Governments across Australia are struggling with the multi-faceted causes of the housing supply and affordability crisis.

All governments are committed to policy measures that speed up the planning process with a range of legislative and regulatory pathways.

But one of the key constraints on housing supply is the question of housing development feasibility. The same Governments that say that housing supply and affordability is their top priority consistently fail to address their own very substantial contribution to the catastrophe.

Projects must be feasible – but what does that mean?

Banks and financiers will only make funds available to builders if they are convinced of the following: there is a market for the dwelling type in the proposed location, at the price needed to cover all costs, including the cost of finance (interest) and a developer margin (profit commensurate with risk).

This is where government-imposed fees, levies, taxes and charges come in. In NSW, the burden of these costs are, by a considerable margin, the highest in Australia.

Urban Ideas (2025), “What makes housing so expensive?”, Urban Taskforce Australia
Urban Taskforce members support pro-active relief on these charges in the context of the housing supply crisis and the operation of the Housing Accord.

How big is the taxation burden on housing?

It is important to consider the full gambit of State and council fees, taxes and charges (note that this analysis does not include taxes applied by the Commonwealth, including income tax, company tax, withholding tax applied to foreign companies, or GST).

• Affordable Housing levies
  • Local council obligation contained in Local Environment Plans
  • 2% affordable housing contribution in the 37 tier two TOD areas
  • 10%-15% affordable housing contribution in return for the height and density bonuses detailed in the Housing SEPP
  • Affordable housing levies are often applied to land that is being developed for the purpose of industrial, commercial and retail land use. That is absurd.
• Housing Productivity Contributions
  • Base HPC of $11K per apartment and $13K per stand-alone dwelling (adjusted for inflation)
  • Biodiversity contribution (where applicable – for example Central Coast Council is proposing a $9.5K charge in a range of locations above the base HPC rate)
  • Transport charge (for example, dwellings constructed in Pyrmont will be charged an additional $15K due to their proximity to the Metro)
• Water Development Service Plan Charges
  • (these range from a low number where the is water infrastructure capacity, up to $80K per dwelling in some parts of western Sydney)
• Land Tax
  • not applicable to owner occupied dwellings or land valued at less than $1,075,000
  • Land tax is charged each year at $100 plus 1.6% of the land value above $1,075,000 and up to $6,571,000.  For land valued above $6,571,000, the tax charged is $88,036 + 2% of the land value above $6,571,000
  • There is no land tax free threshold – the tax is applied to the full value of the land
• Land Tax surcharge on foreign owned companies
  • An additional 4% of land value is applied each year to land valued above $6,571,000, over and above the standard charge, if the company is foreign owned
• Land tax on rezoned land
  • Land tax is applied to land that has been rezoned on the basis of a valuation by the Valuer General that presumes the owner is immediately taking advantage of the highest and best use of that land according to its zoning. So, agricultural land on the rural fringe of the city, that is rezoned for residential development, will incur a land tax obligation on the presumed value of that land based on its residential designation (assuming you are not eligible for an agricultural exemption that applies to farmers), even if the land has not been serviced by water infrastructure, state or classified roads. In the worst case, you get rezoned, but you may have to wait 15 – 20 years for government infrastructure to be delivered to enable you to lodge a DA for housing development.
• Local Infrastructure Charges (S.7.11 and 7.12 of the EP&A Act)
  • Section 7.11 charges are rapidly on the rise with IPART unable to hold them back. While they were capped for many years at $30K for stand alone dwellings and $20K for apartments, it is common for the charges to now be higher than $75K per dwelling.  This includes charges for local parks and green space, even when there are national parks opposite, or verge large green spaces across the road in other LGAs.
  • Section 7.12 were, for 15 years, capped at 1% of construction value. However, higher charges that allow special dispensation if granted by the planning minister are now pushing these levies as high at 5.6% of construction value in Liverpool Council portion of the Aerotropolis precinct.
• Payroll Tax
  • 5.45% is applied to all business with a payroll above the payroll tax free threshold of $1.2 million per year
• Stamp Duty
  • there are various first home buyer exemptions that apply to stamp duty, but where it does apply, it represents a tax on the purchase of property and is paid by the buyers of the property (see below for rates).  It is a transaction tax that negatively affects the efficient operation of the housing market, resulting in perverse behaviour like elderly people staying in a large home long after their children have permanently left home.
• Voluntary Planning Agreements
  • VPAs are regularly entered into with Local Councils to fund local infrastructure or amenity augmentation agreed by the parties.  There is no cap on what can be charged under a VPA.

   Stamp Duty rates

Conclusion

The State Government relies on these taxes to pay for hospitals, schools, justice, community services, roads and public transport. But in the absence of tax relief, their assertions, that government decision making is prioritised for housing supply and affordability, look hollow.

A reduction in taxes on property generation would actually generate more revenue. Relief from having to pay the HPC, or the postponement of all infrastructure levy payments from the start of construction till the end of construction, for example, could improve the financial feasibility of many projects, thus increasing stamp duty and GST payments, way above and beyond the tax revenue foregone or delayed in the short term.

The irony of taxing those who build homes to pay for affordable housing through affordable housing levies is palpable. When there is a shortage of a good, you don’t increase the tax on it, because that will further limit its production.

The NSW Government has been an exemplar when it comes to cutting planning red tape, passing planning reform laws and developing new planning pathways to encourage housing supply and fast track the process. However, they have done the opposite when it comes to taxes on the production of new homes. If the housing supply and affordability crisis is to be overcome, this must change.

By Tom Forrest, CEO, Urban Taskforce Australia

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