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The government is looking to overhaul Victoria’s developer contribution systems to ensure growing communities receive fair funding for infrastructure that aligns with their housing development.
The Victorian Premier, Jacinta Allan, has announced that the government will revise the state’s developer contribution schemes, with a working group of industry bodies exploring long-term reform. The first step will involve a pilot program in 10 key areas set to test a simpler model for incentivising housing and funding essential infrastructure.
Developer contributions are the payments made by developers to councils and sometimes the state government that help to fund the cost of infrastructure within areas where new homes are being built. They pay for services like roads, paths and public transport services, new and upgraded schools, upgrades to health and community facilities, plus parks, playgrounds, sport and recreation areas.
Allan commented that the current framework is “unfair” and that growing communities have been missing out on essential funding. She described the system’s logistics as an “administrative nightmare” as a result of some local government schemes adding “delays and holding costs”.
Speaking on the need for reform, the Premier said that “communities that build more homes should get more funding for things they need”, emphasising that “everyone can contribute, including property developers”.
“Developers already build homes and opportunity, and many already contribute to a system like this – now we’ll work together to make the funding fairer, so growing areas get more support for schools, parks and transport,” she said.
Industry working group to explore long-term reform
In order to overcome these challenges, the Victorian government stated that it will investigate options for long-term reform around developer contribution schemes alongside members of its Housing Affordability Partnership - including the Property Council of Australia, Urban Development Institute of Australia, Housing Industry Association, Master Builders Victoria, and Assemble.
This working group will meet in November 2024 to examine models for change and find a potential system that will most effectively work for industry, councils, government and communities.
The results of this investigation will be reported in March 2025 and will present the state government with potential options that could help Victoria’s suburbs to grow sustainably by providing community infrastructure alongside new housing projects.
Councils will also be able to weigh in during the process, with the government noting that it will confirm how local councils will participate in the working group once the council election caretaker period ends later this year.
Developer contribution pilot to be extended to 10 ‘activity centres’
Until suitable long-term reform can be identified, the government announced that it will first launch a simpler developer contribution pilot, which will be implemented in the areas outlined in the state’s Activity Centre program that aims to increase density around certain city hubs.
This revised developer contribution system will be initially rolled out across the 10 selected activity centres of Broadmeadows, Camberwell, Chadstone, Epping, Frankston, Moorabbin, Niddrie, North Essendon, Preston and Ringwood.
These areas were selected for the Activity Centres program for their proximity to nearby industry, transport and services, with the program set to reportedly accelerate “long and complicated planning processes” from five years to around 12-months to speed up housing delivery,
With the addition of the developer contribution pilot, the government noted that the 10 communities will receive extra funding for infrastructure such as roads, community facilities and public parks with every house that is added.
Throughout this process, the Department of Transport and Planning will advise on the infrastructure needs of each of the communities, and help to inform where additional homes can be delivered through the Activity Centre program to achieve the specified target of 60,000 homes by 2051.
Minister for Planning, Sonya Kilkenny, said that community consultation on the Activity Centres revealed that “vibrant places with green spaces and local community facilities are needed”, and highlighted that this infrastructure is “exactly the kind of thing this new system can fund”.
This developer contribution pilot is currently scheduled to commence on 1 January 2027, with the government set to consult with industry before announcing the revised developer contribution fees and noting in advance that the eventual fees should not be considered as a benchmark for the upcoming statewide reform.
The government also highlighted that the pilot contribution system could change depending on the model proposed for statewide developer contributions, but stated that no decisions will be made until the industry working group reports its findings early next year.
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