A new Victorian Government housing tax could see the cost of a new home jump $20,000 with first-home buyers to bear the brunt of the price rises according to industry experts.
The State Government has announced a new Social and Affordable Housing Contribution (SAHC) to be levied on new developments, with the funds raised to be put into the construction sector to build more social and affordable homes.
Under the scheme, to start in July 2024, newly built developments with three dwellings or more and three or more lot subdivisions will be required to contribute 1.75 per cent of the as-if-complete project value to the Social Housing Growth Fund.
The tax will apply to all local government areas in metropolitan Melbourne, as well as the regional cities of Greater Geelong, Ballarat, and Greater Bendigo.
Over the first 10 years, the tax is expected to raise about $800 million a year.
Real Estate Institute of Victoria (REIV) President Adam Docking said the new tax was “ill-conceived”, with the costs to ultimately be passed onto homebuyers.
“The week prior to the announcement of this new tax, the government launched a review into housing affordability and it looked at everything except taxes on property,” Mr Docking said.
“Then the next week, they decided they want to hit the most vulnerable people with a new tax that’s going to add another $20,000 to the purchase price of a home.
“It’s illogical and when we’re screaming out for more affordable housing across all sectors in Victoria.”
Mr Docking said the new tax could potentially impact the price of established homes as well.
“A government never adds a tax for a short period of time and when it’s finished removes it,” he said.
“Once they get the sniff of extra money or revenue, there’s no reason why they couldn’t roll it over established houses or at a certain price point.”
Mr Docking said the barriers to entry for homebuyers continue to grow with the tax burden now becoming a significant issue in Victoria.
“There are just so many barriers to purchasing a new home at the moment,” he said.
“When you look at the costs of a new build that go to taxation it’s significant.”
“The easiest way to make homes more affordable is to drop taxes, not add them.”
Housing Industry Association (HIA) Executive Director Victoria, Fiona Nield said the tax would impact all homebuyers in Victoria.
“This tax will perversely make the problem of affordability for all Victorians worse, not better,” Ms Nield said.
“A new tax to fund social housing is simply the wrong approach and will be another hit to housing affordability for all Victorians.
Ms Nield said more than one-third of the cost of a new home in Melbourne was already due to taxes.
“In Melbourne, 38 per cent of a new home build is made up of taxes, fees and charges,” she said.
“This new tax will see land and house prices being pushed further out of reach of new home buyers.
“Victorian home buyers already pay a range of taxes when they buy a new home, contributing half of Victoria’s tax revenue now.
“Ultimately it is new home buyers who will lose out as the taxes must be passed on in higher land and house prices.”
Ms Nield said the median price of a block of land in Melbourne was $377,000 and the median house prices was currently $950,000.
“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,” she said.
“This tax is inequitable and unfair.
“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.
“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.”
Victorian Minister for Housing Richard Wynne said the tax would affect less than 30 per cent of residential planning permits and deliver an average of up to 1700 new social and affordable homes each year, as well as boosting construction to create an average of more than 7200 direct and indirect jobs annually.
“We’re establishing a stable funding stream to provide the dignity of housing to thousands more Victorians now and into the future, while locking in social and economic benefits for years to come,” he said.
