Page 3523 - Week 11 - Thursday, 19 September 2013
Land Rent Amendment Bill 2013
Debate resumed from 15 August 2013, on motion by Mr Barr:
That this bill be agreed to in principle.
MR SMYTH (Brindabella) (4.40): I note from this amendment bill’s explanatory statement that it seeks to make amendments to the Land Rent Act 2008 to take effect from 1 October 2013. I thank the minister and his staff for the briefing. These amendments will retarget the land rent scheme to assist those most in need by restricting entrance into the land rent scheme to only those applicants who are eligible for the discounted land rent rate of two per cent.
Key features to take effect from 1 October are as follows: the land rent scheme will only be available to new entrants who are eligible under the criteria for the discount land rent rate of two per cent; the income threshold will be increased and will include the income of a lessee and their domestic partner; lessees who are no longer eligible for the discount rate will be obligated to transition out of the scheme by transferring their land rent crown lease to a nominal crown lease or transferring the block to another eligible applicant; and lessees entering the scheme on or after 1 October 2013 will only be able to transfer their land rent crown lease to a purchaser who is also eligible for the discount rate. This legislation amends the calculation of interest of an outstanding land rent debt from a simple monthly rate to a compounding rate.
To state our position at the outset of what I have to say, the Canberra Liberals will not be supporting the bill. We maintain our continued position on this scheme: we do not agree with the fundamental design of this program, for the reasons already mentioned. As such, support for this scheme is tantamount to supporting wrong policy. In turn, wrong policy cannot solve the problems, no matter how hard you try to bandaid it, as in the case of what the government is trying to do with this amendment.
When the government advertised their scheme, here is what they said: “The Scheme will allow eligible households to pay rent on land rather than purchase it. It will help a number of households who might not otherwise be able to buy their own home to have access to the housing market.” Yet at the time the government failed to follow up with the fact that there were no lenders willing to underwrite people who had signed up for the scheme. Lenders responded by saying that it was too risky. Westpac said: “I have been speaking to the head of our legal department who has advised this proposal looks promising, although they do have some concerns that need to be addressed prior to moving forward.” St George said:
… there was no appetite for participating in the scheme for the following reasons. In the event of a borrower default it would be difficult to distinguish house versus land value upon the sale to repay the housing loan.
Genworth Financial said:
The cost of construction may not equal the value of the dwelling. Without the land component balancing out any negative equity issues realised in the value of the dwelling it is possible from the outset that the borrower may, in fact, have negative equity.