The Victorian Government says a planned rates exemption for social and affordable housing is “off the table for good”. 

The Andrews government has dumped controversial plans for a new housing development tax to help pay for social housing projects, which prompted fears of a backlash on housing affordability. 

It has given up on a suite of planning reforms that would have boosted profits for developers - with government figures claiming the proposed package would have delivered $7 billion in benefits to the property industry

Treasurer Tim Pallas said this week that in “clearly a disappointing result”, the planned changes are “done, they are dusted and they are finished”.

“The key for the government is that we've been left with no choice given the fact that the property sector's response to these reforms has been clearly negative in tone,” Mr Pallas said.

The state had sought to impose a 1.75 per cent levy on the value of new developments, which was expected to raise about $800 million a year to go towards building 1,700 social housing units each year.

Councils and the property industry strongly opposed the move. 

Developers warned that costs would have to be passed on to homebuyers, while councils said exempting social housing residents from paying rates would cut millions of dollars in income each year.

Local government advocates at the Municipal Association of Victoria (MAV) say they still  support increased social and affordable housing across Victoria, but said the government’s chosen path failed to “consider the impacts on council service delivery” and would have “punished our most disadvantaged communities simply because they have the most state-owned social housing”.

“Significant planning reform is still very much overdue.  It would be a shame to see the opportunity for genuine reform of the State planning system torpedoed by the failure of one bill,” said MAV president Cr David Clark.