Pegasus Economics' analysis of ACT budget says settings have contributed to pricing people out of market

An independent analysis of the territory's budget said the government's land tax regime had increased the price of rental properties and had pushed people on lower incomes out of the market.

The analysis, by Pegasus Economics, said while the government had introduced programs to improve the supply of affordable housing this was likely to have little impact for those on a lower income in the nation's capital.

Landlords have to pay land tax on all rental properties in the territory. There is a fixed charge of $1392 on all properties plus a rating factor applied to the average unimproved value of the property.

"The ACT land tax regime has had the effect of increasing the price of rental properties," the report said.

"Canberra now has the highest rental prices in the country and it is arguably the case that people on lower incomes can no longer afford to reside in the ACT."

But while the ACT government has allocated more than $140 million towards housing measures in the recent budget, the report said this was not enough to increase the supply of affordable housing.

"The scale of these programs is small and they are unlikely to have a significant impact on improving the supply of affordable housing for lower income groups," the report said.

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Concerns were also raised about land supply in the territory, saying there was evidence to suggest demand for land in the ACT vastly exceeded supply.

The analysis pointed to a recent land ballot in Macnamara where 7400 buyers registered for 51 blocks of land.

The report was critical of the government's land release program. It said that while the budget papers state there was a steady schedule of land release to meet forecast demand it was "difficult to reconcile this claim with the population growth assumptions in the budget".

"If the supply of residential land is constrained resulting in relative scarcity, this in turn will put upward pressure on residential land," the report said.

"As a major input into the price of residential property, relative scarcity in the supply of residential land can also be expected to feed into higher residential property prices.

"ACT government agencies benefit from the high land prices generated by the mismatch between supply and demand."

The analysis referenced the fact the stock of public housing had not kept pace with ACT population growth and has remained stagnant at around 11,000 properties for the past decade.

"The stock of public housing in the ACT has not kept pace with population and has remained largely stagnant over the past decade, reducing affordable housing options for those from lower income groups wanting to reside in the ACT," the report said.

The report - by Alastair Davey, Brett Kaufmann, Roger Fisher and Susan Antcliff - said the federal government's capital gains tax policy had also contributed to the territory's high house prices.

"Capital gains tax policies have encouraged investment in real estate that have driven up housing costs," the report said.

The Pegasus report has also warned the territory's budget was not sustainable in the long term. It said tax reform to increase general rates in the ACT would cover just a third of lost revenue when commercial and residential stamp duties are reduced.

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