Changes to the ACT's land variation charge could force the territory into a deeper housing crisis, experts say.
Knight Frank town planner Josh O'Connor said the additions to the charge brought in on July 1 would create further delays in construction of ACT houses, which in January slumped to the lowest rate in 11 years.
In most Australian jurisdictions, home owners are the legal owners of their property and have control over its use subject to planning approval.
But in Canberra under Crown lease law, if your house has a single-dwelling entitlement, you could be looking at "hundreds of thousands of dollars just for the privilege of building a second dwelling on your property", Mr O'Connor said.
"That's in addition to all the other costs involved for building the house like materials and labour."
He said this punished mum and dad developers or small development companies disproportionately.
The charge comes down considerably in proportion to the number of homes you build, if you are paying to change the number of dwellings already specified on a Crown lease.
But Mr O'Connor said this did not help much in pushing territory development through the pipeline.
"We all know that in the ACT, huge blocks for 50-100 dwellings rarely exist, and if they do they are being grazed by cattle right now," he said.
There are also industry concerns around what the changes may mean for low- and medium-density builds affordable to first home owners.
"There's no two-ways about it - this is an additional tax and it will only act as a disincentive at a time when we're facing a crisis in housing supply and affordability in the ACT," Property Council ACT acting executive director Katie Stevenson said.
"It's clear that when the full scope of the likely lease variation charge is understood and factored into decisions, some projects will not proceed as they may otherwise have done."
What is the lease variation charge and what are the changes?
The lease variation charge applies in the ACT to modify the terms of a Crown lease to increase the use or value of that land.
Almost all property in the territory is on Crown land, unless it is owned by the Commonwealth.
The latter includes areas like the National Triangle, Lake Burley Griffin, diplomatic missions and parts of the foreshore, so very little residential land is exempt from the lease variation charge.
The charge was created to take a share of increased land value, which is theoretically then used for public infrastructure.
At the start of the 2024-25 financial year, changes were made to the lease variation charge by the ACT government.
If a Crown lease does not already specify the number of dwellings on a property (schedule one), the cost to do so per dwelling is now $43,000, up from $40,000 the year prior.
There are increases in the charge to change the number of dwellings already specified on a Crown lease (schedule two), and to increase maximum floor area for land on industrial leases (schedule three).
The cost to make changes under schedule two varies based on location.
In Hackett, it could cost an additional $29,000 for two dwellings, according to Mr O'Connor.
In Yarralumla, the extra cost is about $22,000, raising the charge to $300,000 to build a second dwelling.
Most Watson properties now carry an additional charge of $20,000, to $165,000 for a second dwelling.
Parts of the same street could fall under different schedules, meaning developers are paying very different prices in almost the same location.
Income for territory government
"I get why [the lease variation charge] exists," former chair of Havelock Housing, Dan Carton, said.
"If the stroke of a pen makes land more valuable, it kind of makes sense for the community and jurisdiction to get a share of that economic gain to help fund hospitals, roads and such.
"But there is a fine line and lease variation charge is certainly part of the mix that deters people from investing," he said.
An ACT government spokesperson told The Canberra Times the government was changing charge "to better align them with market values".
"The lease variation charge is designed in a way that ensures a partial community share of the windfall gains for an owner of land from varying the lease," the spokesperson said.
"The absence of [a charge] would see all windfall gains flow through to the owner of the land."
Charge creates confusion, town planner says
Mr O'Connor said he was often helping clients moving from interstate who did not understand the lease variation charge, but even Canberra developers found it "confusing".
"No other state or territory has that kind of system," he said.
"Anywhere else, you just go about putting a planning application in."
The government spokesperson said people can contact the environment planning and land services customer service centre on (02) 6207 1923 or visit the Access Canberra website for help.
A dedicated hotline to answer any queries on the new planning system is available at 6205 0580.
