Melbourne grass isn’t greener, but it’s getting more expensive

A new Bill introduced into the Victorian Parliament seeks to update the habitat compensation arrangements within Melbourne’s growth corridors, providing additional funding to support State government acquisition of land for conservation area reserves given increases in land values.

The Melbourne Strategic Assessment (Environment Protection Mitigation Levy) Bill 2019 (the Bill) would replace the existing regime for habitat compensation payments with a new Environment Protection Mitigation Levy (the Levy), which will involve significant increases over the next five years from 1 July 2020.

Growth areas developers will need to consider the timing of when the Levy will become payable, and factor the cost into financial modelling.

Background

As part of the 2010 Melbourne Strategic Assessment to support urban development within an expanded urban growth boundary (UGB), the Victorian government is required to establish biodiversity conservation measures pursuant to its commitments to the Commonwealth government under the Environment Protection and Biodiversity Conservation Act 1999 regarding matters of national environmental significance as well as State requirements for impacting native vegetation and habitats. This includes acquiring land for the 15,000 hectare Western Grasslands Reserve and the 1,200 hectare Grassy Eucalypt Woodland Reserve, both of which will sit outside the UGB.

To fund the acquisition of these reserves the habitat compensation regime was established, which requires developers to pay an amount for offsetting the impact to biodiversity values based on time-stamped biodiversity data. The regime has always been intended to fully fund the cost of fulfilling the State government’s commitments under the EPBC Act.

The 2016-17 progress report by the Department of Environment, Land, Water and Planning noted that, at that date:

• 1,244 hectares had been purchased;¹ and
• about $72.6 million had been raised and $46.4 million spent.²

The Department has recently been reported as having confirmed that, since the 2016-17 progress report, approximately 176 additional hectares have been purchased,³ with a significant amount of the land yet to be purchased.

As part of the second reading speech of the Bill, it was noted by the Victorian Environment Minister that land values outside the UGB had rapidly escalated since 2017, meaning that the current habitat compensation amounts would only cover half the cost of land acquisitions for the reserves.

The biodiversity conservation measures under the Melbourne Strategic Assessment have approval under the EPBC Act until 2060.

What will change?

The Bill will introduce new elements to the existing regime, akin existing GAIC processes. Key features of the new regime are outlined below.

Price: The Levy will apply from 1 July 2020 (if not declared to commence earlier). The below table shows the existing habitat compensation amounts, compared to the Levy for the financial year 2020/21.

These new levies remain insufficient to deliver these offset areas on a full costs recovery basis. The Bill provides a complex formula for indexation over subsequent years, with the intention for the Levy to have significantly increased, and reached a sufficient amount, by 2024/25. According to the second reading speech, the increase to the Levy will, on average, impose an additional cost per lot of $152 in the 2020/21 financial year, incrementally increasing to $1,099 by the 2024/25 financial year.

This may provide an incentive for developers to speed up their applications, with those who own land in PSP areas yet to be finalised having to pay a higher price in the years to come.  It can be expected that the Levy may form part of the cost passed to the eventual landowners and occupiers in the growth areas.

Reviews: The Levy will be reviewed within the first three years and then every five years thereafter. The review report prepared by the Environment Minister will set out the conservation outcomes sought to be achieved, and the preferred measures to achieve those outcomes, to achieve full cost recovery by 2060. The review report will go through a public consultation process. Separately, the Bill provides that the Levy funds must be kept in a separate account (including all prior habitat compensation payments) and only used for specific purposes, with Commissioner for Environmental Sustainability conducting audits every two years.

Areas: the Levy will apply to ‘levy areas’ which will be declared and gazetted. At this stage these areas are unknown, however it is expected that they will comprise the 2010 expanded UGB areas already subject to the existing habitat compensation regime. Habitat areas reflecting the listed habitats above will also be identified.

Certificates and notices: Akin to the GAIC regime, notices will be recorded on title that a Levy liability exists, and certificates can be issued for particular parcels of land, including to ascertain the Levy liability, to confirm that the obligation to pay the Levy has been discharged, and to confirmed a staged payment arrangement.

Trigger events: Generally, the Levy will be payable upon processing of subdivision applications, the issue of extractive industry work plans (or amendments to them) and applications for building permits. Certain works and subdivision types, as well as certain activities on Crown land, are excluded.

Staged payments and land transfers: The ability under the current regime to enter into agreements for staged payments and/or land transfers for identified conservation areas will be maintained.

Rights of review: In certain circumstances landowners will have the right to object to a Levy notice, to seek a reassessment of the Levy amount and/or to seek review of a decision under the new regime from VCAT.

Transitional provisions: Importantly, as the Levy only applies to land once, any habitat compensation payments already made under the existing regime for certain parcels of land will not be liable to pay the Levy. Similarly, there are transitional provisions for staged payment agreements under the existing regime.

The Bill can be seen as recognising the need for effective biodiversity conservation, and reflecting the ‘user pays’ principle which is increasingly given effect in environmental regulation. Other recent developments in biodiversity conservation by the State government include the release of the Victorian ‘Biodiversity 2037’ strategy as well as reviews of the Flora and Fauna Guarantee Act 1988 and native vegetation clearing regulations, also occurring this year.

We will monitor the progress of the Bill through Parliament. If you would like to get in touch about planning queries in the growth areas, please contact us on the details below.

1 Melbourne Strategic Assessment Progress Report, DELWP, page 4.
2 Melbourne Strategic Assessment Progress Report, DELWP, page 3.
3 As advised by DELWP to Footprint News, Monday 21 October 2019, 11:16am.
4 https://www.msa.vic.gov.au/regulatory-requirements/habitat-compensation