The Lease Variation Charge (LVC), which is unique to the ACT, applies when anyone seeks to develop land in the territory. At face value, codified LVC changes in the ACT Government’s July 2024 budget release will see the charge increase significantly across the board.

However, several factors will determine the extent of this increase, including where in the ACT you seek to develop and what you seek to build.

Understanding the LVC
The LVC is a charge imposed by the ACT Government on lessees (property owners) who wish to modify (vary) their Crown lease. Specifically, the LVC comes into play when:

• Specifying the number of dwellings on the land.
• Increasing the maximum gross floor area (GFA) for commercial or industrial buildings.

On 1 July 2024, the LVC for varying a crown lease to “specify the number of dwellings” was amended to $43,000 per dwelling – a $3,000 increase to the LVC applicable for specifying the number of dwellings in a Crown lease to permit unit titling, where the Crown lease does not already. Codified LVC fees have also been updated for variations to increase the number of residential dwellings permitted in the Crown lease and variations to increase the maximum gross floor area (GFA) of building on the land under a commercial or industrial zone.

Who is affected?
Put simply, anytime anyone seeks to develop land in the ACT, the ACT Government requires the lessee (owner) to pay a LVC reflective of the increase in the number of dwellings, or the GFA for a commercial or industrial development, if this is not already covered by the existing provisions of the applicable Crown lease (part of the property title, for those not familiar with the leasehold system in the ACT).

Whilst developers with the resources to develop 100+ dwellings will experience cost-effectiveness in the LVC, development sites large enough to accommodate these densities within the ACT may be hard to come by. Conversely, smaller developers – even if looking to fill smaller dwelling supply voids, will be more heavily penalised by the change in LVC.

If the intent is to address the dwelling supply shortage, in reality it appears sites suitable for large developments (100+ dwellings) are scarce, with some areas years away from being close to shovel ready.  

Other recent policy changes impacting developers in the ACT include a relaxation of rules concerning dual occupancy developments and the introduction of a developer licencing scheme. Whilst these policy shifts aim to boost dwelling supply in areas of the ACT through infill, regulate the local building industry and protect consumers, potential implications for smaller players remains concerning.

Differential Increases
Whilst the determination (LVC) has increased a little in some areas of the ACT, in other parts of Canberra, it has increased substantially and may tip location build decisions outside of the ACT.

Per the table below, it will cost you $43,000 per dwelling to limit the maximum number of dwellings permitted on your block under a Crown lease variation (where the quantity is not already stated).

Where the quantity is already stated, then the LVC payable – should you wish to develop a second dwelling on your block in Yarralumla for instance - has increased by $25,000. Those with land large enough to accommodate (and seek to develop) between 5 and 10 dwellings will be charged an additional $27,500 per additional dwelling (an increase from $160k to $187,500).
 
Small, independent developers seeking to extract a little more equity out of their land, those looking to add a second dwelling (e.g. granny flat) to their property, and local builders looking to turn a 1,000+ sqm block into a group of town homes however will pay the most LVC per dwelling developed (if approval is granted). 

Schedule 1 below highlights 2023 v 2024: 

In addition to the increased cost of goods and services across the board, labour scarcity and uncertainty associated with the introduction of a new developer licensing scheme, builders and developers should also be aware of the significant variations in LVC across the ACT depending on your development goals. In short, the updated LVC structure seems to favour high-volume builders—those with resources to develop large-scale projects (100+ dwellings), making it even more challenging for smaller developers to compete.

Increased LVC costs, in addition to increased uncertainty within the construction industry, will impact the balance between encouraging development, and equitable access to land. The ripple effect more broadly through the ACT real estate market will be felt by the residential market as businesses decide which areas – and at what scale – to invest in and develop, affecting both affordability and supply.