Victorian councils have allegedly welcomed the state government’s step away from rates exemptions.

The Andrews government had a controversial plan to introduce a new housing development tax to help pay for social housing projects, which includes a 1.75 per cent levy on all new developments of three or more dwellings. 

The tax on developers was to fund social housing projects, but it caused outrage and consternation among developers, and has now been dumped. 

The levy would have raised about $800 million a year for new social housing.

Treasurer Tim Pallas said that in “clearly a disappointing result”, the reforms have been taken off the table for good.

“They are done, they are dusted and they are finished,” he said.

“The key for the government is that we've been left with no choice given the fact that the property sector's response to these reforms has been clearly negative in tone.”

The Municipal Association of Victoria (MAV) says councils have welcomed the move. 

“The rates exemption wasn’t thought through,” says MAV president Cr David Clark.  

“It did not consider the impacts on council service delivery and it punished our most disadvantaged communities simply because they have the most state-owned social housing.

“It is vital that social and affordable housing proposals do not come at the expense of proper community planning processes. 

“Local communities … were deliberately cast aside in this consultation on the social and affordable housing bill and in the planning reform process more generally.”

The MAV says it is still ready to work with the State Government on planning reform.