News / Council

Council to investigate differential rates system

But charging higher rates for landlords unlikely to be lawful, says CEO

Mark Phillips

A SLIM majority of Merri-bek councillors have backed a contentious investigation into whether the council could introduce a differential rates system for property landlords.

Councillors narrowly voted on Wednesday to support a proposal by South ward councillor James Conlan to look into a shake-up of rates that would double bills for residential landlords and halve them for owner-occupiers and commercial and industrial properties.

Conlan claims a differential rates system could ease cost-of-living pressures for homeowners and make more housing available to first home buyers by making Merri-bek less attractive to investors.

Merri-bek, like most councils in Victoria, currently has a uniform structure where all property owners are billed at the same rate.

But the plan has come under fire from the property industry, which says it would reduce the stock of affordable housing for renters. It is also unclear whether it would be allowed under Victorian local government legislation.

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Following lengthy and spirited debate at their monthly public meeting on Wednesday, councillors voted six to five for staff to investigate a differential rate and report back in September whether it is feasible. Those voting in favour included Mayor Adam Pulford.

The average rates bill for a residential property in Brunswick is currently $1800 a year. Under Conlan’s proposal – which has been developed with Brunswick resident Colin Aslin – the rates paid by residential investors would be doubled to an average of $3600 a property, while rates paid by owner-occupiers would be cut to an average of $900.

About 35% of properties in Merri-bek are rental investments.

While a handful of councils around Victoria do charge differential rates, it is believed Merri-bek would be the first to do so based on the ownership status of a property.

Conlan — who denied an accusation from Councillor Lambros Tapinos that his proposal was a media stunt — said it would provide significant cost of living relief for homeowners paid for by charging investors higher rates, while also changing the ownership structure of properties in Merri-bek.

“What this will do is it will make it less attractive to be a property investor in Merri-bek and the idea behind that is as property investors decided to leave the municiplaity, more properties will become available for first home buyers … so more people in Merri-bek really have the opportunity to own a home,” Conlan said.

He said there was no evidence the proposal would lead to increased rents.

Councillor Angelica Panopoulos, who seconded the motion to investigate the differential rates system, said it was important for the council to shape public debate about housing and home ownership.

“In this housing crisis, it’s incumbent upon us as decision makers to look at all of the options we’ve got available to us,” she said.

Have your say: is a differential rate a good idea?

But Councillor Oscar Yildiz said he was “absolutely flabbergasted” by the proposal being brought to the council.

He said a differential rate would punish landlords and force them to sell up and leave Merri-bek to invest elsewhere.

“Landlords are actually improving the rental market, they’re providing rental [housing] for our residents … It’s [differential rating] nothing but destructive … It will discriminate against landlords who have worked very hard to invest in our city.”

Councillor Helen Davidson said the proposal defied common sense and would have unintended consequences that would disadvantage renters.

“Let’s make it clear from the very start: this is not a policy to decrease rates,” she said. “It is a policy to increase rates for a very specific group of people. It singles them out and would double their annual rates.”

The council’s chief executive officer, Cathy Henderson, said in her opinion it was unlikely a differential rate system based on the type of property ownership would be legal in Victoria.

She said there would also be financial implications for the council that would need to be considered as it was most probably not cost-neutral, even it if was lawful.

“It’s very unlikely that … increasing rates on those that own more than two properties would fund a halving of the rest of the rate base,” she said.

“It’s very unlikely the maths of that would work out.”

In a note attached to Conlan’s motion on Wednesday, staff said it was “very unlikely that it is feasible” given the legislative framework and requirements that apply to local government in Victoria. 

A differential rate may be seen as unfair and excessive towards certain ratepyer groups, the note said.

The motion passed on Wednesday night requires council staff to report by September on whether it would be possible to introduce a differential rate. It will cost about $5000 to prepare the report.

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Double rates for property investors, says councillor