMillan.

Social and affordable housing will ensure that people are housed, but also fuels the construction industry and therefore increases access to work and the labour pool.

“PIA Victoria believes social and affordable housing is essential infrastructure and should be supported by long-term funding programs, like we have for roads, transport, open space, schools and hospitals,” Ms McMillan said. 

However, the levy is being criticised by the building and property sectors. 

Developers said costs would be passed on to new homebuyers rather than absorbed by the developers themselves. Since the median Melbourne house price is $1.1m, this would equate the levy to an additional $19,600 for a home buyer.

PIA Victoria expects that developers will pay a lower initial cost for land to “pass back” the levy, meaning that profits on development costs can be maintained and housing affordability is unaffected. The body states that they are pleased that the 2024 start date provides a period for adjusted assumptions to take effect.

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