The Age is reporting that concerns about a lack of amenities in central Melbourne, where the resident population has doubled in the past decade, has prompted the Melbourne City Council and Victorian Government to raise taxes on new apartment developments:
Planning minister Matthew Guy recently announced a $4500 a unit developer contribution for metropolitan strategic development areas. In a media interview he has also flagged a contribution of $15,000 for each per dwelling in the urban renewal suburb of Fishermans Bend.
Meanwhile, Melbourne City Council is set to introduce developer contributions of between $900 and $3000 unit for Southbank and City North to pay for streetscape upgrades and a community centre.
The council may also lobby the planning minister to introduce developer contributions in the Hoddle Grid amid forecasts the area is going to become the most popular city location for new apartments.
Councillor Stephen Mayne said Melbourne council received a record $6 million from developers last year through its open space levy…
In the meantime, he said, big business had been benefiting from an extraordinary increase in land prices, including the recent sale of the Savoy hotel at $44 million after being bought nine years earlier for $10 million.
The proposals to raise charges on new central Melbourne developments are perverse. If the State Government and Melbourne City Council wants to raise raise additional funds to pay for amenities and infrastructure, surely a general increase in rates on all central Melbourne homes is more appropriate, given all residents would benefit from the improved infrastructure and amenities?
Charging new developments only, whilst allowing pre-existing developments to free-ride, is both inequitable and illogical, and could reasonably be viewed as a blatant tax grab by the government. It also has similarities with the ‘first-user-pays-all’ approach to housing-related infrastructure, which has become a feature of Australian urban planning since the 1990s, to the detriment of overall equity and affordability.
More generally, if Melbourne City Council is so concerned that big business is benefiting from an “extraordinary increase in land prices”, then why not lobby the State Government to introduce a broad-based land values tax (LVT)? This way, the state could capture some of the land values uplift, helping to fund infrastructure and amenities for the community.
In a similar vein, an LVT would help make infrastructure investments self-funding for the government, since any land value uplift brought about through increased infrastructure investment would be partly captured by the government via increased LVT receipts. It would also penalise land banking and vagrancy, effectively increasing the supply of land in the process and bringing new homes to market more quickly.
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