A new precinct will be carved out from Flemington Road in the north, down Northbourne Avenue to the lake to come under the control of a new "City Renewal Authority" from July, Chief Minister Andrew Barr announced on Wednesday.
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Mr Barr released some details of his planned shake-up of the Land Development Agency, with plans to introduce legislation later this month.
Agency chief executive David Dawes met staff on Wednesday to brief them on the changes, but refused public comment. He also declined to say whether he would apply for a position with one of the new agencies, or seek to remain in the public service.
The agency, beset by controversies in 2016, will be abolished, and replaced with two new organisations, each of which will have their own board and their own chief executive.
The City Renewal Authority would be responsible for the Northbourne corridor, starting from the intersection with Flemington Rd and the Federal Highway, and including the Dickson shopping centre and Haig Park. Its authority would extend through the city centre and on to Lake Burley Griffin, including West Basin.
Mr Barr said the authority would take "the same precinct based approach that has been successful in projects like Southbank in Brisbane and Elizabeth Quay in Perth".
Precise boundaries were yet to be finalised. The authority would take control of major projects and land purchases and sales in the area, and prepare sites and infrastructure. It would run design competitions for new buildings and public areas, with the job of improving public spaces, including streets, footpath, parks and buildings.
ACT Planning and the National Capital Authority would retain their power to approve developments in the precinct.
The second new agency would be called the Suburban Land Agency. Its job would be to deliver new greenfield suburbs and more affordable housing, with a focus on land release, housing supply and "better suburbs", Mr Barr said.
Staff would all be offered jobs, but there were no decisions yet on required staff numbers. Nor had decisions been made about who would head the new authority and agency or make up their governing boards.
The carve-up will require three new executive appointments - to head each agency and a separate person to head the Economic Development directorate. At the moment, Mr Dawes heads both the directorate and the Land Development Agency.
Mr Barr's spokesman said no decisions had been made about which directorate the new agencies would fit into, nor which minister they would report to. The Land Development Agency reports to Mr Barr, but his deputy Yvette Berry is Minister for Housing and Suburban Development, and Mick Gentleman is Minister for Urban Renewal.
Mr Barr has released no information on costs. Nor has he released the report of Andrew Kefford, the public servant charged with devising the new structure.
Mr Barr announced the splitting of the Land Development Agency during the election campaign after Auditor-General Maxine Cooper released a highly critical report into its handling of land purchases in Glebe Park and West Basin. Dr Cooper said the purchases, involving about $7 million in taxpayer funds, lacked transparency, accountability and rigour, and their integrity and probity could not be demonstrated. She discovered the "manipulation" of a document released under Freedom of Information, and an unusual arrangement between the agency and a consulting firm which employed former executives.
The Land Development Agency has also sustained considerable criticism for its handling of land supply, with some, including former chief minister Jon Stanhope, accusing it of taking advantage of its monopoly position to manipulate prices, maximise profits and price many Canberrans out of the market.
Liberal leader Alistair Coe dismissed the restructure as "just window dressing" to cover up problems that had plagued the agency for many years.
"Changing the names of the Land Development Agency's functions will not fix the serious integrity issues at the heart of the agency and government," he said.
National Capital Authority head Malcolm Snow welcomed "the focus on the ongoing transformation of the national capital through the formation of the new authorities". The National Capital Authority would continue to have a "direct interest in how Canberra is designed and developed, from greenfield sites to the inner-city", he said.
Correction: Any earlier version of this story said the agencies would sit in the economic development area of the public service, but the government now says no final decisions have been made.
