The housing industry says the proposed Icon Water levy will effectively wipe out the first home owners' grant, transferring it into the water company's coffers.
The association has modelled the cost of a two-bedroom apartment in Woden, which it said was a fairly typical buy for first home buyers. Under Icon's planned new levy, the developer of apartments in Woden would pay $6000 for each new apartment. The industry says that cost would be passed through to buyers.
"For many young people, the ACT first home buyer's grant of $7000 will be eaten up by this charge," Housing Industry Association ACT executive director Greg Weller said.
Mr Weller said by the time GST and mortgage costs were factored in, the charge would add almost $16,000 to repayments over a 30-year mortgage.
Icon wants to raise $90 million over 20 years from the levy, which it plans to charge in Woden, the inner north, Fyshwick and Belconnen. The charge is different in each area, reflecting, Icon says, the expected population increases and the amount of work that must be done to the water and sewerage network. The charges were proposed at:
- Woden: $3000 for each new person (an apartment counts as two people)
- City and inner north: $1800
- Fyshwick: $1500
- Belconnen: $1400
Mr Weller made his comments in a submission to Icon Water on its charge which was to take effect from July this year but needs approval from the water regulator.
Icon is now making changes, which a spokeswoman said would be "particularly in the areas of precincts and transition timing". It would finalise its proposal this week, she said.
The government wants to boost numbers living in the Northbourne corridor and along the second-stage tramline to Woden. But Mr Weller said the levy would distort the market, hitting prices and development in those areas where the government wanted to encourage it. It would be a perverse outcome if a charge levied because of government policy ended up causing it to fail, he said.
"Setting significant and inconsistent price imposts on development will invariably drive development to occur where projects are feasible, rather than where is preferred," he said.
Mr Weller said the apartment market was already softening, and the new charge could discourage developers further and reduce prices the government received for selling development blocks.
Sectors of the property industry have been broadly supportive of the new charge, but the real estate industry has strongly criticised it, with Independent Property Group head of project planning David Shearer describing it as a tax in disguise on first-home buyers.
Mr Weller said Icon had refused to release the detail of what upgrades would be funded with the $90 million levy and it was unrealistic to expect the industry's support without that information.
Up-front charges on development are the least efficient way to pay for infrastructure and would hit affordability. Buyers of new homes were already disadvantaged by having to pay GST, which was not charged on existing houses, and the levy would further discourages the construction of new homes, to the benefit of existing property.
Mr Shearer suggested it would be fairer if all new developments attracted the charge, not just developments in the four areas proposed by Icon.
But Mr Weller doesn't support the idea, saying while that would deal with the distortionary impact, it didn't change the fact that it was a "bad levy". The wider community should share the cost, through borrowing, water and sewerage rates or water prices, he said.