How does ACT's Land Rent Scheme work?

Housing affordability is a hotly debated topic. Some say that the average Australian is being priced out of home ownership, while others believe young people are just spending too much on smashed avo. The ACT has its own plan to get more first home owners into new houses - the Land Rent Scheme.

The Land Rent Scheme was initially introduced as part of the Land Rent Act in 2008, and its original purpose was to help people enter the housing market. As median house prices in the ACT have leapt from $452,500 in 2008 to around $640,000 in 2017¹ - the scheme now benefits a much larger group of people.

It works like this: Instead of buying a house on a piece of land, you purchase a block of land from the Suburban Land Agency. You pay rent to the government (specifically, the ACT Revenue Office), and how much you pay depends on the size of the land. Within a year of initiating the lease, you must begin construction of a house, which is required to be completed within two years of the start date of the lease. Essentially by renting the land rather than having to buy it, you are able to build a home without needing access to vast sums of capital.

The average building cost for a three bedroom home in Australia is around $190,000². At less than one third of the median house price in ACT, this scheme clearly can be a great asset for first home owners.

Construction loans are generally no more difficult to acquire than a regular home loan, it all depends on your financial situation. The final benefit to first home owners in the ACT is that this scheme is open exclusively to them. No person may take advantage of the offer if they already own property, and those with a high gross income or considerable net worth are not eligible.

The key eligibility criteria for Land Rent Scheme is:

• Household income does not exceed $160,000.
• Lessee(s) must reside in property.
• Lessee(s) cannot own other real estate

The scheme is available in certain new developments released by the Suburban Land Agency or existing properties which are being sold and are currently under the Land Rent Scheme. As part of Beyond Bank's Land Rent Scheme loan package, we offer a four month pre-approval window, which means you should have plenty of time to find the perfect plot for your new home.

There are no restrictions on what kind of house you can build under the Land Rent Scheme, other than it must be a single dwelling. This means you can build one standalone house, so a smaller unit in addition to the house would not be allowed. The house will still need to comply with state planning and building standards, and there may be additional regulations specific to suburbs or areas, but these will be clearly outlined when you agree to lease the land.

The rent is calculated at 2 per cent of the unimproved value of the land per year. Unimproved value is essentially the assessed value of the land at a particular point in time rather than the value of the land with your house built on it. If you buy a piece of land for $200,000, your repayments would be around $4,000 per year.

The great news is, if you're able to take advantage of the Land Rent Scheme you will not be barred from applying for the First Home Owners grant of up to $10,000. As long as you meet the individual eligibility criteria for both, you are able to reap the benefits of both schemes.