Natashia is a property partner at Holding Redlich. She has acted for many Australian and off shore funds, institutional investors and developers in their investment activities. She has also acted for state governments on strategic development projects. Her expertise includes real estate fund investments, property development, joint ventures and co-ownership arrangements, commercial leasing, structuring and titling issues and the tax issues associated with real estate projects and investments.

We find ourselves in entirely unprecedented times. The challenges presented by COVID directly affect each individual in Australia and around the world.

The actual economic impact of COVID-19 is impossible to measure at this point in time. However, all experts agree that the Australian economy will be significantly affected. Unemployment sits at 10% (the highest since the great depression), there is an estimated 10% reduction in GDP over the current quarter.

The Australian economy will be driven as much by the policy response to the coronavirus as the fallout from the coronavirus itself.

Everyone expects that the property and construction sectors will form the foundation of this response.

In Victoria, the Government has recognised that a “business as usual approach” will not be enough to deal with the dramatic economic consequences of COVID-19.

Last week, the Government announced the establishment of the Building Victoria’s Recovery Taskforce; a dedicated taskforce to guide the state’s building and development industry through the coronavirus crisis.

The Recovery Taskforce has been charged to:

initially focus on overseeing the fast-tracking of planning approvals using Ministerial powers, where decisions have been delayed due to coronavirus related impacts on the Victorian Planning System.
provide real-time advice to Government on issues impacting the industry, helping to remove barriers to building and development works vital for supporting Victorian jobs, housing and infrastructure.
work with industry and unions to review existing major building and development projects, ensuring workers stay safe and healthy while delivering the infrastructure Victoria needs.
advise Government on a pipeline of building and development projects over the longer term, including initiatives that further expand social housing options.
advise on financial incentives and current revenue measures – such as land tax, developer contributions, fees and rates – and make recommendations to help businesses survive and fast-track investment.

So, what projects are likely to be “fast-tracked” and receive support?

I anticipate these projects will be classified as “shovel ready”, so projects which:

have been to tender but not yet awarded,
ready to go to tender (i.e., documents prepared) but have not yet been released; or
have not yet received planning approval (i.e., are being held up).

The Government has also expressly stated that projects that include a social housing component are likely to be fast-tracked through the planning process and potentially receive financial support.

Another consideration will be whether a project will assist economic recovery through job creation and the supply chain.

Consider the 4 big building projects that the Minister for Planning approved last week:

a 101-storey mixed use development which will become Australia’s tallest building
a 35-level office building at 555 Collins Street
a 26-storey office tower at 52-60 Collins Street
a 300-apartment building at 550 Epsom Road, Flemington

These developments are a useful guide for what types of “shovel ready” projects are likely to receive support in the short term due to job creation.

So, what is a “genuine project”?

It is likely the following criteria will be applied in assessing whether a project will be classified as “shovel ready”:

genuinely readiness – e.g. has the project secured funding and submitted a planning application etc.
scale – evidence of economic and/or social value
proximity – location to existing or future infrastructure and community service
job creation opportunities
social outcome – i.e. social benefit
local procurement
other considerations include whether it is has received a or submitted an application for a development approval

Whilst this criteria only applies to potential projects experiencing planning delays, it is anticipated this test will apply to all potential projects once evaluated.

The primary objective of the fast track projects is to get them to market as quickly as possible. Albeit, the fast tracking of approvals will not help those projects which fall into categories 1 and 2 of ‘ready to shovel’. Presumably, these projects may need some other type of stimulus, but financial assistance is one form of support that industry bodies are likely to be advocating for.

A key takeaway

A genuine project that meets this test will likely be fast tracked and receive support from government where the project has a profile that supports all levels of industry.

So, what could recovery assistance look like?

It is likely that given the large-scale impact of the dramatic economic consequences of COVID-19 there will be financial assistance in the medium and long term.

Where a project meets the key objectives (say, provides a large number of jobs and meets the criteria) then I anticipate financial assistance in the form of contributions may be provided by Government. This will also depend on the scale of the project including whether the project has a social benefit.

Given the tax relief offered to small businesses and the hard-hit hospitality and retail sectors, it is likely that some type of tax relief may be offered to the property sector. The Recovery Taskforce are likely to provide more information about what financial recovery assistance will look like over the next few months while it collects data about this and then makes recommendations to Government.