Mr Barr did not outline the detail of his Land Development Agency split as expected on Thursday, but instead set out his vision for the way Canberra should look as the light rail line is built and large blocks of land on Northbourne Avenue and at West Basin are sold for development.

He had planned to introduce legislation to split the agency this week, but now says legislation will come early in the new year so the two new agencies can be in place by July.

Mr Barr was forced into the restructure after damning findings from Auditor-General Maxine Cooper about the agency's handling of land purchases at Glebe Park and West Basin for the City to the Lake project.

But he is clearly going further than simply setting up a new agency to take control of City to the Lake and Northbourne Avenue. He told the ACT parliament on Thursday that the government would create a "defined precinct over which the new entity will have control so it is able to work with the community and partners in the developments on planning, designing and delivering the vision".

Special precincts had worked at Southbank in Brisbane, Elizabeth Quay, East Perth, and were being used at Barangaroo in Sydney.

He promised "people-focussed, design-led", "economically sensible and sustainable" development.

The new agency would be accountable and responsible for the results, and would operate commercially. Its board would have "the powers and accountability arrangements it needs to get on", and would include experts in design, "the commercial realities of development, community building and social inclusion", governance and sustainable city building, Mr Barr said.

The heart of the city must be renewed, he said.

"This cannot be an exercise in bland and boring building of boxes. It has to be about creating buildings that make statements about this city, excite interest in those living and working in them, or just walking past them," he said. "They should be destinations, as well as useful and modern spaces. They should be able to stand the test of time, and have people still talking about them in 50 years."

He said the city transformation task was different to other cities, given Canberra was not dealing with uncontrolled population growth, nor trying to revive industrial areas or areas in disrepair.

The challenge was to not become "a museum of the early 20th century's conception of city life" but to become "a showcase of how the people of this century want to live and work". Canberra was open to change, innovation and diversity, he said.

The idea of a separate planning precinct was raised in internal government documents in 2013 and 2014 when it was developing the business case for the Gungahlin tramline. At that point, agencies canvassed options including special rating levies, development levies and changing planning controls to maximise development around tram stops and to "capture" the value of land either side of the corridor.

The Capital Metro Agency's rapid business case pointed to the need to "push through planning reforms" to give developers certainty. It suggested carving up the corridor into nine development zones. It also referred to the ability to sell land parcels in Northbourne as "super lots" to encourage developers "to take a long-term view, and therefore investment".

Some options, including a special rating zone and a light rail levy, have since been ruled out by the government.

This year, the government has put two super lots on the market. One on the Dickson side of Northbourne has sold to developer Johnny Roso. The other, on the Lyneham side, is open for bids.