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ACT development tax is a blow to affordable housing

Townhouses are the "missing middle", desperately needed by low-income families and downsizers.Townhouses are the "missing middle", desperately needed by low-income families and downsizers. Photo: Graham Tidy

Despite the strength of the economy as demonstrated by the recent ACT budget, we are facing significant policy challenges, particularly in providing housing affordability for Canberrans.

The housing that is needed most in the market, is the missing middle – two and three-bedroom townhouses – desperately needed for rent and for purchase, for first-home buyers, low-income families and the empty nesters looking to age in place.

So, we were surprised and disappointed to learn on budget day that the charge, which is applied to the variation of a lease to develop from single residence to multiple dwellings, such as townhouses, will increase from $7500 to a whopping $30,000 per dwelling from July 1.

What this means is that in O’Connor, 200 metres from a light rail stop, where three standard residential blocks were to be amalgamated to build 16 townhouses, will now attract a charge of $480,000 before a single brick is laid.

Unfortunately, townhouses will never be built on this site, because with just three weeks warning the land instantly becomes more valuable with no development at all.

The government says the lease variation charge ensures a return to the community gained when the value of the land is increased by a change of use.

But there must also be recognition that filling the missing middle in the housing market, also delivers a benefit to the community.

We are not saying that developers should pay no fees, charges or taxes. In fact, property related taxes and charges make up about 55 per cent of revenue collected.

But the government also needs to be aware that this budget delivered a blow that will set their ability to deliver affordable housing and urban renewal back many years.

The property sector needs warning of such a significant changing of the goal posts.

We need to be able to factor these charges into the price paid at the point of purchase for the land. We need to be consulted and we need a transition plan, and more broadly, we need a charging regime that is focused on delivering on the ambitious policy objectives of the government, rather than thwarting them.

Adina Cirson is ACT executive of the Property Council of Australia.