The Stanhope's Government's land rent scheme which could give hundreds of lower-income Canberra households real help to buy their homes has an air of inspiration about it, and not only because it borrows from some of the leasehold precepts on which the city was founded. That's good by itself, but the two further attractions are even better.

First, it gives entree into an increasingly difficult housing market without many of the risks inevitable when people essentially cannot afford to be there in the first place. That's the more important now in a world in which financial institutions are reeling from their misjudgments in lending more and more money to people who really could not afford to pay. Even better is the way in which it will allow a two-stage entry into the market for families whose needs for housing are often greatest at the time their household bills are greatest: when they are younger and with young families. A family can concentrate their available resources on commissioning a house for their needs, and, in effect, defer making payments on the land part of a typical house-and-land package to a time when their situation has stabilised and they are better able to repay. Over the life-cycle of the home, they may not make net savings (because the land has to be paid for, at its then-current value sooner or later) but they can defer the obligation until when they can afford it (perhaps with the old mortgage largely paid off) or when they sell.

By comparison, some of the first-home grants, or stamp-duty schemes, can give a terrific entree for the cash-poor, but not much help with the onerous overall debt acquired. A large part of that debt, of course, is for future benefit in effect the right to hold the land for 99 years.

The founders of the ACT had a dream that the city could fund its own development by skilful management of the leasehold system. Politicians on both sides liked the ideas of American economist Henry George, who argued first that the community should share in (and be able to tax) increasing land values caused by city development, and indeed that a suitable taxation system could obviate the need for any other taxes. Most Canberra people who acquired land before 1970 did not have to shell out fabulous sums for land: rather they got their land for 5 per cent of its then value (sometimes with a premium if it was keenly sought) then paid an annual rent of 5 per cent of unimproved capital value. The rent embraced most municipal services, such as sewerage and garbage collections, and net rents funded the further development of suburbs.

Like the old scheme, Tuesday's scheme should be, in the long term, cost-neutral, even if there will be an up-front net cost. That's something which might help reassure those already in the market that it is not an expensive or doomed subsidy.