Alix Butler felt a wave of relief when she moved into her new apartment in inner Melbourne last year. "It felt like we finally had a place to call home," she said. Butler and her partner, Tiarn, are among the first tenants in a public-private housing development initiated by the Victorian government. This project is part of a broader plan to demolish and redevelop the state's 44 public housing towers.

The development operates under the Ground Lease Model, where the state demolishes existing public housing and leases the land to private developers and non-profit housing providers for 40 years. These consortiums rebuild the sites with a mix of social, affordable, and market-rate rentals, returning them to the government after the lease period.

The Flemington complex includes 240 public housing units and 116 affordable apartments for couples earning less than $111,000 a year and single individuals earning less than $71,000. However, less than a year after moving in, Butler and Tiarn were informed that their rent would increase by 17 percent. This would raise their weekly rent from $322 to $377, an amount they say is barely manageable. "We very much live fortnight to fortnight, and we have to budget very carefully," Tiarn explained.

In response to the proposed increase, the couple and other residents filed a complaint with Consumer Affairs Victoria (CAV). The operator later revised the increase to $28 per week. However, Butler and Tiarn expressed disappointment that this adjustment would only apply to those who complained, leaving the door open for future rent hikes. "If this is a trend that happens every 12 months, we won't be able to stay," Tiarn said.

The project is managed by a consortium called Building Communities, which includes Community Housing Ltd and Tetris Capital. The Victorian Department of Housing referred questions about the rent increase to Tetris Capital. In a statement, Tetris Capital said, "As per rental contractual obligations and regulatory requirements, renters have the opportunity to work through rental dispute processes with their tenancy manager."

Building Communities has also redeveloped public housing in other areas of Melbourne as part of the Ground Lease Model. The Victorian government has tasked the consortium with further redevelopment projects in South Yarra, Prahran, Hampton East, and Port Melbourne.

Butler and Tiarn's experience has raised concerns about the Ground Lease Model. "It's meant to be this innovative, groundbreaking thing, but tenants are being put into rental stress after one year," Butler said. They argue that the consortium has the authority to set its own rent policies, which has led to their current predicament.

According to Building Communities, residents qualifying for affordable housing will only pay a maximum of 75 percent of "market rent." However, the definition of "market rent" is based on averages from inner-city properties across Melbourne, not just the Flemington area. This means that the rent for their apartment is influenced by higher rental prices in more expensive neighborhoods.

The Australian Tax Office's benchmark for a one-bedroom apartment in inner Melbourne rose from $431 last financial year to $504 this year, a 17 percent increase. Building Communities appears to have applied this increase directly to the couple's rent. Butler and Tiarn were unaware of this policy when they moved in, as it was not mentioned in their lease agreement.

Community Housing Ltd stated that their rent-setting policy is clearly outlined on their website, allowing residents to provide feedback and request evaluations of their rent on a case-by-case basis. Victorian Housing Minister Harriet Shing did not respond to interview requests or questions regarding the situation.

The Ground Lease Model aims to provide various housing options for Victorian renters. However, Homes Victoria, the state public housing agency, stated it cannot intervene in rental disputes unless the consortium fails to meet its contractual obligations.

A 2022 review of social housing regulation recommended establishing an independent regulator to mediate disputes between tenants and operators. While the government did not adopt this recommendation, it is under consideration. Professor David Hayward, who conducted the review, emphasized the need for greater regulation as the state increases its affordable housing stock.

"It is very confusing [for tenants], and what we were urging in our review is to rethink how you provide social and affordable housing with the tenants first and foremost — not the providers," he said.

A parliamentary committee is currently examining the state government's public housing plans and is expected to release its findings later this year. Victorian Greens Housing spokesperson Gabrielle de Vietri criticized the Ground Lease Model, stating it could worsen the housing crisis. Opposition Housing spokesperson Richard Riordan has called for the government to disclose more financial details about its public housing plan.