Developers, Councillors Slam Shire’s Social Housing Levy

The Mornington Peninsula Shire Council’s endorsement of next steps for a draft strategy on social housing have drawn fire from developers and councillors. 

The council voted to move to the next stage, undertaking community consultation, of the process for the Affordable Housing Development Contributions Strategy.

Councillors Lisa Dixon, Antony Marsh and Susan Bissinger voted against it. 

A social housing levy of 3.3 per cent on all new builds, including single houses on new blocks, is proposed as part of the strategy with money raised used to fund social housing projects.

After the community consultation, the council must then pass a motion to include the resulting strategy into its planning scheme. That would then need to be approved by the Victorian planning minister.

Developing the draft strategy has reportedly cost the shire $73,000. 

Marsh told The Urban Developer that there were several concerns with the proposed strategy.

“Social housing is a clear responsibility of the state government and they collect billions in taxes to help fund this service,” Marsh said.

“The Victorian Government talks proudly of its $5.3-billion Big Housing Build, which seeks to deliver new social housing across the state. 

“As of February, 2024, the state has made a mere $12-million investment under this program on the Mornington Peninsula. 

“We have social homes in derelict condition, sitting vacant, and others being sold off by the state without evidence that money raised is being reinvested on the peninsula—this is disgraceful,” he said.

▲ Cr Anthony Marsh voted against progressing the draft social and affordable housing strategy.

Marsh said he wanted to see less of the shire trying to takeover the state’s responsibility and more of it advocating for a greater slice of the Big Housing Build budget.

“The council has been actively advocating against cost-shifting from the state for some time while, in the same breath, proposing we dive into the space and do their job for them by introducing a new tax on locals,” Marsh said.

“Our core focus should be getting a fairer allocation of the existing Big Housing Build budget.”

He also said that the proposed levy would not work as intended.

“Introducing a new levy on developments will increase the cost of new homes on the Mornington Peninsula,” Marsh said.

“This will inevitably lead to high house prices, higher rents, and likely less investment/supply, further increasing competition for available housing and making it even less affordable to live on the peninsula. 

“The proposal did not include any analysis of the impact on house prices, rents, housing stock/supply, or impact on the construction section—one of our biggest employers—it seems to have skipped that step and detailed a pathway on the assumption that this all stacks up, which it doesn’t.”

With increasing house prices and rents, more people would fall off the bottom of the housing ladder, Marsh said. 

“They will either need to move off the peninsula to find more affordable housing—we’re already relatively more expensive before introducing any localised taxes—or it will increase demand for local social housing, further exacerbating the issue.”

Developer Illan Samuel, whose Dromana project is on the Mornington Peninsula, agreed that there were several concerns with the strategy.

“Mornington didn’t consult with industry participants and have provided no details as to how the tax will be implemented,” Samuel told The Urban Developer.

“Do they have land set aside to build social housing? Who will run it?

“This tax looks to increase the cost of delivering this supply by 3.3 per cent or $33,000 per $1 million of value. 

“This isn’t insignificant and will affect everyone looking to put a roof over their heads, so again, it seems extremely counter productive and not in line with the economics of creating supply,” he said. 

Samuel said that such a levy would add $2 million to the cost of delivering projects such as the one he was developing at Dromana as developers and builders maintain margins and costs are passed to the buyer.

▲ Developer Illan Samuel says that a new levy if approved will add $2 million to the cost of his current project in Dromana.

Marsh said that even if enough money were raised to build 1000 new social housing homes with the non-social housing market bearing the cost it would only account for 17 per cent of demand for housing on the Mornington Peninsula. 

He also does not see the levy as a means of addressing the issue of key-worker accommodation.

“It will do the opposite unless those workers are waiting on the state government social housing list and lucky enough to get to, firstly, get housing and, secondly, get housing on the peninsula, let alone near their place of work,” Marsh said.

“It’s clear that any margin gains on one side [social housing provision] will be more than offset by increasingly unaffordable housing in the private market, which is home for most of that very same workforce.”

Samuel said a key question was why the current means of providing social housing were not being used.

“There are already industry associations that focus on creating supply for affordable, social and disability housing that work with the private market,” Samuel said. 

“Why not encourage more activity within Mornington within these groups to provide more supply [as they have identified] than seek to collect funds from anyone creating new supply?

“A process already exists and works—subject to suitable land being available,” he said.

Homelessness and rental stress is a key concern for the shire and one that Marsh said the shire had been trying to address.

“We have actively stepped into this space by offering valuable council land to build emergency/crisis accommodation, and we provide more funding than the state government to local support centres at the forefront of addressing homelessness in our community,” he said. 

But the plan also has its supporters.

Community Housing Industry Association Victoria chief executive Sarah Toohey told the media that there were nearly 4000 households across the Mornington Peninsula facing homelessness, housing stress or overcrowded housing.

Toohey said the council’s decision to take the draft strategy to community consultation was a positive step in easing the region’s housing crisis.
 
“The Mornington Peninsula Shire’s developer contributions strategy is the kind of innovative and visionary thinking we need to see across Victoria to ease the crippling housing crisis,” Toohey said.
 
“There’s a desperate need for more social housing on the Mornington Peninsula. More and more locals are getting priced out of the private rental market, with asking rents up 7 per cent on last year.

“That will rise without ambitious action.”

The Victorian Government has this year opened social housing projects at Preston and Brighton as part of its Big Housing Build.