As Australia’s ageing population look towards retiring into a comfortable lifestyle, land lease living is increasingly becoming a popular option, with roughly 130,000 Australians living in these communities.
According to PropTrack’s 2024 Housing Affordability Report, Australia’s housing affordability hit its worst level on record, showing that median-income households could afford only 14% of homes sold in the 2023-24 financial year, down from 43% just three years ago.
As the government looks to increase housing supply, there is demand for affordable downsizing options for our ageing population.
Land lease communities, also known as lifestyle communities, are a $12 billion sector that has been labelled the fastest growing solution for downsizers in the country.
It has been called out as part of the solution to solve the current housing crisis, as it provides buyers some alternative benefits over traditional land ownership.
What is land lease living?
The land lease model sees the developer own the land, while the individual owns the house built on that land. The land is instead leased by the homeowner under a long-term rental agreement.
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In land lease communities, the developer owns the land but leases it to homebuyers who own the houses built on it, which allows them to avoid paying stamp duty. This render shows the clubhouse outdoor pool at Stockland’s Victorian land lease community, Halcyon Horizon.
The immediate appeal is the security of owning a new home at a much lower cost compared to buying a house outright, as the buyer is not paying for the land.
This avoids fees like stamp duty and land tax, while keeping equity from the property itself.
Benefits and concerns of a land lease arrangement
Compared to traditional home ownership, there are benefits to land lease arrangements and also some things you may not be aware of.
No stamp duty or council rates
Opting for a land lease community can significantly reduce upfront costs compared to traditional home ownership, such as not having to pay stamp duty.
As the land is being leased by the homeowner, there are no stamp duty fees, body corporate fees or council rates – major boons for cost-conscious prospective buyers. And as residents own the house, they keep any capital gains earned on the property.
Instead of taxes and rates, residents pay a weekly site rental fee that covers the use of land and access to amenities. These fees could increase depending on what is laid out in the lease agreement, so be clear on the contract.
However, another benefit is that site rental fees can be offset by government rental assistance for those who are on the aged pension.
MORE: ‘Downsizer demand’: Two new Over 50s communities launch south of Brisbane
Social benefits
Aside from the cost, one of the other main benefits of land lease communities is the social aspect. In most cases, these developments offer shared amenities such as swimming pools, clubhouses and gyms (covered by the weekly site fee), which can foster a sense of community.
Shared facilities can foster community building, an attractive feature for many downsizers. Picture: Eugene Hyland/Ingenia
Last year, Residential Land Lease Alliance (RLLA) reported that most residents chose land lease communities for safety and security, the desire for a smaller home and the community aspect.
“The industry recognises the differences in needs and the vulnerabilities that many older Australians face,” RLLA chair, Natalie Kwok, said.
“We strive to deliver a viable and sustainable housing solution to cater for the increasing demand from an aging population, while meeting the needs of the community and contemporary expectations.”
These arrangements can strike the right balance between independently owning a house, while also feeling connected to a village.
Newer, more efficient homes
Besides the weekly site fees, there are other ongoing costs such as utilities like electricity, water and internet. But recent or newly-built homes are held to higher efficiency ratings, such as the new natHERS minimum 7-star energy ratings.
New builds mean less maintenance for years to come, as well as being cheaper to run.
MORE: How Australia’s new 7-star energy ratings are paying dividends for homeowners
Ongoing running costs and maintenance costs are lower in newly built properties. Picture: Eugene Hyland/Ingenia
A note on exit fees
It’s important not to confuse land lease communities with retirement villages, known for charging high exit fees, sometimes as high as 35%.
Many land lease communities charge no entry and exit fees or capital gains fees.
Of course, it’s crucial to check these details before joining any community, especially if you’re a Victorian resident, where there is less regulation than in the rest of the country.
In most states, exit fees must be disclosed in the lease agreement. But the Housing for the Aged Action Group noted that exit fees in Victoria lacked legislation.
“Land lease communities should be part of the solution to the housing crisis. It’s a form of housing many older people enjoy. Many people want to live in these communities,” said Housing for the Aged Action Group executive officer, Fiona York.
“Gaps in Victoria’s consumer protection laws and access to justice frameworks are destroying some older people’s ability to enjoy a happy retirement. The government is aware of the issues… and have made it a regulatory priority.”
In July 2024, Victoria’s Minister for Consumer Affairs, Gabrielle Williams, announced that reforms were in development to deliver protections for land lease community residents.
Land lease communities provide an affordable retirement option, while offering a similar quality of housing available in new estates.
But with any major life decision, it’s important to get educated and informed about your options, read the agreements carefully and seek independent advice from a financial adviser.
It’s also worth visiting prospective communities in person to see whether the space, houses, existing residents, amenities and overall feel is the right fit for you.
