Social housing tax will hurt Victorian home buyers

Today’s announcement that the Victorian Government will introduce a new tax to fund social housing is simply the wrong approach and will be another hit to housing affordability for all Victorians,” said Fiona Nield, HIA’s Executive Director Victoria.

The new Social and Affordable Housing Contribution will apply a tax of 1.75% to all new developments with three or more dwellings and to all new subdivisions with three or more lots from July 2024.

The tax will apply to the majority of new housing in Victoria, covering all local government areas in metropolitan Melbourne, as well as the regional cities of Greater Geelong, Ballarat, and Greater Bendigo.

The cost of new homes after July 2024 will increase with this tax being passed through in the land prices for all new lots in these areas.

Victorian home buyers already pay a range of taxes when they buy a new home, contributing half of Victoria’s tax revenue now. In Melbourne 38% of a new home build is made up of taxes, fees and charges. This new tax will see land and house prices being pushed further out of reach of new home buyers.

Ultimately it is new home buyers who will lose out as the taxes must be passed on in higher land and house prices.

Median land prices are $377,000 in Melbourne, while the median house price is now $950,000. Home buyers are already contributing their fair share of revenue to the state.

HIA estimates that this tax could add over $6,600 to the cost of land for new homes. Add stamp duty and GST along with many more costs and this tax could cost more than $20,000 for a new home buyer, adding to their mortgage repayments.

Funding for social and community housing is a critical role of government. But this is a community need and the response should be an equitable one. It simply doesn’t make sense to suggest that making houses for those that can afford to buy a new house cost more is the right solution to support those that can’t afford to buy one. This tax will perversely make the problem of affordability for all Victorians worse, not better.

The Government should be funding social housing from general rates and taxes as well as working in partnership with the housing industry and the community housing sector to identify feasible and effective actions to support the delivery of long-term solutions for public housing needs.

The tax will hit many more new homes than the suggested 30% of planning permits. The tax also comes at a time when the government is implementing a new windfall gains tax in regional Victoria which will raise land prices significantly, increasing building code requirements that will add to construction costs and just last week increased builder registration fees by between 40 percent and 200 per cent.

The Government must stop shifting the burden of funding social and community infrastructure onto a select group of Victorians each year that choose to buy a new home. This tax is inequitable and unfair.