By Catherine Carter
THE new land rent scheme (which has been debated and passed in the Legislative Assembly), forms part of the Government’s “Affordable Housing Action Plan” and will reduce the upfront costs in buying a home for low-income buyers.
It works by allowing families to buy a home on land rented from the ACT Government.
“For example, if households choose to rent land with an unimproved value of $100,000 then they would only have to pay a rental amount of $38 per week,” says Chief Minister Jon Stanhope.
Eligible households are those earning less than $75,000 gross a year, who own no other real estate and who will live in the house on the rented land.
Under the scheme, land rent will be available on all new, single, residential blocks released by the Land Development Agency, and will apply to 81 blocks available in Franklin by the end of this month. Mr Stanhope says this scheme will combine with other land releases and increased concessions for first-home buyers to increase the options available for affordable housing.
This scheme is innovative and clearly of interest to low-income families. It also broadens the range of options available to new-home buyers, and anything that increases the diversity of choices is a step forward.
However, while it may make it possible for low-income earners to afford to live in a house, one of the benefits of owning a home is the way the land value increases over time to match, or even outpace, cost-of-living increases.
This scheme denies the purchasers those gains, leaving them with the house, which can depreciate, rather than gain in value. Some might consider long-term leases just as secure, without the upfront cost of purchasing and maintaining a house.
Stamp duty is still charged on homes under the scheme, and a better way to make housing more affordable for all first-home buyers would be to simply abolish it.
Some issues need clarification. For example: what happens if a home owner defaults on the land rent while still paying regular mortgage payments for the home sitting on the land?
Will the income threshold be adjusted for inflation and cost of living increases? And if so, how?
What happens when the homeowner sells? How is the land component valued? If the home owner wants to sell before the end of this year, and the only buyers aren’t eligible for the rental scheme, will the government step in and refuse to allow the sale? How transferable will the land rental scheme rate be?
These are all details requiring further information before the would-be home owner can confidently know that the scheme is suitable not just for the present, but also for the future.

Catherine Carter is executive director of the Property Council of Australia (ACT).