KR Peters director Peter Nicolls has welcomed the State Government's apparent shelving of its controversial $800 million annual levy on property developments to fund social and affordable housing.



The Andrews government stunned and infuriated the property industry when it announced plans for its Social and Affordable Housing Contribution levy which it hoped would fund 1700 social and affordable homes each year. The announcement also included the scrapping of social housing from council rates.



The Property Council of Australia claimed it would have added up to $20,000 to the cost of a typical new house in Melbourne and $12,000 to the cost of units.



However, last week Premier Daniel Andrews said the levy would be put on ice claiming the Property Council had not "honoured" an agreement to support the tax.



Under the government's proposal from July 2024 all newly built developments with three or more dwellings or lot subdivisions would have been slugged 1.75 per cent of the projected value of the project. The levy was to apply to projects in Melbourne, Geelong, Bendigo and Ballarat. In return the government had a promised to slash red tape in order to expedite development approvals.



Mr Nicolls described the move as a "money grab".



"No one in the property industry supported this new levy because it would have been an extra burden, a burden the industry does not need," he said.



"The levy meant that if you bought land valued at $1 million, it would have cost $100,000 in taxes including this new levy and council contribution fees.  For a three lot development, that would have added an extra $33,000 onto the cost of each dwelling.



"At the end of the day someone has got to pay and it's always the poor buyer."



Mr Nicolls said the new levy would have exacerbated the cost pressures already being felt in the industry.



"Everything that goes towards building a house is going to cost more. Interest rates are going to rise so money will cost more. Inflation is rising so labour, materials and transport costs more.



"All these pressures are slowing the market. Every property cycle people think values are going to keep rising. They don't understand that the decline has already started. The peak has passed."



Mr Nicolls said if it presses ahead with the levy,  the State Government would be in danger of "killing a healthy market" pointing out that many developers already make a contribution to the pool of affordable housing by including homes for low income families in new estates.



"This levy was not necessary and it was definitely not the right time to bring on a tax of this nature," Mr Nicolls said.