Mornington Peninsula Shire has proposed a mandatory development contribution scheme to address its social housing deficit. 

The scheme, introduced at a council meeting this week, aims to generate funds for up to 1,000 new social housing units by levying a 3.3 per cent charge on new developments.

The Mornington Peninsula, a scenic coastal region just an hour south of Melbourne, is witnessing a severe housing crunch that is disproportionately affecting its low-income residents. 

Local rental markets, reportedly dominated by short-term holiday lets, have driven prices up, making the Peninsula less affordable than Melbourne itself.

The Shire says it face a looming shortfall of 8,051 social housing units by 2041 if no action is taken. 

“It is now significantly more expensive to rent a home on the Peninsula than in Melbourne,” the council says.

The proposed levy would apply to all developments that result in a net increase in dwellings or commercial floor space, with certain exemptions like renovations and public buildings. 

Funds collected would be directed towards both new social housing projects and support for existing state and local programs.

Developers have voiced strong opposition to the plan. 

High-profile industry figures like Sam Tarascio of Salta Properties criticise the levy as a misguided measure that will ultimately raise housing costs for buyers and stifle development. “This proposed levy will only make homes even more expensive, taking more supply out of the market, and reducing accessibility to those who need housing support at the lower end of the market,” Tarascio says.

Despite developer resistance, community housing advocates support the initiative. 

Sarah Toohey, Chief Executive of the Community Housing Industry Association Victoria (CHIA Vic), has praised the council's “innovative and visionary thinking”

“More and more locals are getting priced out of the private rental market, with asking rents up 7 per cent on last year,” Toohey said, adding that nearly 4,000 households are currently facing homelessness or living in overcrowded conditions.

The council plans to engage the community extensively before deciding whether to advance the proposal to the Victorian Government. 

“We expect this consultation to generate a lot of community interest, as it should. There are costs and benefits to this approach and all need to be brought to the table for debate,” said Mayor Councillor Simon Brooks.

This proposal comes at a critical time as the region's tourism and hospitality sectors struggle to find workers, exacerbated by the lack of affordable housing. Developer pushback is expected as the consultation process unfolds.