2026-27 Victorian Budget submission
About the proponent
Grounded is an independent Victorian housing economics and policy organisation specialising in land, affordability, and community-led housing models. We have made multiple submissions to Victorian budgets and housing reviews, with a focus on Community Land Trusts, shared equity, rural housing access, and land-based policy mechanisms that suppress speculative rent capture.
Executive Summary
System Architecture for Scalable Affordability
This submission proposes a coherent package of budget measures that extend proven land and housing economics into the owner-occupied market and planning system, addressing housing affordability as an emergency while maintaining fiscal discipline and policy continuity.
The measures are designed to operate as an integrated system. Individually, each intervention addresses a specific market failure. Collectively, they shift public expenditure away from inflationary demand-side support and toward durable, non-speculative housing supply that retains affordability over time.
Key elements of the proposed architecture are as follows.
- Reduce deposit barriers for first home buyers
Community Land Trusts and ground lease models materially lower entry prices by removing land value from the purchase price. This typically reduces required deposits by 40- 60 percent compared with market purchases, bringing ownership within reach without increasing household leverage or requiring ongoing subsidy. The underlying effect is stable prices over time, rather than one-off, inflationary assistance that is lost on resale. - Modernise shared equity to retain affordability over time
Ground Lease Model 2.0 extends existing shared equity programs by retaining affordability and public value across resale cycles. It shifts public support from a one-off intervention at purchase toward a structure where value is preserved and reused. - Rebalance stamp duty discounts toward lasting supply
A modest reallocation of stamp duty discount expenditure provides seed capital for supply-side pilots without removing support for first home buyers. Investment in perpetual affordability models delivers permanent outcomes rather than one-off price effects. - Introduce an Affordable Supply Impact Statement
The Affordable Supply Impact Statement embeds affordability accountability into planning decisions. Developers must disclose baseline and projected income-to-price and income-to-rent ratios and report against them over time. A Scarcity Radar supports enforcement and protects planners from pressure to approve on optimism rather than evidence. - Establish a state-backed construction finance window
A Treasury-backed construction finance facility addresses a clear market failure affecting community-led and affordability-focused projects. By covering the 24-month construction phase only, the facility accelerates delivery while keeping fiscal exposure short-term, secured, and recoverable. - Enable landholder participation through third-party land security
Landholders may offer separate parcels as security to support construction finance, reducing risk to the State. Incentives are time-limited, performance-based, and capped to the value of de-risking provided, converting passive landholding into active participation in housing delivery. - Deploy an Affordable Housing Infrastructure Bond
The Affordable Housing Infrastructure Bond treats affordability as long-lived infrastructure. By aligning repayment with asset life and funding via site value, the bond reduces subsidy gaps, lowers household leverage, and limits price capitalisation. - Activate idle land for immediate housing outcomes
Targeted land tax incentives mobilise vacant land for temporary housing, including tiny homes, while enabling trunk infrastructure to be sized for future permanent development. This discourages land banking and delivers both short-term supply and long-term capacity. - Support downsizing through Independent Living Units
Independent Living Units provide a dignified local downsizing pathway while releasing underutilised housing stock. Stewardship fees and retained land value can seed future community-led and youth housing, creating an intergenerational affordability pathway. - Introduce a Community Opportunity to Purchase framework
A Community Opportunity to Purchase Agreement preserves optionality when residential, community, or adaptable commercial assets are sold. It provides a counter-cyclical safeguard during market downturns without restricting owners’ ability to sell.
Together, these measures form a modern housing policy architecture that:
- Reduces leverage required to enter housing
• Increases the share of new supply secured for long-term affordability
• Retains public value across resale cycles
• Improves planning accountability and transparency
• Keeps Treasury exposure capped, short-term, and recoverable
This system allows the 2026 Budget to respond decisively to the housing emergency while reinforcing Victoria’s position as a leading jurisdiction in land-based affordability reform.
Modernising Housing Policy in an Election Year
Victoria is better placed than any other Australian jurisdiction to materially alleviate the housing affordability crisis, following recent reforms that have demonstrably slowed land price inflation and opened the door to structural solutions.
The speed and severity of rental stress, displacement, and homelessness are overwhelming household resilience and weakening workforce participation, community stability, and local economic confidence. This submission is written in that context, and with urgency informed by direct family experience of homelessness this year. The policy aim is to extend proven land and housing economics efficiencies into practical budget measures that can be implemented quickly and scaled safely.
This submission is framed as an evolution of existing policy rather than a departure from it. The intent is to modernise and extend current shared equity and affordability settings so that public support delivers lasting value, rather than being consumed at the point of purchase and lost on resale. In an election year, this approach allows government to demonstrate responsiveness and renewal while maintaining policy continuity.
Definition: Community Land Trust
A Community Land Trust is a not-for-profit land stewardship model that separates land from the dwelling. The land is held for long-term community benefit with affordability retained over time, while households rent or purchase the dwelling and build limited equity under transparent resale rules. The purpose is to prevent land value uplift from capitalising into purchase prices and to retain affordability across multiple ownership cycles.
Further detail is set out in the Grounded in Affordability report (April 2025).
Land Tax, Economic Rent, and Owner-Occupied Housing
Land tax is one of Victoria’s most effective tools for suppressing speculative land price growth in the investor-owned housing market. By taxing unimproved land value on an ongoing basis, it reduces the extent to which future capital gains are capitalised into purchase prices. This dampens land price escalation and stabilises entry costs for subsequent buyers.
However, this stabilising effect does not operate in the owner-occupied sector, where land tax does not apply. In this segment of the market, expected capital gains are fully capitalised into prices, reinforcing upward price pressure and increasing leverage requirements for first and subsequent home buyers.
Community Land Trusts apply the same economic logic to owner-occupied housing that land tax applies to investor-owned housing. By separating land from the dwelling and retaining land in long-term community ownership, CLTs prevent economic rent from capitalising into land prices. Purchase prices reflect the cost of the dwelling and permitted equity share rather than speculative land value.
In effect, CLTs demonstrate in the owner-occupied sector what land tax already achieves in the investor-owned sector: suppression of capitalised economic rent and stabilisation of purchase prices over time. This symmetry explains why CLTs consistently deliver lower entry prices and more stable resale outcomes without requiring ongoing public subsidy.
The policies proposed in this submission extend this established economic principle into parts of the housing market where existing tax settings cannot reach. They do not replace land tax or alter its thresholds. Rather, they complement it by applying the same rent-suppression logic through tenure design and governance in the owner-occupied market.
Land Tax Threshold Effects and Market Transmission
Recent national accounts data illustrate how land tax thresholds operate at the margin to influence system-wide land prices. Although land tax applies only above defined thresholds, land values are set by marginal transactions rather than average holdings. When expected capital gains are suppressed at the threshold, this dampens price escalation for comparable land across the wider market.
ABS National Accounts data show that in 2024–25 total Australian land values increased by approximately $597 billion, with residential land accounting for $541 billion. Victoria’s contribution was $70.6 billion, materially lower than New South Wales at $151 billion and Queensland at $185.5 billion. This followed a similar pattern in 2023–24, when Victoria recorded land-value growth of $44 billion compared with $170 billion in New South Wales and $203 billion in Queensland.
The timing is clear: since the land-tax thresholds were lowered in January 2024 — from $300 000 to $50 000 for individuals — Victoria’s land-price inflation has flat-lined. The reform dramatically broadened the tax base and raised the cost of holding under-utilised land. This has dampened speculative demand while preserving construction momentum.
Over the two-year period, Victoria’s combined land-value growth of $114 billion was approximately one-third of the growth observed in New South Wales and Queensland. This divergence is consistent with the effect of more comprehensive land tax coverage and lower effective thresholds in Victoria, which reduce the capitalisation of expected gains into land prices at the margin.
Because land prices are formed by the most price-sensitive transactions, even partial suppression of capital gains at the threshold transmits through valuation benchmarks, lending assumptions, and bidding behaviour more broadly. This explains how relatively modest policy differences can generate large divergences in aggregate land-value outcomes.
This dynamic is directly relevant to owner-occupied housing, where such threshold effects do not apply. The policies proposed in this submission extend the same rent-suppression logic into that segment of the market through tenure design rather than taxation, without altering existing land tax settings.
Read the full research note on this outcome.
Ground Lease Model 2.0 as Policy Evolution
Ground Lease Model 2.0 builds on the logic of shared equity, recognising that partial ownership is increasingly the only realistic pathway into housing for younger Victorians or those starting over. It improves earlier models by retaining affordability and public value over time.
Under GLM 2.0, households purchase the dwelling and a defined equity share, while land remains in community ownership. Resale outcomes are governed by indexed or equity-adjusted formulas that allow households to build modest wealth without exposing the housing system to speculative escalation. Public subsidy is recycled rather than extinguished.
This approach strengthens existing shared equity policy by addressing its primary weakness: affordability benefits are lost when properties return to the open market.
Residential Tenancies Act and Prescribed Lease Pathways
Delivering Ground Lease Model 2.0 at scale requires a legal framework that can accommodate both movable and permanent housing forms while maintaining consumer protections and economic viability.
For movable dwellings, including tiny homes and some Independent Living Units, Part 4A site agreements under the Residential Tenancies Act provide a viable and established pathway. These agreements support long-duration occupation, land-use fees, and regulated site arrangements and are well suited to early activation, transitional housing, and downsizing models where dwellings are relocatable. Part 4A agreements are therefore appropriate for Activate Land initiatives and early-stage community-led housing delivery.
However, Part 4A site agreements are not designed to support permanent dwellings, shared equity structures, or indexed resale formulas at scale. Their application becomes increasingly constrained where dwellings are fixed, finance is involved, or equity interests are shared. In these circumstances, reliance on Part 4A arrangements creates legal ambiguity and limits lender confidence.
The current prescribed lease framework also presents constraints. Existing prescribed forms do not adequately support long-term ground leases with variable equity shares, stewardship fees embedded from commencement, or indexed or equity-adjusted resale mechanisms. As a result, models seeking to retain affordability over time are forced into bespoke legal structures, increasing transaction costs and regulatory risk.
The severity of current affordability pressures strengthens the case for targeted reform. Long-term affordable housing models must be capable of recovering land stewardship, financing, and management costs in a way that ensures marginal revenue exceeds marginal cost over time, without reliance on speculative capital gains. Established housing economics supports the use of land-based charges, ground leases, and equity adjustment mechanisms to achieve this outcome.
At present, the Residential Tenancies Act limits the transparent incorporation of these mechanisms into residential arrangements, particularly for permanent dwellings involving shared equity or resale restrictions targeting affordability (even under a NFP model). Recent tribunal decisions, including those affecting lifestyle community operators, underscore the sensitivity of these issues and the need for clearer statutory guidance.
The intent of reform is not to weaken tenant protections or circumvent regulatory oversight. Rather, it is to enable economically sound affordability mechanisms to operate transparently within a clear and consistent legal framework. Without such reform, innovative models are pushed toward opaque workarounds that increase risk for residents, providers, lenders, and regulators.
A staged approach is therefore proposed. Part 4A site agreements should continue to be used where dwellings are movable and transitional. In parallel, the Residential Tenancies Act should be updated to provide clear statutory pathways for permanent ground lease and shared equity housing, with consumer protections, lender recognition, and legislative settings that can accommodate long-term affordability protections rather than remaining reliant on bespoke instruments.
This dual-pathway approach allows early delivery to proceed while establishing a stable legal foundation for scalable, non-speculative housing models. It aligns consumer protection, economic viability, and long-term affordability within a single regulatory architecture.
Affordable Supply Impact Statement
Purpose
An Affordable Supply Impact Statement is a mandatory disclosure instrument requiring proponents of major developments, rezonings, or public land disposals to quantify how their proposal will change local housing affordability over time.
Its function is to place proponents and decision-makers on the public record by stating, in advance, whether a proposal improves, maintains, or worsens affordability for local households.
Core Requirement
Before approval, proponents must publish baseline and projected affordability metrics and commit to reporting against them over time.
At a minimum, the ASIS must disclose:
• Baseline income-to-price and income-to-rent ratios using local sales, rents, wages, vacancy, and waiting-list data.
• Projected income-to-price and income-to-rent ratios at project stabilisation, based on dwelling mix, tenure, pricing, and staging.
• The expected trajectory of these ratios during staged delivery.
Policy Test
Planning approval should be contingent on one of the following being demonstrated:
• The proposal improves local affordability ratios.
• The proposal materially expands supply while preventing affordability deterioration through binding arrangements that persist beyond first sale or lease, such as ground leases, shared equity resale rules, or equivalent tenure-based controls.
Where affordability outcomes worsen, the ASIS must specify offsetting measures sufficient to neutralise the impact. Unmitigated affordability deterioration should be treated as a material planning concern.
Delivery and Accountability
The ASIS must include an agreed supply rollout schedule aligned with infrastructure capacity. Persistent under-delivery must trigger corrective action.
To support evidence-based decision-making and protect planning officials from pressure to approve on optimism rather than data, the ASIS is supported by a Scarcity Radar. This shared dataset tracks approvals, completions, vacant zoned land, delivery staging, infrastructure pipelines and key market indicators, enabling early identification of withholding or under-delivery and providing a defensible basis for negotiation and enforcement.
Affordability outcomes must be reported publicly at regular intervals following approval. Reporting must compare actual outcomes to approved baselines and projections. Persistent divergence should trigger review or revised conditions.
Summary
The Affordable Supply Impact Statement converts affordability from an aspirational objective into a measurable planning outcome. Like an Environmental Impact Statement, it embeds accountability into land-use decisions and ensures the affordability effects of development are visible before, during, and after approval.
Rebalancing Stamp Duty Discounts Toward Lasting Affordability
Stamp duty discounts for first home buyers now represent one of the largest housing expenditures in the Victorian budget, costing approximately one billion dollars per annum. The average concession per recipient is around $30,000 – $40,000, roughly three times the value of historic First Home Buyer Grants. Despite their scale, stamp duty discounts operate through the same demand-side mechanism as grants and are similarly inflationary in supply-constrained markets.
Since the introduction of stamp duty discounts in 2011, average first home buyer loan sizes have continued to rise. The policy has not altered the income-to-price ratio faced by new entrants. Instead, it has increased borrowing capacity at the margin, intensified competition for entry-level dwellings, and capitalised into higher prices. The result is higher household leverage without a durable improvement in affordability.
The issue is not the existence of stamp duty discounts, but their dominance within the housing affordability budget. At current scale, they absorb substantially more public funding than supply-side interventions that deliver lasting affordability outcomes. This imbalance limits the State’s capacity to address the structural shortage of well-located, medium-density, affordable homes.
A modest rebalancing would improve outcomes without reducing support for first home buyers. Reallocating one percent of annual stamp duty discount expenditure, approximately $50 million per year, would have negligible impact on individual purchasers while enabling a high-impact supply-side pilot. This funding could seed a Community Land Trust program focused on sites capable of delivering the scale threshold, around 20 dwellings, with affordability preserved in perpetuity.
Unlike stamp duty discounts, which are consumed at the point of purchase, investment in Community Land Trusts is recycled. Land remains in community ownership, resale controls preserve affordability across generations, and ground lease revenues fund long-term stewardship without recurrent government subsidy. Each dollar of public support therefore produces a permanent affordability outcome rather than a one-off price effect.
This approach allows government to maintain politically important first home buyer concessions while beginning a transition toward models that reduce future budget pressure. It reframes housing expenditure away from inflationary demand support and toward a scalable system of quality supply that delivers long-term affordability and fiscal sustainability.
Proposed Land Donation Incentive: Targeting Higher-Yield Sites and Supporting an Emerging Tenure
This policy introduces a transferable land tax credit to reward landholders who donate suitable residential land into eligible perpetual affordability housing entities. The credit may be applied across the donor’s land tax assessments for other Victorian holdings, but it does not attach to the donated title and cannot be transferred to future purchasers, preventing the incentive from being capitalised into sale prices.
The incentive targets parcels capable of delivering housing at the scale threshold, around 20 dwellings. This scale is necessary to absorb fixed stewardship, planning, and financing costs and to deliver affordability that is retained over time. Smaller sites may participate where they contribute to a broader delivery pipeline, pilot new models, or enable early-stage site activation.
A landholder donating a parcel with an unimproved site value of $2 million and a minimum capacity of 20 dwellings would generate a land tax credit capped at 15 percent of the Valuer-General’s site value, equivalent to $300,000. With modern land portfolios often carrying $40,000 to $80,000 in annual land tax exposure across multiple parcels, donors are able to realise this benefit within three to six years. Faster utilisation increases the present value of the incentive without increasing total program cost.
For the State, the fiscal return is highly favourable. A $2 million site yielding 20 CLT dwellings equates to a budget cost of $15,000 per dwelling in foregone land tax. Even at 15 dwellings, the cost remains approximately $20,000 per unit. This contrasts with conventional affordable housing delivery models, where the combined cost of capital grants, land contributions, and concessional inputs typically exceeds $150,000 per dwelling. The economic proposition is that tax expenditure equivalent to 10 to 20 percent of land value secures land that is then permanently removed from speculative cycles and permanently dedicated to affordability.
CLTs remain an emerging tenure within Victoria. Limited institutional familiarity means that governance, stewardship obligations, and resale controls associated with perpetual affordability are not yet well understood across government.
This scheme responds by linking public support to legally enforceable long-term affordability controls secured through planning agreements, long-term ground leases, and registered instruments, with a clear pathway to standardised, title-based affordability protections through RTA reform.
Potential unintended consequences are manageable. The credit does not attach to land titles and cannot be transferred to future owners, limiting price inflation and two-speed market effects. A 20-year use period and a 25 percent annual utilisation cap prevent over-acceleration. A minimum eligibility threshold requiring land capable of at least 15 dwellings keeps the program focused on high-impact sites and discourages low-value donations. Related-entity rules prevent multiplication of credit claims across artificial structures.
The core public benefit is that the mechanism channels strategically located, medium-density-capable land into a perpetual affordability framework at low fiscal cost. It allows Victoria to secure the land component of affordable housing delivery without recurring capital outlays, while building institutional familiarity with CLTs through structured eligibility and stewardship oversight.
Budget Cost Estimate
The budget cost of the proposed land tax credit is modest in the early years and remains structurally low even under mature uptake. The program targets parcels capable of delivering the scale threshold. These parcels typically hold an unimproved value between $1.5 million and $3 million across regional centres and metropolitan infill locations.
Under a 15 percent credit ceiling, indicative tax expenditure per donated parcel is as follows.
$1.5 million parcel
Credit ceiling: $225,000
Dwelling capacity: 15 to 20
Effective cost per dwelling: $11,000 to $15,000
$2.0 million parcel
Credit ceiling: $300,000
Dwelling capacity: 18 to 25
Effective cost per dwelling: $12,000 to $17,000
$3.0 million parcel
Credit ceiling: $450,000
Dwelling capacity: 25 to 30
Effective cost per dwelling: $15,000 to $18,000
Initial uptake is expected to be low due to the novelty of CLTs within Victorian government and among professional advisers. A realistic first-phase profile is three to five donations per year. At an average ceiling of $300,000, annual tax expenditure in early years is likely to fall between $900,000 and $1.5 million.
Even under a fully established program delivering eight to ten donations annually, annual cost would sit between $2.4 million and $3.0 million. This is materially below the cost of traditional capital grant programs, where a single 20-unit affordable housing project typically requires $3 million to $5 million in direct subsidy. Under the donation-credit model, the State obtains the land component at a fraction of that cost and secures permanent affordability rather than time-limited discounting.
Because the credit applies only to existing land tax liabilities and cannot be traded, accumulated, or assigned to purchasers, fiscal exposure is capped and predictable. The 25 percent annual utilisation cap and 20-year expiry window further stabilise the program’s cost profile.
Construction Finance Window for Affordable Housing Delivery
A consistent barrier to the delivery of community-led and perpetual affordability housing is access to short-term construction finance. While long-term operating models may be viable, many projects stall at the construction phase due to the cost and risk profile of private construction lending.
Private lenders typically price construction loans at a premium, impose restrictive presale requirements, or decline projects altogether where dwellings are not sold at full market value. This disproportionately affects Community Land Trusts, shared equity models, and other affordability-focused developments, even where long-term cashflows are stable and risks are lower than conventional speculative projects.
A state-backed construction finance window, covering the construction period only, would address this constraint directly. The facility would provide low-cost, time-limited finance for up to 24 months, aligned with typical construction durations, and would be repaid in full at project completion through refinancing, settlement, or transition to long-term finance.
The facility would not replace private lending over the life of the asset. Its role is to bridge the construction phase only, where market failure is most acute. By limiting exposure to the construction window, fiscal risk is capped and predictable.
Landholder Incentives Through Third-Party Land Security
Landholders may elect to support eligible affordable housing projects by offering a separate parcel of land as security for access to the state-backed construction finance window. The secured land does not need to be the project site and remains in the ownership of the landholder.
By providing land-backed security during the construction period, landholders materially reduce construction-phase risk and improve credit quality. In recognition of this risk mitigation, participating landholders may access one or more of the following incentives, subject to project performance and compliance:
- A temporary land tax concession applied to the secured parcel for the duration of the construction loan.
• Priority consideration or streamlined assessment for future planning applications on the secured parcel, where proposals align with housing or affordability objectives.
• Preferential access to Affordable Housing Infrastructure Bond finance for subsequent projects involving the secured land, including early-stage infrastructure funding where appropriate.
To preserve fiscal discipline, the total value of any State incentive must not exceed the quantified financial benefit to the State arising from reduced construction risk, lower default exposure, or improved credit terms. Incentives are calibrated to the value of de-risking provided and do not operate as open-ended concessions.
All incentives are time-limited, performance-based, and conditional on successful project completion. They are not transferable and do not attach to the land title beyond the agreed period. Where enabling infrastructure is provided, any resulting land value uplift is managed through land-based charges, including the Community Infrastructure Levy, to ensure uplift is partially captured and recycled rather than realised as an unearned private windfall.
This mechanism converts passive landholding into active participation in housing delivery. It rewards landholders for accelerating supply and de-risking construction, while maintaining clear fiscal boundaries and alignment with existing land tax and infrastructure financing tools.
Eligibility and Access
Access to the construction finance window should be available to projects delivering housing under enforceable long-term affordability controls and meeting clear governance and delivery criteria. Application requirements should be proportionate to project scale and supported by streamlined, technology-enabled processes to ensure accessibility for small, community-led, and innovative proponents.
Priority may be given to projects delivering at the scale threshold, where fixed costs can be absorbed and long-term stewardship is demonstrably viable. Smaller projects remain eligible where they contribute to a broader delivery pipeline, pilot new models, or support early-stage site activation linked to future scale.
For Treasury, the risk profile is favourable.
- Construction loans are short duration and repaid at completion.
• Security is real-asset based and limited to the construction phase.
• The facility can operate as a revolving fund, recycling capital as projects complete.
This approach addresses a genuine market failure in construction finance, accelerates shovel-ready affordable housing projects, reduces reliance on capital grants, and aligns short-term balance sheet support with durable affordability and supply outcomes.
Affordable Housing Infrastructure Bond
Eligibility Threshold
Access to Affordable Housing Infrastructure Bond financing is limited to projects where a minimum of 65 percent of dwellings are secured as perpetually affordable housing. This threshold reflects delivery realities in projects that seek to house both low- and moderate-income households, while ensuring that public finance is directed to developments where affordability is the primary outcome.
The remaining dwellings may be allocated to moderate-income or key-worker households under controlled pricing or tenure arrangements, provided governance settings prevent price escalation and protect overall affordability outcomes. This structure supports mixed-income delivery without diluting policy intent or increasing fiscal exposure.
Economic Rationale and Repayment Structure
The Affordable Housing Infrastructure Bond aligns the repayment of affordability investment with the economic life of the housing and associated infrastructure, rather than concentrating costs on an initial purchaser.
Under prevailing market settings, land and infrastructure costs are capitalised into the first sale price and financed through private mortgages at market interest rates. These costs are then repeatedly passed forward through resale, compounding prices and household debt without delivering a lasting public return.
By spreading affordability costs over the life of the asset and attaching repayment to land value, the bond materially reduces the residual subsidy gap that registered community housing providers typically require to make projects viable. Rather than relying on large upfront capital grants to bridge the gap between construction cost and affordable pricing, projects can service a greater share of total cost through predictable, asset-linked revenues. This improves capital efficiency, reduces pressure on grant programs, and enables limited public subsidy to be targeted where it is most needed.
The bond replaces this front-loaded financing model with a long-duration repayment window of 15 to 20 years. Repayment is attached to the land rather than the household, allowing costs to be shared across successive occupants and aligned with asset use.
This structure reduces upfront borrowing requirements, lowers deposit thresholds, prevents affordability costs being embedded into resale prices, and improves intergenerational equity by distributing repayment in line with the life of the infrastructure rather than the tenure of a single buyer.
Site Value as the Revenue Base
Bond repayment is funded through a Community Infrastructure Levy calculated on site value. This approach reflects established principles of infrastructure finance and land economics.
Site value provides a stable and non-distortionary revenue base. It captures locational value created by public action rather than private investment, and it avoids penalising construction quality, dwelling size, or household income. By contrast, financing affordability through purchase prices or rents amplifies price volatility and leverage.
The use of site value also provides a practical demonstration of land-based revenue mechanisms that have historical precedent in Victoria’s infrastructure development, including the financing practices of the Melbourne and Metropolitan Board of Works under Sir Ronald East. The AHIB therefore operates as both a delivery mechanism and a proof of concept for disciplined land-linked funding models.
Fiscal Implications
The Affordable Housing Infrastructure Bond does not require upfront capital grants and does not create open-ended budget exposure. Fiscal impact is limited to administrative costs and any explicitly capped credit support.
By aligning repayment with infrastructure life and sourcing revenue from land rather than households, the mechanism reduces reliance on recurrent housing expenditure and limits the capitalisation of public support into higher prices. It converts a portion of housing policy from a consumption-based subsidy into a self-amortising infrastructure investment with defined fiscal boundaries.
Aligning Second-Home Reforms with Perpetual Affordability
Recent reforms affecting second homes and secondary dwellings in Victoria have been driven primarily through planning settings, including expanded pathways for granny flats, small dwellings, and infill activation. These reforms have increased flexibility and supply potential and are an important step in improving housing responsiveness.
However, most current settings operate on a dwelling-by-dwelling or owner-by-owner basis. While they may increase supply in the short term, the affordability benefit is typically transient. Once a dwelling changes hands, any public benefit embedded in the reform is lost and the property re-enters the market at full market pricing.
This limitation is not a flaw of planning reform itself, but of the absence of mechanisms to retain affordability beyond the first use or occupancy. Without a pathway to lock in long-term affordability, planning-enabled supply improvements risk functioning as one-off releases rather than cumulative system reform.
Future iterations of second-home and secondary dwelling policy should therefore incorporate voluntary pathways that allow dwellings enabled through planning reform to transition into long-term affordable housing where appropriate. This may include links to ground lease models, shared equity arrangements, or other tenure structures capable of retaining affordability across ownership cycles.
Aligning planning flexibility with durable affordability outcomes would ensure that reforms compound over time rather than dissipate with resale. It would also provide a clear, non-coercive pathway for owners who wish to convert secondary dwellings or under-utilised housing into lasting community benefit, particularly in high-pressure regional and peri-urban markets.
Community Opportunity to Purchase Framework
Internationally, governments are increasingly adopting Community Opportunity to Purchase frameworks to ensure that housing, community, and strategic commercial assets at risk of speculative turnover are given a pathway into long-term public or community benefit before being absorbed by consolidated investor markets. These frameworks do not prohibit sales or mandate outcomes. They create a structured right of first opportunity for eligible community, local, or affordability-focused buyers to purchase assets under defined conditions.
The core rationale is market ordering rather than market replacement. When residential, community, or commercially adaptable assets are sold into highly financialised markets, future affordability, service, and place-based outcomes are often foreclosed. Community Opportunity to Purchase mechanisms intervene at the point of transaction to preserve optionality, allowing assets to transition into long-term affordable housing, community use, or mixed-purpose delivery where viable, without restricting owners’ ability to sell.
A Victorian framework should apply flexibly to asset classes where public interest is high and irreversible loss risk exists. This may include multi-dwelling residential properties, former or existing community facilities, and commercial or mixed-use buildings with conversion or adaptive reuse potential. Rather than prescribing a fixed dwelling or floor-area threshold, eligibility should be guided by principles such as scale, location, tenure concentration, redevelopment potential, and local housing or service stress indicators.
This flexibility is particularly important during market downturns. Periods of fiscal tightening or asset disposal programs can lead to rapid divestment of public or quasi-public assets at discounted prices, often to well-capitalised insiders. A Community Opportunity to Purchase framework provides a counter-cyclical safeguard, ensuring that when assets are sold, community and affordability-focused buyers have a time-limited opportunity to assess and acquire them at market value, rather than being excluded by speed or information asymmetry.
Under such a framework, when an eligible asset is offered for sale, a short, clearly defined notice period would apply. During this period, eligible entities may conduct due diligence and, where viable, negotiate or match purchase terms. If no transaction proceeds within the window, the owner retains full freedom to sell on the open market without restriction.
Importantly, a Community Opportunity to Purchase framework does not rely on compulsory acquisition or price controls. Transactions occur at market value and may be supported by existing State tools, including construction finance windows, land-backed security arrangements, or Affordable Housing Infrastructure Bond finance where assets are converted to housing or community-serving use.
For the State, the value of this framework lies in early visibility, optionality, and discipline during both expansionary and contractionary cycles. It reduces the risk that strategically important assets are permanently lost to speculative consolidation, improves the efficiency and timing of public investment, and complements land tax, planning, and finance reforms already in place.
A Victorian Community Opportunity to Purchase framework would strengthen resilience across housing, community infrastructure, and local services, ensuring that when assets change hands, public interest outcomes are at least considered at the moment they are most at risk.
Activate Land, House People
Objective
Mobilise vacant or underutilised privately owned land for time-limited housing delivery, reduce speculative land holding, and deliver immediate housing outcomes while longer-term projects and infrastructure are brought forward.
Policy rationale
A significant share of residentially zoned land remains vacant or underutilised for extended periods, particularly in high-pressure markets. During these periods, land contributes neither to housing supply nor community outcomes. At the same time, demand for transitional, crisis, and short-term accommodation continues to exceed available stock.
Victoria already uses land tax settings to influence land use behaviour in other sectors, including agriculture, where concessions are linked to productive activity rather than passive holding. This policy applies the same principle to housing: land tax relief is earned through verified housing delivery, not ownership alone.
Mechanism
Landholders holding vacant land zoned residential, mixed-use, or otherwise suitable for housing are eligible for a land tax discount where they enter into an agreement allowing temporary housing to be delivered on the site.
Temporary housing is delivered and managed by an eligible housing delivery partner, such as a registered housing provider, local council, or eligible community-led entity. Housing forms may include relocatable tiny homes, modular dwellings, or other approved structures meeting minimum safety and amenity standards.
Occupancy is prioritised for people experiencing homelessness or acute housing stress, verified through local housing registers or recognised service providers.
Eligibility criteria
The land must otherwise be liable for full land tax, ensuring the policy targets larger or speculative holdings rather than incidental backyard lots.
The agreement must operate for a minimum period, for example three years, to ensure stability for residents and avoid short-term churn.
A delivery partner is responsible for tenancy management, site operations, and compliance, removing operational burden from the landholder.
Integration with construction finance
Activate Land sites may also be eligible for the state-backed construction finance window where temporary housing requires upfront works, servicing, or site preparation. This allows enabling costs to be financed over the construction period rather than borne upfront by delivery partners, accelerating deployment while keeping Treasury exposure short-term and secured.
Infrastructure-linked activation
Where land is suitable for transitional housing and future permanent development, participation may be linked to early-stage infrastructure provision funded through the Affordable Housing Infrastructure Bond.
Land tax discounts may be increased where the landholder agrees to oversize the site relative to immediate housing need and enable trunk infrastructure that supports later permanent development. For example, a site hosting up to 50 temporary dwellings may be required to make available land at approximately 200 percent of the minimum area required, allowing services to be sized for future use rather than temporary occupancy alone.
Infrastructure costs may be financed through the Affordable Housing Infrastructure Bond, with repayment structured through land-based charges over time. This aligns infrastructure investment with long-term land productivity rather than the temporary housing phase.
Incentives
In return for verified participation, landholders may receive:
- A land tax discount for the duration of active housing use.
- Priority access to streamlined planning pathways for future development aligned with affordability objectives.
- Access to early-stage infrastructure provision that increases site readiness while delivering immediate housing outcomes.
Safeguards
If a landowner withdraws before the minimum period, land tax is reinstated at the full rate on a backdated basis, with an additional penalty.
Housing quality, occupancy, and compliance are enforced through the delivery partner.
The scheme operates with a defined sunset clause to avoid long-term market distortion or substitution for permanent supply.
Budget impact
Fiscal exposure is capped and predictable. Incentives apply only to existing land tax liabilities and only during periods of verified housing delivery. The policy leverages private land assets and short-term finance to deliver immediate housing outcomes at low public cost, without creating ongoing ownership or operating obligations for the State.
Strategic fit
Activate Land complements construction finance, infrastructure bonds, and planning reform by converting idle land into productive housing sites. It discourages land banking, accelerates supply during periods of acute need, and ensures that public concessions are earned through delivery rather than passive holding.
Independent Living Units as a Local Transition Pathway
Independent Living Units provide a practical downsizing pathway that enables established residents to remain in their local area while releasing underutilised housing stock. By supporting smaller, accessible dwellings within existing communities, the model improves housing utilisation and reduces pressure on both greenfield expansion and institutional retirement housing.
Many participants in Independent Living Unit projects are asset-rich but liquidity-constrained during transition. While households may ultimately fund their dwelling through the sale of an existing home, there is often a timing gap between construction and settlement. This short-duration funding gap can delay or prevent delivery, even where overall project viability is strong.
The state-backed construction finance window is well suited to this use case. Construction loans can be provided for the build period only, typically under 12 to 18 months, and fully repaid upon sale of the participant’s existing dwelling or refinancing at completion. This limits public exposure while enabling projects to proceed without requiring households to sell before securing a suitable replacement home.
By addressing the timing mismatch rather than the underlying affordability, the construction finance window supports dignified downsizing without introducing ongoing subsidy. It also reduces transaction stress, improves take-up, and accelerates delivery of well-located smaller dwellings that free up larger homes for families.
Where Independent Living Units are delivered under long-term affordability or stewardship frameworks, retained land value and modest stewardship fees may be accumulated in a reserve and applied over time to seed future community-led affordable housing projects, including youth-focused developments. This creates an intergenerational pathway in which downsizing contributes directly to expanding the local affordable housing base, without additional budget outlay.
This approach integrates Independent Living Units into the broader affordability system, linking private capital, short-term state-backed finance, and long-term public benefit within a single, low-risk delivery pathway.
Conclusion
Victoria has already demonstrated that land-based policy can suppress the capitalisation of economic rent and stabilise land markets. The measures proposed in this submission extend that logic into the owner-occupied sector and into planning accountability, ensuring that affordability gains are retained rather than dissipated, without requiring large recurrent grants.
This submission builds on priorities raised in Grounded’s previous budget work, including rural exclusion approaches to bypass land banking, the need for a Property Options Registry to surface underutilised sites and public land opportunities early, and the growing risks posed by concentrated property data alongside emerging AI-driven market power. These dynamics increasingly allow well-capitalised actors to identify scarcity, front-run infrastructure, and manage supply to protect prices.
The policy response therefore requires not only additional supply, but transparent systems that prevent scarcity from being manufactured and monetised. Tools such as the Scarcity Radar, enforceable affordability mechanisms, and land-based tenure design align planning, finance, and infrastructure with genuine housing outcomes.
The test for the 2026 Budget is straightforward: reduce the leverage required to enter housing, increase the share of new supply secured for long-term affordability, and embed accountability mechanisms that ensure public intervention delivers durable, system-wide benefit.
Photo by John Torcasio on Unsplash