Victoria’s New Developer Contributions Framework – What Developers Need to Know

Joel Snyder & Jonathan Hourigan
23 October 2024

The Victorian Government has announced a comprehensive overhaul of the state’s developer contributions system, marking a significant shift in how infrastructure funding will be collected and distributed. It is suggested that the reform package will create a more equitable and efficient system for property developers while ensuring growing communities receive adequate infrastructure support.

Key Changes at a Glance

1. A comprehensive statewide reform of developer contributions
2. A pilot program targeting 10 key Activity Centres
3. Immediate funding boost for growth areas

Current System Challenges

The Premier has identified the existing developer contributions framework as problematic for several reasons, including that:

• only 43 out of 79 councils currently collect developer contributions;
• 133 separate developer contribution plans exist across the state;
• implementation varies significantly between areas, creating inconsistency;
• the system has been criticised for administrative complexity and increased holding costs; and
• a Ministerial Advisory Committee has found the current system to be inequitable and unnecessarily complex.

Reform Process

The government has announced the establishing an industry working group comprising key stakeholders, including:

• Property Council of Australia
• Urban Development Institute of Australia
• Housing Industry Association
• Master Builders Victoria
• Assemble

Activity Centre Pilot Program: Detailed Implementation

The pilot program targets 10 Activity Centres, effective January 1, 2027, including:

• Broadmeadows
• Camberwell
• Chadstone
• Epping
• Frankston
• Moorabbin
• Niddrie
• North Essendon
• Preston
• Ringwood

Scope and Implementation

• apply to areas within an 800-metre radius of each centre’s commercial core;
• affect all housing projects within these zones;
• support delivery of 60,000 additional homes by 2051; and
• increase infrastructure funding for:
  • roads and transport infrastructure;
  • educational facilities;
  • health and community facilities;
  • parks and recreational spaces; and
  • public transport services.

Growth Area Opportunities

The government will allocate $150 million for infrastructure in growth areas, offering opportunities to developers to:

1. obtain grants;
2. focus on developments in Melbourne’s urban fringe;
3. fast-track projects in these areas; and
4. leverage existing developer contribution arrangements.

Strategic Implications for Developers

Short-term Considerations

1. Project Timeline Planning
   1. Determine if current projects can proceed under existing arrangements
   2. Assess opportunities before the January 2027 implementation
   3. Evaluate if changes impact development costs in affected areas
2. Financial Planning
   1. Review feasibility studies for projects in pilot areas
   2. Consider timing of land acquisitions
   3. Revise budgets to accommodate new contribution requirements

Long-term Strategic Planning

1. Portfolio Management
   1. Assess exposure to affected Activity Centres
   2. Consider diversification across planning zones
   3. Evaluate opportunities in growth areas receiving immediate funding
2. Risk Management
   1. Monitor policy developments and timelines
   2. Engage with industry bodies in the working group
   3. Develop contingency plans for various scenarios

Looking Ahead

While the reform promises significant change, developers should stay cautious as proposals may evolve. Collaboration with stakeholders is encouraging, but final recommendations won’t come until March 2025, and the pilot implementation is set for 2027.

The real test will be whether the new system streamlines contributions or adds complexity to an already challenging process.

Best Hooper will continue to monitor developments and provide analysis on the reformed contribution system. We are pleased to assist landowners and developers navigate the reform process.