Page 1984 - Week 06 - Wednesday, 25 June 2008
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unable to enter the market the ability to straddle the line between buying and renting by purchasing a property subject to a long-term rental lease on the land. My understanding is that the government regard this scheme as merely one strand of their plan for affordable housing. Whilst I reserve my judgement as to the government’s overall ability to tackle this problem, I believe that this scheme will be of some use.
The land rent scheme will be available on greenfield blocks sold by the Land Development Agency. It will allow buyers to avoid buying the land and instead enter into a scheme whereby they rent the land under normal Crown lease with an option to buy the land at any time by paying its unimproved value.
For buyers with a household income below $75,000 per annum, subject to adjustments for dependants, the rental cost for the land under the scheme is set at two per cent of unimproved value per annum. This rate is calculated to cover the infrastructure cost to the government involved with the release of the land. For buyers who do not qualify for the discount rate, the regular rental cost for land under the scheme is set at four per cent of unimproved value per annum. This rate is calculated to approximate the market rate of the cost of housing services.
The scheme involves an annual review of the land value and the income of the tenant. Tenants may switch back and forth between the discount rate and the regular rate, depending on their income. Once on the discounted rate, this rate prevails for 12 months even if their income increases during that period.
These rates of land rent are also subject to an upper limit in annual rental increases to avoid sharp increases in rent in times of rapidly rising land values. If the unimproved value of land increases by more than average weekly earnings in a year then rental increases for that year are capped at this level. This means that rental increases caused by rapid increases in land values will be spread over several years rather than occurring in a short period of time.
In other respects, the scheme allows the land tenant the same rights as an owner of land. The tenant may at any time choose to purchase the land at the prevailing unimproved value. The tenant may also sell their property freely either by buying the land prior to sale or by selling the property subject to the land rent scheme. A new buyer who acquires the property subject to the land rent scheme may themselves continue on the scheme or purchase the land at the prevailing unimproved value. And of course the lease on the land is the standard 99-year lease for buyers who have leasehold title to land. The essential difference is that tenants under the land rent scheme are subject to land rent payments in addition to their rates and charges.
I understand, from briefings that have been provided on this bill, that tenants taking up the land rent scheme will be subject to a mandatory education session taking about three hours. This session is designed to explain the scheme and to ensure that land rent tenants do not take up the scheme through lack of understanding.
I am not one who takes the view that the general populace are helpless simpletons who need mandatory assistance from their anointed government masters to make their own informed and intelligent decisions. Nor am I keen on imposing mandatory requirements for commercial transactions. However, this mandatory education
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