The ACT government was warned its "unsustainable" monopoly on land sales was driving up the cost of land and making housing more unaffordable almost 20 years ago, newly declassified Cabinet documents show.
A 2007 submission obtained by The Canberra Times under the 10-year release rule said the community was concerned about the "erosion of affordable housing" as far back as 2001, shortly after the Stanhope Labor government was elected.
The submission confirmed the territory government's long reliance on land sales revenue and a long-term failure to act on the problems it faced in both being the ACT's monopoly provider of land and trying to meet social outcomes for affordability.
While the Stanhope government largely acted on the concerns through its affordable housing action plan, the governments of his successors has become ever more reliant on rising land sales revenue.
Former Treasury official Khalid Ahmed, who was among those warning the Stanhope cabinet about the monopoly, confirmed it was an issue the government was trying to deal with as early as 2001, shortly after it took control of land release and development.
But Dr Ahmed said the original intention had been to use the monopoly to help supply more affordable housing for Canberrans, as the government was at that time conscious of the risks posed by controlling both land release and development.
The documents show a steering group was formed in September 2006 to find ways to increase the supply of affordable housing in the territory, and in the April 2007 submission, Cabinet was warned that rising house prices were having a devastating impact on Canberrans earning less than the average wage.
Between 2000 and 2003, the median house price in Canberra almost doubled, and while a median priced house in Canberra cost around three times the ACT median household income in 2000-01, this ratio had risen to around six by 2003-04.
"While a median income household (around $68,000 per annum) can still purchase a median priced house in Canberra, for households on $50,000-$60,000 income, entry into home ownership has been severely limited," the submission said.
"As this income group's transition into home ownership is delayed, the demand for rental accommodation has increased. Rents are still relatively affordable for this group, but due to low vacancy rates, lower income groups are finding it difficult to access affordable rental accommodation."
This posed problems for labour supply and future growth prospects, the working group found, but there was also some evidence it had lead to a delay in new household formulation.
The level of indebtedness had also increased significantly for households since 2000, with buyers in 2006 paying around $275 million more than if they'd bought in 2001.
"This is the equivalent of each first home buyer paying an extra $110,000," the submission said.
The extra interest costs alone were estimated to be $1100 a month for a median-priced house, which meant houses were at a considerably higher risk of falling into financial stress.
"The large-scale increase in house prices relative to income cannot continue indefinitely," the submission said.
"Consciously or not, the government has used its monopoly power in the new land market to increase financial returns to the ACT community - that is, prices have been set on monopoly rather than competitive or social welfare maximising principles.
"That the current supply policy is unsustainable is highlighted through the social and economic issues mentioned [above]."
Dr Ahmed said the government considered and partly implemented some changes at the time, including increasing the amount of englobo land sales so private developers would compete for subdivisions, driving down the cost of land.
He also said the Stanhope government had aimed to have land sales profits margins in line with private developers' margins, of 10 to 20 per cent, though those mechanisms had since been largely abandoned.
Former Chief Minister Jon Stanhope said he stood by the 2007 strategy and its effects, though he was disappointed more was not done to ensure more englobo sales in the years since.
He also said he was disappointed more had not been achieved to ensure there were always 1000 residential blocks 'on the shelf' ready to release any time they were needed, one of the strategy's key recommendations.
Despite criticism of the current government's approach to land sales by many stakeholders, the government last year increased the number of blocks it plans to release over the next four years by almost 1000 dwellings.
It also released a long-awaited housing affordability for the next five years, though many are still waiting on the detail of how the strategy will be implemented.