Land lease plan !

Many people despair of ever owning their own home. The cost of a house and land can only be achieved by taking out and servicing a mortgage many times the average annual salary.

The problem is that the value of land has increased at a phenomenal rate in the past several decades, and maybe now is the right time to consider a different approach.

The government releases land for housing and developers provide the infrastructure - and set the asking price. Either the homeowner buys the land and engages a builder, or the builder constructs a speculative house and offers it for sale.

All this revolves around the ownership issue. You need to buy the land as well as the house it stands on.

What if instead of selling that land the government offered it for perpetual lease ?

The householder owns the home built on that land - and can sell it to another person. Both know that the land underneath it belongs to the government and that it is subject to an annual dividend to be paid to the government.

It would be important that the land fee be tied to a formulae protected by law to prevent a future greedy government hiking the rent to usurious levels. Probably a percentage of the average basic wage would suffice, with levels adjusted annually.

The advantage would be removing the huge land purchase price from house and land deals and substituting a nominal rent in it's place. The government - owner of the land - would be justly compensated for getting such a small return by the fact that it was gaining a regular return in perpetuity.

The householder would gain by only having a mortgage covering the construction cost of the home erected on that land - which would be paid off much sooner because of it's lower level.
The interest thus saved would probably cover the annual lease fee.

It would be an interesting variation on the rigid home equity formulae presently in vogue. It would have some advantages for both the public and the government - and the added advantage that there would be a huge drop in second hand home prices - because all the new owner would be buying would be bricks and mortar - not the land that the home was sitting on.

Obviously it would not apply to existing properties - but it could be a refreshing new approach to land releases on the perimeter of our overcrowded cities.

We live in uncertain times - and new solutions to old problems should be welcome !