Submission to the Public Accounts Committee Inquiry into Land Rent Schemes
This submission draws on direct stakeholder engagement with the Australian Capital Territory (ACT) Land Rent Scheme prior to its launch, ongoing analysis of land value capture mechanisms, and applied work in community land trust and ground lease models, including the Grounded in Affordability report.
Land rent schemes are one of the few policy tools capable of addressing housing affordability at its structural source: the cost and treatment of land. By separating land from improvements, they reduce entry costs, lower loan-to-value ratios, and stabilise mortgage risk. Their effectiveness, however, depends on whether the economic value of land is retained and recycled for public benefit.
How a land rent scheme works
A land rent scheme separates ownership of land and dwelling. The resident purchases the home and leases the land from a public or stewardship entity.
The economic logic mirrors interest rates. When borrowing costs rise, purchasing capacity falls and buyers bid less. A land lease has the same effect. By introducing an ongoing payment, it reduces the capitalised value of land embedded in the upfront price.
In practice, this can reduce deposits by up to 60 per cent and materially lower loan-to-value ratios. The result is lower mortgage risk, improved repayment stability, and greater access to ownership for moderate-income households.
Housing should be treated as essential infrastructure, not a profit centre. A land lease allows governments to close the loop on capital gains by retaining land value and recycling it into future housing outcomes.
Lessons from the ACT Land Rent Scheme
The ACT provides the most relevant Australian case study. It demonstrates both the potential of land rent schemes and the consequences of partial implementation without long-term stewardship mechanisms.
At its core, the scheme improves access by separating land from dwelling and applying a discounted land rent. However, it does not embed affordability across successive owners. Households can convert to a standard Crown lease at current unimproved land value, at which point the dwelling exits the affordability framework and returns to full market exposure.
This creates a structural limitation. While the government recaptures land value at conversion, the asset itself is not retained within an affordability system. There is no resale mechanism to preserve reduced pricing, and no requirement for the dwelling to remain accessible to future low- and moderate-income households.
The result is a one-time affordability intervention rather than a compounding public asset. Over time, dwellings transition out of the scheme, requiring new supply to maintain access rather than building an enduring base of affordable housing.
The scheme is understood to generate approximately $20 million in annual land rent revenue. However, this revenue is not ring fenced or systematically reinvested into perpetually affordable housing supply, limiting its capacity to support long-term system expansion.
The ACT Land Rent Scheme has been assessed primarily in terms of access, uptake, and fiscal performance. There is limited public reporting on the long-term trajectory of dwellings within the scheme, including rates of conversion to standard Crown lease and the retention of housing within an affordability framework.
As a result, it is not possible to determine from existing reviews whether the scheme is building a sustained stock of affordable housing or whether dwellings progressively transition out of the system over time.
This distinction is critical. Without tracking retention and reinvestment, a land rent scheme may improve access for initial participants while failing to deliver a compounding supply of affordable homes for future households.
The core lesson is that pricing, conversion pathways, and revenue retention are not secondary design features. Without mechanisms to retain land within an ongoing stewardship structure, land rent schemes risk functioning as transitional access tools rather than delivering durable, system-level affordability.
Current evaluation frameworks focus on entry, not endurance.
Institutional design and long-term stewardship
The Mildura School Lands Trust provides a century-long example of effective land stewardship. Established under Victorian legislation in 1916, it has operated continuously to generate approximately $1.8 million per annum, providing ongoing funding support for 26 public schools in the Sunraysia region through just 183 residential and commercial sites.
Its core strength is retention. Unlike transitional models, the underlying land base remains intact over time, allowing value to compound and be recycled for ongoing public benefit. This distinguishes it from schemes where assets progressively transition back into the private market.
Its success is not dependent on complex institutional layering. It is driven by consistent land valuation, disciplined leasing, and clear revenue recycling. Where lease settings align with land value, the system largely self-regulates.
However, the context of its establishment matters. When created over a century ago, housing affordability was not a structural crisis in the way it is today. While the governing legislation has been updated, it has not been substantially reoriented to address contemporary housing system pressures or to position the model as a scalable affordability solution.
Like the ACT Land Rent Scheme, it also suffers from a lack of active policy advocacy and visibility. Despite regular informal promotion, including recommendations through local school networks, it has not been translated into a contemporary, scalable housing narrative. Systems that function quietly risk being overlooked, underutilised, or repurposed.
The result is under-realisation rather than failure. The model demonstrates that long-term land stewardship can deliver stable, compounding public value, but without deliberate policy recognition and replication, its impact remains geographically and politically contained.
The lesson is not that more governance is required, but that retention alone is insufficient without visibility and intent. Durable systems must both preserve value and be actively positioned for scale.
Ground Lease Models and structural risk
Western Australia should distinguish between land rent schemes that deliver perpetual affordability and models that primarily shift costs across time.
Victoria’s Ground Lease Model (GLM) typically operates through 40-year lease arrangements. It incorporates peppercorn lease phases, which can reduce upfront costs but are expected to reintroduce full market exposure at expiry or step-change points. This creates medium-term affordability rather than structural affordability. While these models improve access, they do not necessarily preserve affordability across successive ownership cycles unless supported by enduring stewardship and resale controls.
The standardisation of finance documentation and lease structures will also be critical to scale. The United States experience, including the role played by Fannie Mae in standardising mortgage products and underwriting frameworks for shared equity and community land trust housing, demonstrates how secondary market confidence can unlock mainstream lending participation.
Under the GLM model, the state effectively defers land cost recovery. This risks becoming balance sheet substitution rather than genuine affordability reform.
The Pyrenees Shire Council housing development in Beaufort, Victoria, further illustrates the distinction between supply activation and enduring affordability. Council intervention helped unlock housing supply in a market where private development was not proceeding, demonstrating the important role local government can play in overcoming delivery barriers. However, without embedded resale controls or long-term stewardship mechanisms, the retention of affordability across successive ownership cycles remains uncertain. This highlights the difference between projects that increase supply at a point in time and systems that preserve affordability over generations.
By contrast, perpetual or renewable lease structures, as outlined in the Grounded in Affordability report, maintain affordability across ownership cycles by retaining land ownership, linking resale values to income or controlled indices, and calibrating lease rates to reduce the capitalisation of land value.
The distinction is critical. Time-limited leases support access. Perpetual structures support affordability.
Framework considerations for Western Australia
A. Pricing and settings
Land rent must be aligned with prevailing capitalisation rates to prevent arbitrage. Underpricing transfers value to households and undermines long-term affordability.
This can be structured to maintain the liquidity and financial stability of both residents and the Trust. A stewardship fee (akin to a capital gains tax) can be paid on exit, when residents are cash-flow positive.Â
B. Revenue retention
Land rent revenue should be transparently retained and reinvested into housing supply, particularly social and affordable housing, to ensure compounding impact.
C. Valuation frequency
Western Australia’s reliance on periodic land valuations, often conducted every three years, introduces structural risk. If lease rates are not updated in line with current land values, arbitrage opportunities emerge. More responsive or indexed valuation mechanisms are required.
D. Supply activation
Land rent schemes should include clear construction timelines to prevent land banking. Appropriately calibrated lease settings also reduce incentives for speculative holding.
E. Private sector participation
Stable, transparent settings can attract private builders and institutional capital, provided long-term certainty is maintained.
F. Role of Keystart and Treasury in Financing
Both the ACT Land Rent Scheme and the Mildura School Lands Trust demonstrate that land-based affordability models can function operationally, but also highlight a persistent constraint: the absence of a coordinated financing framework. Limited lender participation and the lack of a formal guarantee mechanism have constrained scale, reduced accessibility, and increased reliance on a narrow set of institutions.
Keystart is well positioned to provide end-buyer financing within a land rent framework. Lower entry prices reduce loan-to-value ratios, improving loan performance and materially lowering default risk. In many cases, this removes the need for lenders mortgage insurance, further reducing cost barriers for households.
There is a complementary role for Keystart to establish a dedicated construction funding window. This would address financing gaps during the build phase, particularly for modular housing, which can reduce the cost of improvements but requires upfront capital certainty. Supporting construction finance would unlock supply and reduce delivery risk.
To enable scale, a broader risk framework is required.
WA Treasury can play a targeted role as lender of last resort or provide a limited sovereign guarantee for qualifying projects. This does not require full balance sheet exposure. A defined guarantee facility can crowd in private capital, reduce risk premiums, and provide confidence to lenders unfamiliar with leasehold and land rent structures. The absence of such a mechanism has been a limiting factor in both the ACT and Mildura contexts, where otherwise viable models have not achieved system-wide adoption.
International experience suggests this barrier is solvable through standardisation and aggregation. Once lease structures, underwriting criteria, and repayment streams become predictable, institutional finance gains confidence rapidly. Land rent payments are among the lowest-risk forms of housing-related cashflow due to their stability, occupancy linkage, and lower leverage profile. This creates strong alignment with philanthropic capital, impact investment, and long-duration institutional investors such as superannuation funds.
A land rent reserve should be established at the project or program level. A portion of land rent revenue is retained to cover temporary payment shortfalls, smoothing income volatility and protecting both lenders and the underlying asset base. This reserve function strengthens credit quality and reduces reliance on reactive interventions.
All land rent and mortgage payments can be securitised through a central trust structure. This enables aggregation of cashflows, transparent monitoring of payment performance, and early identification of financial stress.
This structure supports a proactive approach to household stability. Where risks emerge, intervention can occur early, including referral to financial planning support. This function can be embedded within governance structures, with financial expertise represented at board level.
The combined effect is a lower-risk lending environment built on reduced loan-to-value ratios, diversified income streams, and active management of household risk. This shifts the model from reactive foreclosure-based systems to preventative financial stewardship.
The key lesson is that finance is not the binding constraint if risk is properly structured. With modest government backing and disciplined revenue management, land rent models can attract private capital while maintaining long-term affordability outcomes.
Scaling impact
Western Australia faces a shortfall of approximately 20,000 social housing dwellings. A land rent model provides a pathway to address this both at scale and at least cost.
The Grounded in Affordability report outlines how this can be operationalised through a Community Land Trust model, combining public land provision with private financing of dwellings and calibrated lease structures.
By retaining land in public or trust ownership and allowing residents to fund the dwelling component, the state can leverage private capital while maintaining long-term affordability. Lease revenue can be recycled into additional housing supply, compounding over time.
This approach shifts housing policy from one-off subsidy to ongoing infrastructure investment.
At scale, this model aligns strongly with the requirements of both philanthropic capital and institutional investors, including superannuation funds. Land rent streams, once established and supported by appropriate risk structures, represent one of the lowest-risk, most stable forms of housing-related income. Payments are tied to occupancy rather than market volatility, and the separation of land from improvements reduces exposure to construction and asset price cycles.
The primary constraint is not investor appetite, but confidence in the underlying framework. In the absence of standardisation, guarantees, and aggregation, capital remains cautious. However, with modest sovereign backing, such as a limited guarantee or lender-of-last-resort function, these risks can be substantially mitigated.
A relatively small sovereign guarantee can unlock disproportionately large volumes of private and institutional capital at little or no direct budget cost. As seen in infrastructure and housing finance markets internationally, public balance sheet support is often most effective when used to reduce perceived uncertainty during early market formation rather than cover realised losses. When structured prudently, such guarantees are rarely called.
Once aggregated through a trust structure and supported by consistent revenue flows, land rent portfolios become suitable for securitisation and long-term investment. This creates a pathway for scaling beyond individual projects into a system-level asset class, capable of attracting large pools of capital while maintaining affordability outcomes.
The key insight is that capital is available, but it requires a credible, low-risk structure. With appropriate design, land rent models can transition from niche programs to investable platforms, delivering both financial stability and long-term public benefit.
Legislative design and enduring public benefit
The effectiveness of a land rent scheme ultimately depends on its legislative architecture. Western Australia should consider embedding principles that ensure land value is retained, recycled, and expanded over time, rather than treated as a one-off intervention.
Statutory definition and resale mechanisms
Legislation should provide a clear statutory definition of a land trust model, establishing it as a distinct form of land tenure. This should include:
• separation of land and improvements
• long-term or perpetual ground lease structures
• recognition of the dwelling as a financeable asset independent of land ownership
• explicit authority for resale formulas that moderate price escalation
A statutory resale formula is critical. Without it, land rent schemes risk reverting to full market pricing over time, particularly where lease rates are set below capitalisation levels. The legislation should enable resale mechanisms that primarily link price growth to wages growth, ensuring affordability is retained across ownership cycles and preventing land values from permanently decoupling from household earning capacity. The framework should retain flexibility to apply alternative controlled indices where necessary to maintain long-term affordability and financial stability.
This is not a restriction on ownership, but a condition of access to land held for public benefit.
Expansion as a primary duty
The core legislative object should be to expand the base of affordable housing over time through reinvestment, land acquisition, refinancing, and the recycling of land value for public benefit. Trustees or administering bodies should be under a positive duty to grow and recycle the land base, not merely preserve an initial asset.
Perpetual affordability through stewardship
Affordability should be achieved through institutional design rather than static controls. Land should not be permanently alienated free of purpose. Where land or interests are transferred, proceeds should remain within the system and reappear as land held under the same affordability conditions. This reframes affordability as a system property, not a household entitlement.
Annual unimproved valuation
Land should be valued annually on an unimproved basis, with lease payments reflecting the value of land only. This ensures that residents are not charged for their own improvements and that land value capture remains accurate over time. Regular valuation also prevents arbitrage arising from outdated assessments.
Beneficiary-pays structure
Participants receive access to land at below-market entry cost and in return contribute through a structured lease payment. This payment is not a penalty or tax, but consideration for access to land held for public benefit and for the ongoing stewardship of affordability. Payment legitimacy flows from benefit received.
Governance and administration
Legislation should provide for clear governance, reporting, and oversight arrangements. Trust-based or statutory bodies holding land for public purposes are expected to impose standards, manage behaviour, and ensure compliance with long-term objectives. This is consistent with secure long-term leasing and does not undermine tenure.
There is also a need to balance the inherently quiet, self-regulating nature of ground lease systems with active public advocacy. Where land lease models are functioning effectively, their impact can be invisible in political and policy debates. Without deliberate communication of outcomes, including affordability gains, revenue recycling, and community benefit, these systems risk being overlooked or redirected. A formal mandate to report on and publicly communicate outcomes should be embedded. This also strengthens the capacity to attract philanthropic and impact-aligned investment by demonstrating measurable long-term public benefit.
Governance structures should reflect the long-term public interest nature of the asset. A tripartite board model is recommended, drawing from established community land trust practice:
• Resident representatives, reflecting those directly affected by lease conditions and affordability settings
• Community representatives, including local neighbours and stakeholders to ensure alignment with place-based outcomes
• Independent or civic representatives, including professionals in finance, planning, law, and public policy to ensure fiduciary discipline and long-term stewardship
This structure balances lived experience, local accountability, and technical expertise. It also protects against capture by any single interest group while maintaining legitimacy across stakeholders.
Such a model ensures that land held for public benefit is governed with both technical rigour and community accountability over the long term.
The Mildura School Lands Trust demonstrates that these principles are durable. Established in 1916, it has maintained land under public purpose for over a century, with revenue consistently recycled to designated beneficiaries. Its structure shows that perpetuity is achieved through reinvestment rules and institutional discipline, not by freezing individual arrangements.
This legislative framing ensures that land rent schemes do not devolve into temporary affordability measures, but instead operate as long-term public infrastructure systems.
Conclusion
Land rent schemes can materially improve affordability, but only if the economic value of land is retained and reinvested.
The ACT demonstrates the risks of underpricing and failing to recycle value. Mildura demonstrates the long-term potential of disciplined land stewardship. Western Australia has the opportunity to design a scheme that captures these lessons.
The priority is not simply enabling access to land, but ensuring that land value is captured, retained, and used to expand housing supply over time.
A well-designed land rent framework aligns with emerging best practice across economics, housing policy, governance, and human rights. It recognises housing as essential infrastructure, embeds long-term stewardship into land systems, and ensures that public investment generates enduring community benefit rather than temporary market access.
Current housing policy largely subsidises access to an appreciating asset class. A land rent framework provides an opportunity to instead build a permanently affordable housing system.
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