Landbanking in Crosshairs Under Victoria’s New Leader

There are an estimated 3000 properties zoned as residential in established suburbs in Melbourne that have been waiting to be developed for more than five years.

This is part of the reason the state’s Vacant Residential Land Tax (VRLT) will be expanded as the new Jacinta-Allan-led government gets serious ahout Victoria’s housing crisis.

Much of those 3000 properties have been landbanked—a common practice whereby owners hold onto land until conditions are favourable either to sell or develop.

The state government now wants to speed that process up to help address housing supply. 

“We know the best thing you can do to make homes more affordable is supply more of them—this is all about freeing up empty houses for rent and vacant land for new homes, particularly across the outer suburbs and regional Victoria,” state treasurer Tim Pallas said. 

From January 1, 2025 all empty residential-zoned properties in the state, including in the regions, that have a building on them and have been empty for more than six months will be subject to the tax.

That tax is set at 1 per cent of the property’s improved value and is expected to generate $6 million in revenue for the state.

Currently $10 million is collected by the tax annually. The expansion is expected to take that to $31 million per annum.

The tax has until now has only applied to 16 inner and middle suburbs within Melbourne.

It is separate to the land tax, the absentee owner surcharge and the federal vacancy fee for foreign owners of residential dwellings, according to the State Revenue Office, who admisters the tax.

▲ Greenfield market will continue to grow as people continue to want to work remotely.

And from January 1, 2026, the tax will also cover unimproved land zoned for residential use that has laid vacant for more than six months.

The period of vacancy used for calculating if properties need to pay the tax will start on January 1, 2024.

State agencies will not be exempt from the tax and will be asked to justify why they are holding on to the land. 

The government believes the tax will motivate owners to sell land to those who can develop it or if the land has vacants homes, will prompt owners to add them to the rental market.

Exemptions will apply for single family holiday homes, any property recently acquired or occupied regularly for work and any properties being built or renovated.

Not every one agrees with the move: The Victorian Farmers Federation president Emma Germano said many farmers were concerned agricultural land used to house seasonal workers would get caught up in the tax expansion.

Property Council of Australia executive director Cath Evans said the move undid any good faith instilled as part of the recently signed Affordability Partnership.

“The partnership clearly outlines that consultation is a shared responsibility and that we all agree to work together to find solutions in a complex economic environment,” Evans said.

“Sadly, eight business days later, the Treasurer, who was a signatory to the partnership, has announced the introduction of new and expanded taxes without any consultation.

“We are yet to understand how these reforms will improve the availability of rental stock to the market or increase the supply of new homes.”

▲ The new tax comes as the government rolls out its Housing Statement to add 800,000 homes to Victoria during the coming decade.

The Affordability Partnership is an agreement between the state government and industry to work on policy development to address housing affordability. 

Victorian Greens leader Samantha Ratnam said landowners currently had to self declare vacant properties for the land tax to apply, so the expansion was potentially unenforceable. 

The State Revenue Office website says that landowners need to notify the agency of any vacant property they own by January 15 each year including any that would qualify for exemptions from the tax. 

It also says that the agency does carry out monitoring and investigations and that late notifications are viewed more favourably than properties uncovered during investigations.

The Greens want the tax to be increased to 3 per cent of improved land value. 

Pallas had expected to introduce the legislation in the Victorian parliament late last week.

▲ Former premier Daniel Andrews.

Before his resignation, Daniel Andrews announced legislative reforms as part of his last reform, the long-awaited housing statement which has an ambitious goal of 800,000 new homes. 

They included the new 7.5 per cent levy on short-stay accommodation platforms such as Airbnb.

This is expected to generate up to $70 million for the state government to spend on affordable housing.

Critics however said the costs would only be passed on to the consumer.

New South Wales has since imposed a cap on Airbnb rentals in Byron Shire aimed at freeing up housing for key workers and long-term residents.