Page 1987 - Week 06 - Wednesday, 25 June 2008
There are land rent schemes in other parts of the world which, being established on a freehold system, depend on the establishment of trusts to purchase and own the land which is then rented to homeowners. However, the ACT is still a leasehold system and so this project, which reintroduces land rent for particular people in the first instance, takes advantage of the territory’s land tenure system; and, if well handled, this scheme may well provide the scaffolding out of the rental housing trap for some people on lower middle incomes.
One of the biggest barriers faced by many people seeking to purchase their first home is the so-called deposit gap. The deposit needed for a house and land is growing faster than the savings a couple can accrue while they pay increasing rents. If it is possible to purchase a home and then save additional money on a concessional land rent while the mortgage on the house is paid off then not only does that person or that couple start to own their own home but they can be better placed to eventually purchase the land. That is the theory and, with a bit of luck, in most cases that will be the practice.
I would like to discuss some concerns that I still have with the scheme because I am not convinced that Treasury et al have yet put in place the safeguards that I would hope for with an innovative program in a section of the market where the borrowers will be particularly vulnerable. This scheme is about making a space in the market. There is no protection for borrowers who might find themselves trapped with negative equity or simply unable to meet repayments. It will be up to standard credit providers such as banks and mortgage companies and the purchasers to sort it out among themselves.
In that context, then, I sought some reassurance from government that the credit providers were fully aware of this scheme and were themselves committed to making it work. I understand that they have shown considerable interest in it, both broadly when the idea was first floated and, more recently and specifically, in regard to this legislation. There do not appear to have been any discussions, however, about the challenges faced by people on low incomes and their extraordinary vulnerability to rising costs, including mortgage costs, interest rises and fuel costs.
Other organisations consulted include the Law Society and the Real Estate Institute. It has been assessed externally by an independent expert, AHURI, that is, the Australian Housing and Urban Research Institute, but there has been no input from experts whose work is focused on the very people that this scheme is directed towards.
In recognition of these issues, attendance at a compulsory training course being run at CIT will be required for anyone wishing to put themselves up for a ballot of an LDA block available to rent. That course is based on a similar course in New Zealand and has been assembled under the guidance of the CIT, the LDA, the Chief Minister’s Department and Treasury. It has not, however, involved any conversation with CARE Financial Counselling or ACTCOSS, who are key organisations in the ACT with a real, everyday understanding of what is happening to people in financial stress or on low incomes.
I have been reassured that issues relating to land rent payments will be handled sympathetically and intelligently by that part of Treasury that handles rates. I also