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Legislative Assembly for the ACT: 2003 Week 12 Hansard (19 November) . . Page.. 4358 ..

MS DUNDAS (continuing):

(2) more effective financial incentives for the installation of energy and water efficient appliances or other measures in rental properties;

and report to the Assembly by June 2004.

I have moved this motion asking the government to investigate concessions on land tax for landlords providing affordable housing because I do not believe enough is being done to increase the supply of private rental properties that low-income people can afford to rent. Because the task of making housing more affordable, particularly through alterations to the land tax system, would be complicated, I am only asking the government to investigate ways that the scheme could be altered to make investing in property more affordable in the ACT. For instance, a complication that I recognise is that concessions will be needed only while we have a rental shortage that makes rental costs unaffordable for low-income people. Considering our reliance on the land tax as part of our revenue base, it would not be desirable to create a system that resulted in a dramatic fall in land tax revenue if prices in the rental market collapsed and rents became more affordable again. But, as I am sure you are all aware, rents in Canberra have spiralled upward over the last few years. A few months ago, the Canberra Times reported an increase of 17 per cent in the preceding year, driven by an acute and ongoing shortage of rental properties.

Rent increases are certainly outstripping increases in household income. The ACT government relies on substantial revenue from land tax paid by private landlords, but I believe this is impacting adversely on the supply and affordability of rental housing. And we need a land tax concession scheme that encourages landlords to buy and let out properties at affordable rent prices.

There is no question that landlords have been making substantial capital gains on investment properties which have far outstripped required outlays on interest payments, rates, land tax and other charges. However, these gains are not realised until the property is sold. For many property investors, finding the spare money to service costs on an investment property is a real challenge. A land tax bill of up to $4,000 puts a rental property investment beyond the reach of many middle income earners, and the possible removal of negative gearing would make property investment even more of a struggle for many.

There are a number of ways that the impact of land tax on affordability could be mitigated. One option is an up-front concession for landlords providing cheaper rents, possibly repaid at the time a property is sold. This would minimise loss of revenue. But it is just one of the options that I think the government should be investigating.

I believe that any concession needs to be targeted only at properties at the low end of the market, and the level of concession needs to have some relationship to the rent the landlord would forgo to be eligible for the concession, or act as a sufficient incentive for investors to choose to purchase lower value investment properties rather than more expensive properties. A reason I think that a land tax concession scheme would increase the number of properties available at affordable rents is the additional benefits that a landlord would gain by offering a property at slightly below the level that the market will bear. This gives landlords a larger number of applicants to choose from and it reduces the period that a property is vacant between tenants. This often means that the landlord is

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