Developer Nick Antos is caught in the middle of a new development tax, rushing to submit an application for a new eight-unit Braddon development by Friday's 5pm cut-off to avoid paying an extra $192,500 in tax.
From Saturday, Mr Antos and other developers will have to pay $30,000 a unit for developments on residential blocks, instead of the $5000 to $7500 per unit charged now. Developers who get applications in by Friday will avoid the tax, but because Mr Antos is not ready to lodge a full DA, he is lodging an initial application instead, in the hope of being assessed under the old rules.
The new tax, a surprise announcement in the June budget, has left the building community up in arms, saying it threatens the viability of small-scale townhouse and unit developments.
Mr Antos bought the block in Torrens Street, Braddon, in May, and said he did feasibility work based on the costs and charges at the time. The jump in change-of-use charge from about $47,500 to $240,000 was "a little bit hard to absorb", he said.
"It's huge uncertainty, it's a massive, massive cost, and on top of that the money has to be paid upfront," he said, with the payment due before planning documents are released.
"On the large projects you can probably wear a bit of that, but a small builder like me that's building five, six, seven, eight, we can't wear $200,000. You get to the point where you're doing it for very little."
Rob Knee, from Architects Ring and Associates, said the new charge could make small developments unviable. Such developments involved big risk and developers "put a lot on the line" to do them, he said.
Without risking thier margin, they were left with three options to pay the extra tax - pay less for the blocks, which would impact on homeowners trying to sell them, save on building costs which could hit quality, or recoup the money in higher prices, which would impact affordability.
Mr Knee said if the new charge slowed small townhouse and unit developments, that, too, would put upward pressure on prices and hit affordability.
The new tax is a described as a lease variation charge, and replaces the current strata title charge paid when developers unit title their new blocks. Some in the industry say it will discourage developers from strata titling their blocks and those who can afford to will hang on to the new homes instead of selling them. In that case, they would build smaller rental-style apartments instead of townhouses.
An ACT Treasury spokesperson said the move would "improve consistency" with the charges that applied to post-1971 leases.
"This is creating a more consistent and fair approach to lease variations across all of Canberra," the spokesperson said.
Peter Blackshaw agent Andrew Chamberlain pointed to another possible outcome - that developers would build fewer units to save on tax.
"I think an unintended consequence of the way the tax has been implemented is that developments will default to fewer large dwellings, which is contradictory to the intentions of creating some more affordable stock," he said, with developers better off building "three executive townhouses than seven little ones".
"I'm not sure what the solution, but I just don't think this ... is going to be been a good one."
The tax worked against the government's desire to encourage higher-density living near shops and transport because some of the properties would be worth more as a single home than as a group of units or townhouses, he said.
Director of project planning at the Independent Property Group David Shearer said residents in the older parts of the city who wanted to move away from redevelopment areas but stay in their suburb needed to make enough from the sale to cover the cost of selling, buying and moving, otherwise there was no motivation to sell.
"Removing any incentive for homeowners to sell to developers will simply further limit the supply of residential infill re-development, which will decline so markedly that the demand for this housing will get driven elsewhere," he said.
The tax would "reinforce the bi-polar nature of Canberra's housing supply choice", he said.
"It's either high density apartments or a house, with complete disregard for the missing middle .... townhouses in established suburbs which are an affordable and ideal choice for those who wish to age in place, or for those simply don't want to live in an apartment."