Developer levy unlikely

By Shine Dighe

Melbourne City Council’s proposal to collect a ‘developer contribution’ amounting to $900 per dwelling for new CBD residential towers may not see the light of the day.

Planning Minister Matthew Guy, who has the final say in the matter, said recently on 3AW: “I haven’t seen anything to justify it. I don’t know where the figure came from. Why $900 and why not $850 or $1500?”

He further added, “There has to be a base of common sense to it and well, not just let’s arrive at $900 and work out why we have come there and get it through legislation.”

He was of the opinion that when it came to developer contributions, developers were asked to contribute quite substantially already. He argued for a set level of contributions whether it was a basket of goods they provided or amount of money and not different from council to council.

The levy is to create a $26.5 million fund for public infrastructure needed for the expected 14,200 new residents by 2031. The City of Melbourne’s Draft Community Infrastructure Development Framework (2014) identifies the need for 3792sqm of new community infrastructure to service the rapidly-growing residential population of the Hoddle Grid.

Also, the proposed levy does not complement the council’s idea of affordable housing in the CBD, as it is uncertain who will end up paying the tax.

Melbourne Lord Mayor Robert Doyle said: “Let’s disabuse the notion that it will be a developer contribution. It will be passed straight through to the purchasers of these residential units. It will drive up the cost of buying a unit in the city.”

Minister Guy seemed to agree when he commented: “The only people who were going to pay this are those who were purchasing the apartments. At the end of the day, this will not be a tax paid by developers but by homebuyers.”

Cr Doyle also raised the point that the council made “enormous amounts of revenue” through council rates paid by the residential owners.

“We are supposed to provide community infrastructure with this,” he said.

Indeed, if the council wants to raise additional funds for amenities and infrastructure given the expected population growth, is it not more appropriate to increase the rates?

In addition to the $900 developer contribution, an apartment valued at $500,000 would also incur a proposed open space contribution, totaling $3800 per approved apartment.

Speaking in favour of the fund, Cr Ken Ong pointed out: “It’s not just about tall building and lots of people. It’s about what happens when people hit the city streets, and about the amenities and services that need to be provided. The property developers with projects in the city are making a good living out of the city. We are just asking them to be responsible, and to contribute back.”

The charge will be applicable to all apartments currently under consideration for approval regardless of when the application was lodged. Of the 17,257 apartments currently in the development pipeline, 5260 are under consideration for planning approval and could be subject to a developer contribution if it were in place immediately.

Applying the maximum the contribution levy of $900 per dwelling to the forecast number 9547 new dwellings in the area would raise in the order of $8.5 million by 2031.

Council would be required to fund $17,951,700 – being the balance of the estimated total cost of $26.544 million. The developer contribution would only apply up until 2031.

In addition to this levy, from 1 July 2015, the State Government is looking to introduce a standard infrastructure levy of $4500 per dwelling.

“However the mechanisms for its application have not been defined. While the Hoddle Grid appears to fit the criteria for an SDA, this has not yet been determined by the State Government,” the council’s report notes.

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