In a significant shift for urban planning in Victoria, premier Jacinta Allan has announced a pilot program that will require housing developers to contribute funding for critical public amenities like schools, parks, and transport infrastructure in areas where they construct new homes. The trial, set to commence on January 1, 2027, aims to address longstanding inequities in how essential infrastructure gets funded in the state’s booming growth corridors and activity centres.
Speaking to reporters, Allan asserted that the current arrangements for developer infrastructure contributions in Victoria are “complex, inequitable and unfair”, leading to an “administrative nightmare” that often delays homebuilding. Under the existing patchwork of schemes, only 43 out of 79 local councils collect infrastructure levies from developers, and they do so inconsistently.
“Communities that build more homes should also have the opportunity to receive the funding they need for the things that make those communities great,”
– Premier Jacinta Allan
Trialing a New Approach in Key Activity Centres
The revamped infrastructure contribution program will initially be piloted in ten designated “activity centres” that the government has earmarked for accelerated development of high-density housing. These suburban hubs include:
- Broadmeadows
- Camberwell
- Chadstone
- Epping
- Frankston
- Moorabbin
- Niddrie
- North Essendon
- Preston
- Ringwood
Planning minister Sonya Kilkenny emphasized that the ultimate goal is to create a simplified, standardized system that “works for all communities and for all local government areas around the state.” A working group featuring industry representatives will report back to the government by March 2025 with recommendations on structuring the new regime.
Funding Gap for Critical State Infrastructure
Victoria currently lacks a streamlined mechanism for collecting developer contributions toward essential state infrastructure such as public transport, schools and hospitals. The limited existing schemes, including the Growth Areas Infrastructure Contribution which applies mainly in Melbourne’s fringe suburbs, are estimated to cover just 15% of the state infrastructure and services needed to support rapidly growing communities.
A 2023 report from Infrastructure Victoria, the state’s independent advisory body, highlighted the severe mismatch between where development is occurring and where funding is being captured for infrastructure. Over the past decade, just seven local councils in Melbourne’s outlying greenfield areas accounted for 50% of Victoria’s population growth – but these areas often lack sufficient public amenity because of constrained infrastructure budgets.
Resistance Likely from Developers and Councils
The move to overhaul infrastructure contributions is likely to face pushback from some developers and local councils. Property industry groups have long argued that hefty upfront infrastructure charges deter development and worsen housing affordability. Cash-strapped councils in growth areas, meanwhile, are reluctant to cede control over infrastructure funding to the state government.
However, many urban planners and public policy experts contend that the current system is broken and failing to deliver liveable communities. A well-designed, consistent infrastructure contribution scheme could provide funding certainty, unlock development in the right locations, and ensure that all Victorians have access to essential public amenities.
“Reforming developer contributions is politically challenging but critical for delivering sustainable urban growth. We need a system that incentivizes housing density in locations with good infrastructure and captures a fair share of value uplift.”
– Urban planning expert at a leading Melbourne university
Trial Builds on Other Housing Initiatives
The infrastructure contributions trial rounds out a suite of recent housing initiatives announced by the Andrews government aimed at boosting supply, improving affordability and creating liveable communities. These include extending stamp duty concessions for first-home buyers and a controversial plan for the state to override local councils and rezone some suburbs for higher-density development.
With Victoria’s population projected to hit 11.2 million by 2056 and Greater Melbourne to reach 9 million residents by 2056, planning for growth requires a holistic approach that aligns where we build homes with funding for physical and social infrastructure. The infrastructure contribution reforms will be a critical piece of the puzzle – if the government can win over skeptical developers and councils.
As the 2027 trial approaches, Victorians will be watching closely to see if the revamped policy delivers on its promise of a fairer, more equitable and less complex funding model for the infrastructure that makes communities thrive. In the meantime, the hard work of detailed policy design, consultation and capability-building awaits the government and its partners in the housing sector and local government.
