Executive summary
Key recommendations for the 2026-27 Federal Budget:
- Rebalance federal housing policy away from demand-side subsidies, including Help to Buy, and toward structural housing models that retain affordability and public value over time, with Community Land Trusts as core national infrastructure.
- Develop through the Council of Financial Regulators, APRA and Treasury a maximum effective residential mortgage term of 30 years, without extension through refinancing.
- Establish a $2 billion National Community Land Trust pilot as best-practice shared equity infrastructure, delivering access, perpetual affordability, self-funding and scalability as a fiscally disciplined alternative to Help to Buy.
- Mandate Housing Australia to act as lender of last resort for CLTs, provide equivalent guarantees to first home buyer schemes, and establish a dedicated Community Housing and CLT Fund accessible to smaller, for-purpose developers.
- Create an Affordable Housing Construction Finance Window within Housing Australia to support construction risk for CLTs, shared equity and perpetual affordability providers.
- Expand Housing Australia’s bond issuance capability to issue Commonwealth-backed Affordable Housing Infrastructure Bonds funding enabling infrastructure and construction for CLT and perpetual affordability projects.
- Recognise Independent Living Units within CLTs as housing infrastructure, eligible for Housing Australia finance and able to recycle surpluses into youth housing CLTs.
- Introduce a federal Community Opportunity to Purchase Act granting CLTs first right of refusal on Commonwealth land sales and federally funded land transfers.
- Grant CLTs first right of bid on public land and rezoned medium-density land where public value has already been created through Commonwealth funding, guarantees, asset transfers or infrastructure contributions.
- Reform Treasury land valuation frameworks to prioritise triple bottom line outcomes over highest upfront sale price and align Commonwealth land disposal with long-term affordability and fiscal outcomes.
- Introduce a 100 percent transferable CGT discount, capped at market value, for land donated to registered CLTs delivering perpetual affordability.
- Reform negative gearing and CGT by phasing out concessions for existing residential investments and restricting concessions to newly delivered, perpetually affordable housing.
- Remove interest deductibility for land banking across all ownership structures, reinstated only where delivery thresholds are met against total developable land holdings.
- Direct APRA via the Council of Financial Regulators to re-introduce and tighten macroprudential limits on investor interest-only lending, with a pathway to phase out, including short-term rental investors.
- Introduce a national short-term rental register and enabling framework for locally set caps and permit pricing, including cap-and-trade where jurisdictions choose, with revenues directed to affordable housing supply.
- Require the National Housing Supply and Affordability Council to investigate data-driven and algorithm-mediated market conduct affecting supply, pricing and access, and establish a national Scarcity Radar pilot.
- Govern housing algorithms in the public interest through proportionate transparency, audit mechanisms, regulator data access and suspicious-activity reporting where market conduct risks are identified.
Purpose
This submission updates and extends Grounded’s previous Federal Budget submission, incorporating subsequent work on negative gearing and capital gains tax reform, land banking, short-term rentals, and Community Land Trusts (CLTs) as essential housing infrastructure.
The central argument remains unchanged. Demand-side housing policy continues to inflate land values, transfer public wealth to asset holders, and deepen fiscal exposure, while failing to deliver affordability. Structural reform is now unavoidable. The question is how to create the pathway of least resistance.
Problem definition
Australian land prices have increased by $5.1 trillion in the last decade, doubling the land value that had occurred over the previous 26 years. These gains are not driven by productivity, construction cost, or population pressure alone, but by policy settings that capitalise subsidies, interest rate cuts and income support into land prices.
Instead of recognising that the commodification of land and housing has been a primary cause, we have been lulled into thinking the pathway forward is to give more market power to the for-profit development industry. Not only has a national priority developed to rollout unlimited supply, this occurs with limited checks and balances in place.
Imagine failing even middle class Australians in any other market and the response is to give that industry even more power?
Rental markets remain extremely tight in many regions, with availability and affordability under sustained pressure. Workforce participation is constrained. Older women are the fastest growing cohort of homelessness. The fiscal cost of inaction compounds each year.
Treasury’s reliance on “highest and best price” outcomes for land disposal is incompatible with long-term affordability, productivity, and intergenerational equity.
Why Community Land Trusts
Community Land Trusts recognise land as a community created asset. By separating land from housing, CLTs ensure that public and community investment is retained rather than extracted.
Key features include:
Residents purchase or rent the dwelling only, not the land.
Deposits are reduced by approximately 50 to 70 percent.
Ongoing land use fees replace land speculation with stewardship.
Resale formulas cap prices relative to local incomes or median prices, locking in affordability in perpetuity.
Capital gains are partially retained by the Trust to recycle subsidy.
Perpetual affordability is maintained over generations.
Locals who contribute to the community as volunteers/ key workers are prioritised.
Provides a pathway for community agency to take ownership of problems at source.
International evidence demonstrates:
Returns on investment of approximately 3.1 to 1 over 30 years in published lifecycle analyses that include health, wellbeing and fiscal savings.
Foreclosure rates are up to 90 percent lower than the conventional market.
Lower loan-to-valuation risk, enabling reduced mortgage insurance costs.
CLTs deliver access, impact, scalability and perpetuity. No mainstream federal housing program does all four.
Critically, CLTs can redirect housing market outcomes without requiring immediate reform to politically sensitive tax settings such as negative gearing or capital gains tax. By removing land from speculative markets and locking in resale controls, CLTs change price formation at the point of delivery, reducing reliance on contested tax reform while still delivering durable affordability.
However, this should be understood as sequencing, not substitution. Structural tax reform remains necessary to address economy-wide distortions and land price inflation. CLTs provide a politically durable pathway to begin market correction now, while creating the institutional and evidentiary base for broader reform over time.
Tax reform package
Negative gearing and CGT
Phase out negative gearing on existing residential investment properties.
Restrict negative gearing to newly delivered dwellings that meet strict affordability and tenure requirements, including CLTs and regulated shared equity models.
Reduce the CGT discount for residential investment property. Retain full exemptions only for owner-occupiers and approved perpetual affordability projects.
These reforms directly address the capitalisation of tax concessions into land prices.
Investor lending reform
Ban interest-only loans for residential property investors.
Apply the ban to short-term rental investors without exemption.
SMSF reform
Tighten SMSF residential property investment rules.
As a nod towards inter-generational equity, redirect concessional SMSF investment toward pooled vehicles that seed CLTs and perpetually affordable housing.
Enable compliant SMSF participation in regulated affordable housing infrastructure rather than individual speculative dwellings.
Interest deductibility and land banking
Remove interest deductibility for vacant or underutilised land where development does not occur within a defined timeframe.
Extend this removal explicitly to corporations, trusts, managed investment vehicles and holding companies.
Current law disproportionately penalises small landholders while protecting large-scale land banks with significant market power. This distortion must end.
Interest deductibility could be reintroduced only where developers deliver a minimum annual release rate measured against total developable land holdings, evidenced by subdivision certification, title creation and construction commencement, rather than planning approval alone (see Scarcity Radar).
Tax incentives for land contribution
Transferable CGT discount for land donation
Introduce a 100 percent transferable CGT discount for land donated to a registered CLT delivering perpetual affordability.
The CGT discount ceiling is capped at the independently assessed value of the donated land.
The discount may be applied to another site owned by the same holding company.
This enables balance-sheet neutrality while permanently locking in public benefit.
For more detail see our recent Victorian Budget submission.
Mortgage term limits
Legislate a maximum residential mortgage term of 30 years, with no extensions through refinancing or loan rollover.
This restores housing finance as a productivity tool rather than a price inflation mechanism and prevents affordability from being artificially maintained through intergenerational debt extension.
Land and planning reform
Community Opportunity to Purchase Act
Introduce a federal Community Opportunity to Purchase framework applying to all Commonwealth land sales and federally funded land transfers.
Minimum 180-day public notice period prior to sale.
Mandatory first right of refusal for registered Community Land Trusts and approved perpetual affordability providers.
Applies to surplus Commonwealth land, defence land, infrastructure-adjacent land, and land disposed of through federal programs.
Allows first right of bid on public land and rezoned medium-density land in areas of housing stress where federal funding or guarantees apply.
Treasury valuation reform
Require Treasury to explicitly account for triple bottom line outcomes in land disposal and infrastructure decisions.
Allow long-term fiscal returns, workforce stability, wellbeing, avoided welfare costs and perpetual affordability to outweigh the highest upfront sale price.
Highest price is not the highest value.
Short-term rental reform
Introduce a national cap-and-trade framework for short-term rentals.
Caps set at local government level based on vacancy rates, workforce housing needs and population pressure.
Tradeable permits auctioned, with revenue hypothecated to localised affordable housing supply.
Primary residence exemptions are strictly limited and time-bound.
Short-term rental investors are excluded from negative gearing, interest-only loans and CGT concessions.
This converts extractive activity into a funding source while restoring long-term rental supply.
Direct funding and pilots
National CLT pilot program
Establish a $2 billion National Community Land Trust pilot as best-practice shared equity housing infrastructure.
The pilot must deliver access, perpetual affordability, self-funding and scalability, and operate as a fiscally disciplined alternative to demand-side programs such as Help to Buy.
CLTs retain affordability after resale, recycle public investment, and do not inflate surrounding land prices. Their tripartite governance model embeds community, resident and public-interest oversight across both short- and long-term horizons.
State-based pilots should prioritise statutory recognition, access to low-cost finance, land access pathways and consistent policy treatment across jurisdictions.
Modelling indicates approximately a 450 percent return on public investment compared to Help to Buy when lifecycle costs and subsidy leakage are accounted for.
Without reform, replacement housing program liabilities are projected to exceed $15 billion within a decade. CLTs materially reduce this exposure.
Federal direction through the National Cabinet is required to update state Residential Tenancies Acts to support shared equity and capital gains sharing under NFP housing.
Housing Australia’s role
Housing Australia should act as the central financing and risk-management institution for Community Land Trusts and perpetual affordability housing.
This includes acting as lender of last resort for CLTs and providing guarantees equivalent to those used for Help to Buy schemes.
Housing Australia should establish a dedicated Community Housing and CLT Fund accessible to smaller, for-purpose developers, not only large community housing providers.
Housing Australia should expand its existing bond issuance capability to issue Commonwealth-backed Affordable Housing Infrastructure Bonds to fund enabling infrastructure and construction for CLT and perpetual affordability projects.
Bond repayments should be structured against site value over long durations, ensuring affordability is preserved and infrastructure costs are shared across successive owners at least cost.
International precedent demonstrates that layered guarantee structures are rarely, if ever, called upon.
Construction finance window for affordable housing
Establish a dedicated Affordable Housing Construction Finance Window within Housing Australia.
Provide low-cost debt, guarantees and subordinated finance for construction risk, not just land acquisition.
Restrict eligibility to CLTs, shared equity and perpetual affordability providers with enforceable affordability covenants.
Algorithmic housing markets and regulatory failure
Australia’s National AI Plan does not address AI’s impact on the nation’s largest asset base: land.
Housing markets are now influenced by predictive algorithms combining land titles, planning signals, infrastructure announcements, listings data and sentiment analysis.
Early access enables anticipatory behaviour. Price discovery occurs after supply behaviour has already shifted.
When major developers and institutional investors rely on similar models, supply behaviour synchronises. Listings pause. Releases slow. Prices rise.
This mirrors insider advantage without an equivalent regulatory framework.
Regulatory gap
Policy risk
Land is already a structurally concentrated asset. Algorithmic optimisation amplifies scarcity and withholding incentives.
Without intervention, AI will entrench advantage for capital-intensive actors and accelerate affordability loss ahead of public visibility.
Required federal response
Govern housing algorithms using principles applied to trading algorithms.
Introduce suspicious-activity reporting for major housing platforms and large landholders.
Mandate reporting of anomalous listing withdrawals, delayed releases and synchronised supply contraction.
Require auditability where algorithmic systems materially affect housing supply or pricing.
Introduce a public-interest property data concession to end exclusive access to privatised land and planning data.
Develop public-interest housing algorithms to equip planners, regulators and researchers with balanced, real-time data to counter information asymmetry and hold market actors to account.
Role of national institutions
The National Housing Supply and Affordability Council must investigate algorithm-driven supply behaviour as part of its core mandate.
Supply analysis must extend beyond rezoning and approvals to examine real-time market conduct.
Establish a national Scarcity Radar to monitor:
The annualised supply rollout per Master Planned Community.
Listing withdrawals.
Release pacing (informed by auction clearance rates, days on market, credit availability, open day visits, approved finance).
Title creation delays.
Algorithmic correlation across major developers.
This is essential to detect manufactured scarcity before prices move.
The role of financial institutions in reinforcing asset value stability must be incorporated into market analysis.
The use of automated decision systems in housing finance should be examined at a systems level to understand their aggregate effects on access, risk allocation and market behaviour.
Protecting communities now requires transparency over how AI uses land, housing and credit data.
Any National AI Plan that ignores this is incomplete.
Without algorithmic oversight, affordability will continue to be shaped by invisible systems operating far ahead of democratic scrutiny.
Affordable Housing Infrastructure Bonds
Introduce Commonwealth-backed Affordable Housing Infrastructure Bonds issued via Housing Australia.
Bonds to fund enabling infrastructure and construction for CLT and perpetual affordability projects.
Returns are structured for long-term, low-risk investors, including superannuation. Repayments are charged on the site value over 20 years, ensuring multiple owners contribute at least cost.
This converts infrastructure spending from land price inflation into permanent housing assets at least cost.
Independent Living Units and intergenerational affordability
Independent Living Units (ILUs) are a core part of Grounded’s housing futures work and the ageing-in-place strategy. With moderate government assistance, ILU’s can help the market help itself.
ILUs enable older Australians to downsize into secure, well-located housing while remaining embedded in their community.
Delivered under a Community Land Trust model, ILUs retain perpetual affordability rather than converting accumulated housing equity into speculative gain.
Intergenerational value capture
ILUs should operate within a shared equity and shared surplus framework.
A modest share of uplift or operating surplus is retained by the CLT rather than extracted at resale.
Once per decade, this retained value can seed fund a new youth housing CLT or cohort of permanently affordable dwellings.
This creates an intergenerational transfer of housing opportunity rather than an intergenerational wealth drain.
Why this matters
Downsizing without affordability controls simply recycles scarcity.
ILUs within CLTs free up larger homes, reduce pressure on aged care, and stabilise neighbourhoods without inflating land prices.
Older residents gain security, lower housing costs and dignity in ageing.
Younger households gain access to entry-level housing without competing against inherited equity.
Federal policy settings
Recognise ILUs as eligible dwellings within Housing Australia finance and guarantee programs.
Prioritise ILU-linked CLT projects in federal funding rounds where ageing, disability and workforce housing overlap.
Enable retained surpluses from ILU developments to be recycled into new CLT projects without triggering punitive tax treatment.
Align ILU delivery with National Housing Supply and Affordability Council analysis to capture their role in unlocking underutilised housing stock.
ILUs are not a retirement product. They are housing infrastructure.
When embedded in CLTs, they convert private equity into perpetual public benefit.
This is how ageing in place can actively fund the next generation’s access to housing rather than crowd it out.
Conclusion
Australia’s housing crisis is not a market failure in the abstract. It is the predictable outcome of policy settings that have allowed $5.1 trillion in land value uplift over a decade to accrue largely untaxed, ungoverned and increasingly optimised by algorithms, while public expenditure is repeatedly deployed to chase affordability after it has already been lost.
Demand-side subsidies such as Help to Buy, permissive land banking and algorithm-driven supply coordination have combined to entrench scarcity, concentrate advantage and deepen fiscal exposure. Continuing along this path will require ever-larger public outlays simply to hold conditions steady, while affordability continues to erode for working households, older Australians and younger generations alike.
Relying predominantly on supply expansion overlooks the fact that for-profit developers are bound by fiduciary duties to maximise returns, not to deliver affordability or counter-cyclical outcomes.
Community Land Trusts offer a structurally expedient and politically durable pathway. By converting land from a speculative asset into housing infrastructure, CLTs retain public and community investment, deliver access at materially lower cost, recycle value over time, and lock in affordability in perpetuity. Critically, they can redirect market outcomes without requiring immediate changes to negative gearing or capital gains tax, while building the institutional foundation for broader reform.
When combined with Independent Living Units, CLTs also enable intergenerational equity, allowing ageing in place to actively seed the next generation’s housing rather than crowd it out. This aligns affordability outcomes with political economy realities rather than working against them.
Federal leadership is now required to align tax, finance, land disposal, AI governance, statutory definitions and housing institutions around long-term outcomes rather than short-term price signals. This includes governing housing algorithms in the public interest, equipping planners with balanced data, ending information asymmetry, and enabling national institutions to detect and deter manufactured scarcity before it harms communities.
Housing policy must move beyond price management and temporary relief. The question is no longer whether the Commonwealth can afford to shift course, but whether it can afford not to. Bringing Community Land Trusts front and centre of federal housing policy is a fiscally responsible step toward restoring affordability, productivity and intergenerational fairness, and ensuring that the benefits of land are shared rather than extracted.