14 March 2024

No limit on RZ1 dual occupancy homes under Liberals, says Lee

| Ian Bushnell
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Elizabeth Lee

Opposition Leader Elizabeth Lee has outlined a number of housing and planning policy differences. Photo: Ian Bushnell.

Developers will not be limited to building homes of 120 sqm on dual occupancy blocks in RZ1 zones if the Canberra Liberals win government in October.

Opposition Leader Elizabeth Lee marked out this significant policy difference at the Property Council’s ACT Economic Outlook event today (14 March).

She also announced that a Canberra Liberals government would undertake a full review of the contentious Lease Variation Charge as part of a wider review of the ACT tax system, including rates and stamp duty.

The new Territory Plan will allow dual occupancy developments on large blocks over 800 square metres in an RZ1 zone to accommodate a second dwelling up to 120 square metres in size. The developer can then unit-title the second dwelling so it can be sold.

The government also says a stamp duty exemption will apply to the first transfer of unit-titled dwellings on suburban residential blocks (RZ1) for purchases valued up to $800,000 from 27 November 2023 until 30 June 2026.

However, Ms Lee said that arbitrarily restricting a second dwelling on an RZ1 block to 120 sqm was a poor policy.

She also said a Liberal Government would exempt the second dwelling from stamp duty when it is sold for the first time but made no mention of the sale price or time limit.

“We believe that it’s your land, your home and your choice,” Ms Lee said.

“We’re committed to seeing sensible density on our larger blocks in the suburbs to give choice to all the Canberrans who wish to continue living in the community that they know and love, but who want the option of a smaller dwelling with a smaller garden.”

The government argues that limiting the dwelling size will mean more affordable products being offered to the market.

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But Ms Lee said later that many property experts had told the party that restricting the size of the second dwelling to 120 sqm was actually not going to do much in terms of affordability when you’re talking about construction costs that have increased astronomically.

“Being able to build a 120 square metre home compared to something [bigger] or maybe even twice its size doesn’t mean it’s going to be half the price,” she said.

Ms Lee doubted this would lead to land owners maximising their investment by building bigger and more expensive homes, saying they would still have to stick to ACT planning rules requiring green space.

She also announced that the Liberal Government would undertake a thorough review of the lease variation charge, how it’s calculated and applied, and its impact on housing accessibility and affordability.

Ms Lee said the industry had told her the Lease Variation Charge, what the government calls a windfall gains tax, was a barrier to new housing.

“While that review is on the way, we will guarantee that no Canberran who has opted to take advantage of the RZ1 changes under the current regime is at a disadvantage,” she said.

She said the government should pull whatever levers it could at the territory level to alleviate the housing crisis.

“Many property people have spoken to us about how regressive the lease variation charge is as a tax and that [its removal] could be more than offset by the potential growth in activity and investment,” she said.

Ms Lee said the Canberra Liberals would have more to say on land zoning and tax before the election, but indicated that everything would be up for review if they won government, including the current tax reform program, stamp duty and rates.

She recommitted to releasing more land for housing, including a feasibility study of developing land in west Tuggeranong.

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While welcoming Chief Minister Andrew Barr’s intention to finally bring forward land releases, Ms Lee said there was still no concrete plan.

“When you have a look at what he announced in the Budget review, the $50 million payment to the Suburban Land Agency, it doesn’t come with any tangible targets,” she said.

Ms Lee also said a Liberal Government would prioritise skills, saying the number of apprentices and trainees undertaking training was declining in contrast to other jurisdictions.

“We will prioritise investment in the skills that are needed now for the Canberra of tomorrow and we will focus our support on getting young people job ready, not spending millions of your money on contracts that have no tangible outcomes,” she said in a dig at the CIT contracts affair under investigation by the ACT Integrity Commission.

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Sounds like the libs are just going to do what the property industry want. Every economist under the sun is telling us that stamp duty is the worst tax in australia. Canberra is leading the way in getting rid of it. A liberal government would be a step backwards

Not a decision I would back. For those sick of the government it seems the independents need to be in the Assembly in large numbers.

“Your land, your home, your choice” is fine if you live somewhere west of Uluru, maybe, but certainly not if you live in a community

I think we will find that the 120sqm limit will be a policy failure. It’s not worth the effort to build it and it won’t be profitable unless perhaps you live in Red Hill. The rich get richer….

I would agree, but I think just lifting the limit on home size will also be a failure. The right move would have been to allow dual occupancy on blocks over 700 sqm rather than 800 sqm. Not oly are 800 sqm blocks relatvely rare, but many are not ideally placed near main roads etc. and too many have large expansive homes on them (you mentioned Red Hill?) which will not lend themselves to this type of redevelopment.

HiddenDragon8:50 pm 15 Mar 24

For a party which is facing a steep uphill battle to get the numbers even to have a chance of forming government with cross-bench support, this is a truly heroic policy.

Removing the size limit on a second dwelling will obviously appeal to people who are looking to cash-in and to people who are prepared to believe that this will improve the odds of them getting their dream home in their dream location.

Against that will be all the people who like their streets and suburbs the way they are – and that includes not just the stereotypic “Boomer NIMBYs” (i.e. the ones who are in no hurry at all to move on) but also younger families who have mortgaged themselves to the eyeballs to get the sort of home in the sort of street that they want their kids to grow up in. For all of those people, the Labor policy which limits the size of a second dwelling (at least until the election…..) will be the lesser of two evils.

The Liberals might do better to have a less divisive approach to planning and zoning and to talk in somewhat more detail about any bright ideas they might have on rates and stamp duty – issues of more pressing and immediate interest to many more voters.

I’m really not sure how this will affect those families who have mortgaged

Interesting… I am not sure that “families who have mortgaged themselves to the eyeballs to get the sort of home in the sort of street that they want their kids to grow up in” will be impacted in the least here. After all, they are already in their homes. Nobody is going to force them to put a dual occy on their property. They are free to play cricket on their oversized family block to their heart’s content.

Of course, if ‘type of street’ is the main thing they will be concerned about, then that is sounding a little NIMBYist.

Let’s be honest, most of the housing stock in this city that ends up being redeveloped is pretty much junk. Mass produced mid to late 20th century ex-govies and the like, almost all not meeting any kind of sustainability standards, requiring tens if not hundreds of thousands of dollars to get them up to any level of liveabilty, mostly on run down dried up oversized blocks. What is desirable about these homes other than some misplaced sense of sentiment?

In my own leafy inner north suburb, I have seen a number of these dwellings demolished and replaced with great big new homes. The new homes are almost always better than what they replaced, and even though they are still single dwellings, they are often double or even triple the size of the previous home, yet not a whisper of discontent by folks in the neighbourhood.

I ask you, instead of replacing a single junk house with a single new oversized and premium priced dwelling, would it not be a better outcome if we had two or perhaps even three modest homes on those same cleared blocks? The built structure would be around the same size, yet the new homes would be more affordable and also in greater supply.

Unless of course, we have a problem with what ‘type of street’ we end up with.

Anything that restricts developer profits the Liberals are against. So green space, car parking spaces, and access roads get smaller and/or fewer while the proportion of the block used for housing gets larger! So Ms Lee’s proposal in completely in-line with standard Liberal thinking!

And what do you think the Labor/Greens government has been doing for the last 20+ years? We’ve lost so much green space, so many trees and got smaller blocks of land, more units, more asphalt, concrete and steel as well as fewer car spaces. Sounds like the Libs are just going to follow a similar line of practice, with all putting developers before the public.

devils_advocate3:44 pm 18 Mar 24

Developers won’t be interested in RZ1 blocks for redevelopment purposes. It’s really only for people that own an existing block of land that is suitable for a secondary residence in the back yard. I can’t see how someone would sensibly buy an RZ1 block for redevelopment purposes.

devils_advocate12:30 pm 15 Mar 24

Everyone responds to incentives, and the ACT “Government” is no exception.
-the government generates revenue from sales of new land. Allowing urban infill directly competes with that. Constraining the prices of new land releases reduces government revenue. So the ACT government will rationally do all it can to discourage urban infil through deadweight taxes, red tape etc.
-any addition of new supply to the market constrains prices overall. The ACT government taxes the value of home sales through stamp duty, and so reductions in the prices of homes (or lower growth) reduces revenue.
-similarly, the ACT government levies punitive additional taxes in the form of land taxes, which are a cost to Commonwealth revenue as landlords deduct this from their rental or PAYG income. So in addition to cost shifting to the Commonwealth, the ACT “government” directly profits from inflating AUVs for the land on which rental properties have been built.

I’m not sure I’m on board with what the Liberals are proposing. They need to take a step back and look a little deeper. All the parties should instead be focused on which zones need to be upgraded from RZ1 to RZ2 if they’re near shops, services, facilities, good public transport, etc.

What is clear is the years of effort and money poured into the new planning system by former Minister Gentleman, was what a huge waste of effort that was. It just gave opportunities and project funds to consultants and ACT Public Servants for some navel gazing. The new planning strategy was universally mocked and even the new planning minister Steel wants a refocus.

Ben Ponton should be the first to go, so many insiders from all areas of planning and development say he’s a poor listener and well out of his depth.

There really should be no restrictions on the ‘where’ and simply restrictions on the ‘what.’ Arbitrarily limiting supply of properties fit for redevelopment will only see those properties increase in value. We see it already with RZ2 blocks being more expensive than their equivalent RZ1 blocks. Keep it simple. Dual occupancy is hardly a big step from single dwelling and does very little to change the nature of most streets. Any block over 700 sqm should be eligible.

“We believe that it’s your land, your home and your choice,” Ms Lee said.
Too bad about the neighbours who will suddenly lose access to natural light at their homes; or will have to contend with extra cars trying to park in their street, restricting access their properties. No Ms Lee, it is not as simple as your home, your choice. You aren’t living in a bubble if you live in a suburban street.

devils_advocate12:16 pm 15 Mar 24

No. There has been no suggestion of changing the development controls. This just relates to titling of the dwellings.

D_A – go and read the first line of this article.

devils_advocate3:14 pm 15 Mar 24

“D_A – go and read the first line of this article.”

Done. Now go look up what the “development controls” are.

Finally, a sane proposal. limiting a 2000sqm block to two 120sqm dog boxes was utterly idiotic. Even limiting a standard quarter acre block in that way would be ridiculous.

If our Greens/Labor council members want to live in granny flats, they can go ahead but the rest of us have no interest.

devils_advocate10:03 am 15 Mar 24

In fairness, and to the best of my knowledge (happy to be corrected) you can still build to 50% or 35% plot ratio (depending on the street facing access) and single-storey on an RZ1 block.

The difference under the more recent proposal relates to being able to unit title and therefore have separate ownership of the two or more dwellings. But yes imposing the size limit on the secondary dwelling is arbitrary and counter-productive since the majority of RZ1 blocks would effectively be limited to fairly small secondary dwellings anyway; and even if they are larger, any new (additional) supply puts downward pressure on prices.

Andrew Cooke11:07 am 15 Mar 24

How many 2000sqm blocks are there in Canberra? Most suburban blocks range 700-900sqm, and blocks in newer subdivisions are closer to 500. An old standard quarter acre is 1000sqm (1011 to be more precise)

devils_advocate12:19 pm 15 Mar 24

So to take this example, if the block was 1000 for ease of calculation, in the scenario where the owner was building a secondary residence in the back yard with 1 driveway crossing, the TOTAL plot ratio across both houses would be 35% or 350 meters. So in aggregate 175m per house on a single level, PROVIDING all other setbacks and building controls are met. Not grand by any stretch.

Andrew Cooke – I believe from the last numbers I saw, there were a couple of thousand 2-3000sqm blocks in the ACT, so a non trivial amount.

Every house I have ever owned or rented has been right around the 1000sqm mark. I’d never choose to live in the newer suburbs where they are squashed in like sardines.

I feel sorry for all the young people with kids and no real backyard but apparently that just isn’t considered important in modern times.

Im still asking who actually voted for these changes ? II love my RZ1 area

devils_advocate7:38 am 15 Mar 24

RZ1 blocks have always permitted multiple dwellings subject to block size and setbacks (development controls). Neither of these things have changed.

Really Rz1 blocks are for single dwelling

devils_advocate9:15 am 16 Mar 24

“Really Rz1 blocks are for single dwelling”

That has not been the case previously, secondary residences/dual occupancies have been allowed on RZ1 for decades.

In fact I believe prior to 1985 it may have been possible to title them separately.

Yep i think you are right, they started by allowing dual occupancy on corner block near shops, etc then the fluffy homes, then more and more now this , I have lived in myRZ1 home for decades, thats what i wanted space, again who voted for this

So you have lived in your home for decades because you wanted space? Awesome. You have it. Nobody is going to force you to develop it into a dual occupancy. But why should you dictate to me? I also have an RZ1 home. But I think I’d rather redevelop it. My 810 sqm block is overkill as far as I’m concerned. But here’s my idea. You keep your single dwelling RZ1 home, and I develop mine into 2 homes. Each of us gets what they want. Easy.

Yeah and then we have to put up with car blocked streets etc ZR1 was for single dwelling not as you put it for development

devils_advocate11:31 pm 14 Mar 24

Profits made by committing large sums of capital and labour and incurring substantial risk cannot be termed as “windfall gains” no matter how hard the unproductive classes might like to screech about it. The use of a block of land is already built into its zoning, charging extra on top of that is just adding cost and at the same time limiting competition, which has predictable impacts on price.

By all means though let’s continue to screech about the fact that developers might make a profit, because obviously we should be relying on altruism to get us out of the current crisis.

As they say never get between a socialist and a large pile of someone else’s money.

Never get between a property spiv and his rent seeking of taxpayer funded “incentives”.

You’re right, the use and value of a block of land is already built into its zoning, planning restrictions and lease conditions.

Expecting to receive all of the profit from the government changing those to a higher value use is pretty much the definition of a windfall gain. The property spiv does nothing to generate that profit, it is solely caused by government action.

Of course though, property spivs are so used to receiving these type of publically funded incentives, they somehow think it’s deserved and earned somehow.

To be fair, it isn’t the government changing the use that adds value, but the actual invesment of the developer, which adds the improvement. The public will recieve its share once the development is complete, by way of a new property now paying rates (and perhaps land tax) ad infinitum. And who knows? Maybe all those extra homes will ease the pressure on the housing market.

Incidental Tourist11:29 pm 14 Mar 24

Hence developers should wait until after October.

devils_advocate10:04 pm 14 Mar 24

They need to actually commit to removing punitive taxes that stifle development, reduce deadweight regulatory costs that slow down developments and make them more expensive to build, and wind back all of the egregious anti-landlord policies (including but not limited to punitive land taxes) that have been implemented over successive years by tweedle dumb and tweedle dumber.

How on earth is the Lease Variation Charge regressive? Its literally a tax on the windfall gain in value that is created through changing the restrictions on what can be built on a block.

A change in value that is controlled by and caused by the government rather than anything a developer does.

Of course “property people” don’t like it, it reduces their ability to make extra profits from doing nothing.

Argue its too high, argue it doesn’t provide an incentive to build more but its perfectly reasonable for the government and through them, the public, to be the main beneficiaries from changes in planning controls and lease restrictions.

Wouldn’t you also pay capital gains tax once the unit is sold? So you’re being taxed twice.

I don’t think you get double taxed Raphael. I believe Capital Gains is taxed on the proportion ‘excluding’ the LVR.

There’s a number of Property costs, Capital and Transactional expenses that are added or deducted in the CGT calculation.

BJ,
there are risks around how CGT interacts with the LVC but I would note, the ACT Government doesn’t levy CGT, it’s a federal government tax. There’s many areas where state taxes have some overlap or interaction with federal ones, noting also the constitutional issues at play in that space.

Better coordination of property taxation at all levels should be a key focus of holistic tax reform, instead of the piecemeal approach that currently occurs. It would be far better to have more consistent and integrated taxation but that’s a pipe dream because of our current governance arrangements.

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