Victoria announces biggest housing reform agenda in a generation

Victoria will usher in the biggest shake-up to the state’s property sector in a generation, with sweeping housing and planning reforms announced on Wednesday (20 September).

In an attempt to tackle a crippling shortage of housing, the release of Victoria’s Housing Statement – The Decade Ahead 2024-2034, details plans to build another 800,000 homes over the coming decade.

As the fastest growing state in the country, Victoria’s population is expected to rise from 6.8 million to 10.3 million by 2051.

Premier Dan Andrews’ Labor Government on Wednesday signed the Affordability Partnership alongside the Property Council of Australia, Master Builders Victoria, the Urban Development Institute of Australia, the Housing Industry Association and Super Housing Partnerships.

“As part of the Partnership, the Government will foster the conditions needed to stimulate investment and build high-quality homes faster in the places where Victorians want to live – and the industry will build more housing for the Victorians who need it most,” a government statement noted.

Among the raft of reforms, were measures aimed at reforming Victoria’s planning system, curbing urban sprawl, protecting renters’ rights, and accelerating the rollout of social and affordable homes.

Short-stay rental platforms such as Airbnb and Stayz were in the government’s crosshairs, with a 7.5 per cent levy applying to revenue from the platforms from January 1, 2025.

Mr Andrews said income from the levy would go towards Homes Victoria, funding the construction of social and affordable housing.

Quentin Kilian, CEO, Real Estate Institute of Victoria, welcomed the release of the new housing policy but said it did not go far enough.

“(The statement) addresses some of the longer-term supply challenges but it falls well short of addressing the short to medium term reform that all Victorians are crying out for.”

Stayz offers response

Eacham Curry, Senior Director, Government & Corporate Affairs, Stayz, told API Magazine that the 7.5 per cent increase means owners need only remove themselves from listing on platforms to avoid paying the levy, and the Victorian government may end up getting nothing at all.

“Property owners will not stop letting their properties and guests will not turn away from renting them.

“Additionally, the levy won’t address the concerns that are being expressed by local government about how the sector should be regulated.”

Mr Curry urged the government to consult with industry so they can share “sensible proposals” about regulation that works.

“That includes things like a code of conduct to ensure everyone understands what the expectations are for the sector and a register of all properties that are being short term let.

“This will assist in collecting data that will underpin better policy development.

“Even if every Short Stay home was turned over to long-term letting tomorrow, it wouldn’t cover this year’s immigration, let alone next years, or the years after that.

“It’s important to note, that in many instances, short-term let properties are not of a type that would be considered part of the affordable housing mix and are not located in the areas of greatest housing need.”

Rental reform

Among the changes to the rental landscape were restrictions to rent increases between successive fixed-term leases, restrictions on rent bidding by tenants, and an extension to the notice period for rent increases to 90 days.

Regarding the rent increase restrictions, Mr Kilian said that while certainty is important for property owners and renters, this must be balanced with the ability for property owners to cover increasing costs, such as land tax and interest rates.

“The seasonal fluctuation of market rates must be considered with such a proposal,” he added, in relation to the notice period extension.

“Regional towns may also be inadvertently impacted, given short-term itinerant workforce fluctuations.”

The government did resist the temptation to implement rent control policies.

“On the surface, rent controls appear to address the issue of affordable housing by limiting the amount landlords can charge for rent but despite its intentions, international examples have shown rent control often worsens the housing crisis by discouraging investment in housing, reducing the quality of rentals and distorting the housing market,” the government’s Housing Statement noted.

Planning processes streamlined

Mr Andrews said the government was reforming Victoria’s planning system, clearing the backlog of planning permits, “giving builders, buyers and renovators certainty about how long approvals will take – and a clear pathway to resolve issues quickly if those timeframes aren’t met.”

With a focus on increasing density in preference to continued urban expansion, the housing reforms will implement design standards that require higher density city areas to be built with more room, natural light and energy efficiency.

Incentives for developers will include taller height limits and quicker planning processes.

“We’ll streamline the planning process for medium to high density residential developments that meet the set criteria: construction costs worth at least $50 million in Melbourne or $15 million in regional Victoria, and delivering at least 10 per cent affordable housing,” the policy statement read.

“This will include new build-to-rent projects.

“It’ll mean around 13,200 additional homes will be brought to market that would otherwise be delayed – and it’ll cut application timeframes for these types of projects from more than 12 months down to four.”

Benni Aroni, Partner at Pitcher Partners Melbourne, said reforms relating to the creation of activity centres, clearing backlogs, and interacting with other government authorities are positive moves but his praise came with caveats.

“More detail is necessary on the structural changes proposed, such as the Plan for Victoria and a review of the Planning and Environment Act, which are overdue.

“But the location of surplus government land will be important.

“We don’t see too many $50 million residential developments in Melbourne’s suburbs, and more detail is needed around the proposed 10 per cent affordable housing requirement.

“How will affordability be determined? Such detail will be important for developers in considering whether those types of projects will be commercially attractive, because they are carrying the risk in these developments.

“If these reforms commence a true partnership between government and the development industry, the housing targets and economic prosperity of Victoria will be considerably advanced.”

The plan to build hundreds of thousands of new homes comes soon after the Housing Australia Future Fund (HAFF) passed with a majority vote in the Senate on 13 September after an agreement was reached between the government and The Greens.

Deputy Premier Jacinta Allan said, “Unlocking the potential in and around our major transport projects in Melbourne’s inner and middle suburbs is a key focus of our Housing Statement, which will deliver more homes, more jobs and better-connected services.”

Homeless overlooked

The Council to Homeless Persons (CHP) said the reform agenda did not go far enough in addressing the acute homelessness situation in Victoria.

It welcomed measures to make renting fairer and overdue improvements to 44 existing high-rise public housing buildings, but CHP’s CEO Deborah Di Natale said the package fell short on social housing commitments.

“We’ve got tens of thousands of people without a home tonight, sleeping in their cars, couch surfing, living in an unsafe rooming house, or considering returning to a violent relationship.

“We need at least 60,000 new public and community homes to be built in Victoria over a decade but unfortunately there’s nothing like that in these announcements.  

“The grim reality is without a major increase in social housing, which accounts for just 2.9 per cent of all dwellings across the state, we’re not going to stop rising homelessness.

“The government should outline exactly how many extra public and community dwellings will be built because of this announcement.

“A modest charge on short-stay accommodation is a sensible way to fund desperately needed public and community housing but the amount of revenue that will raise pales in comparison to what’s needed,” Ms Di Natale said.