$5.4 billion tax grab to hit home buyers

31 August 2010

The NSW Governments decision to lift the cap on local council development levies from $20,000 to $30,000 would cost Western Sydney home buyers $1.8 billion and NSW home buyers $5.4 billion, according to the Urban Taskforce. The Taskforce’s chief executive, Aaron Gadiel, said that the high cost of levies would make housing more unaffordable for ordinary home purchasers.


Make no mistake, this decision will make everyday home buyers much worse off, Mr Gadiel.


Less new homes will be built, those that are built will be more expensive, and fewer people will have the opportunity to own their own home.


NSW has hit new record low levels of housing construction every year from the past four years and high development levies have been a major cause of our housing undersupply.


NSW produces less new housing per head of population than any other state in Australia.


Mr Gadiel said the lack of new homes in Sydney is having a profound social impact.


Only 64 per cent of Sydney households own their own home down from 70 per cent at the beginning of the decade.


Sydneys level of home ownership is now lower than every Australian capital city, bar Darwin.


In contrast, Brisbanes level of home ownership has increased from 63 per cent to 68 per cent.


Victorian local council development levies are below $20,000, and theyre managing to produce twice NSWs level of housing, despite their small population base.


Mr Gadiel said this was the third time the NSW Government had flip-flopped on development levies.


In October 2007, the NSW Government announced that “levies paid to local government in the growth centres [were] to be held in trust by the State Government to be spent on agreed programs”. The government claimed that “the average local government charge [in the Western Sydney growth centres] will be cut from $45,000 to less than $30,000.” The Government promised that plans for levies “will need to be endorsed by a delegate of the Minister for Planning”. The trust was never established, no requirement was ever introduced for the ministerial approval of all levy plans and development levies in excess of $30,000 remained widespread.


In December 2008, the NSW Government announced that it was “capping infrastructure contributions payable to local councils at $20,000 per lot”. Several months later this reform was subsequently watered down, and the “cap” was re-designated as a “threshold”. Almost all levies in excess of $20,000 a lot were subsequently green lighted by the government.


The current $20,000 hard cap was introduced in June 2010.


Its incredible that on average, each attempt by the NSW government to reform development levies seems the last about three months before its abandoned, Mr Gadiel said.


The latest cap recently came under challenge in the Land and Environment Court, where the Court rejected arguments that the cap was unreasonable.


The Land and Environment Court was prepared to back the NSW Government levy cap, but the government itself isnt.


The Urban Taskforce is a property development industry group, representing Australias most prominent property developers and equity financiers.


Download PDF Document