Some homes in Mildura can appear dramatically cheaper than similar properties across the street, but the difference is not necessarily a bargain created by the housing market. It can come down to a century-old land arrangement that exists nowhere else in Australia in quite the same form.

Mildura’s college-lease system covers 184 blocks in the north-west Victorian city. Buyers can own the house and other improvements on a block while the underlying land remains owned by the Victorian Education Minister and is leased rather than sold freehold.

The arrangement has survived for about 140 years and still raises money for local schools.

For buyers, that means a college-lease property needs to be understood differently from an ordinary house-and-land purchase.

The first key point is ownership.

With a typical freehold home, the buyer acquires both the land title and the buildings or improvements on it. In the college-lease system, the land itself remains in public ownership. The purchaser acquires the improvements and takes over the lease rights and obligations associated with the block.

That distinction helps explain why the sale price of a college-lease house can look much lower than a nearby freehold property.

ABC reporting gives a recent example from Lemon Avenue in Mildura, where one college-lease home reportedly sold for about $300,000 while a similar freehold property across the road had sold for almost $550,000 two months earlier.

The lower purchase price does not mean the buyer receives the same bundle of property rights for half the money.

The buyer also has to account for ongoing lease payments, council rates, insurance and the different financing treatment that can apply to leasehold property.

Local real-estate agents say the arrangement can confuse buyers from Melbourne, Sydney or other markets because the advertised house price looks familiar while the land tenure is not.

Finance can be one of the biggest practical issues.

Lenders generally value the security behind a mortgage by considering the borrower’s interest in the property. A leasehold structure can create additional conditions or make some lenders more cautious because the borrower does not hold conventional freehold title to the land.

That does not mean college-lease homes cannot be financed. It means a buyer should speak to lenders or brokers familiar with the arrangement before assuming a standard home-loan approval will transfer automatically.

The second key point is the lease itself.

A prospective buyer needs to understand the term, rent or lease charge, review arrangements, transfer rules and any restrictions applying to improvements, use or redevelopment.

Those details matter because a low upfront price can look less attractive if ongoing costs are not included in the comparison.

For that reason, comparing a college-lease property with a freehold home should involve total costs and rights rather than just the sale price.

The system exists because of Mildura’s unusual development history.

In 1886, the Victorian Government reached an agreement with Canadian engineers George and William Chaffey to develop the Mildura irrigation settlement.

The Chaffey brothers set aside part of the available land to generate income for education. The original concept was linked to an agricultural college, but the planned college was never built.

The land endowment survived, and the income eventually supported local schools instead.

Today, the 184 lots remain part of the college-lease scheme. Officially, the land is owned by the Victorian Education Minister.

The lease revenue flows through the Mildura Schools Land Trust and is distributed to schools in the Sunraysia region.

The Department of Education says the trust distributes about $1.95 million each year to 27 primary and secondary schools, benefiting more than 9,000 students.

Schools use that additional revenue for equipment, technology and other resources that may not be covered by ordinary budgets.

That creates an unusual link between the local housing market and education funding.

Each leaseholder is effectively part of a system in which the land continues producing income for schools rather than being permanently sold out of public ownership.

Supporters of the arrangement argue that it produces two public benefits: a potentially lower entry price for housing and a continuing education revenue stream.

There are also trade-offs.

The buyer does not gain the capital value of the land in the same way as a freehold owner. Any increase in land value remains associated with land the buyer does not own.

The resale market can also be narrower because some purchasers and lenders are unfamiliar with leasehold property.

Local agents say many buyers are investors rather than owner-occupiers, partly because experienced investors may be more comfortable modelling lease costs and rental returns.

First-home buyers can still be attracted to the lower headline price, but they need to understand why it is lower.

A property advertised for hundreds of thousands of dollars less than a nearby freehold home is not necessarily being sold at a discount to its true legal interest. It may simply be pricing a different form of ownership.

The scheme has also attracted attention as Australia debates housing affordability.

Mallee Accommodation and Support Program has used five college-lease properties for social housing with assistance from Homes Victoria.

The organisation argues the model can create two social outcomes from the same land: housing can be built while lease revenue continues supporting schools.

Housing advocates have suggested similar models could be considered elsewhere, particularly where governments or community organisations retain land and lease it for housing rather than selling it permanently.

That broader concept is often called a land-lease, community-land or ground-lease model, although the legal structure varies significantly between schemes.

Mildura’s system should not be treated as a ready-made template for every market. It exists because of a specific historical land endowment, and its rules have evolved over more than a century.

Replicating it elsewhere would require decisions about who owns the land, how long leases run, how rent is set, how lenders treat the interest and what happens when properties are sold or redeveloped.

Those design questions determine whether a lower purchase price actually improves affordability over the long term.

For someone considering a Mildura college-lease home now, the practical checklist is straightforward.

First, confirm that the property is a college-lease lot rather than freehold. Second, obtain and read the lease documents. Third, ask for the current lease charge and how it can change. Fourth, speak to a lender before making finance assumptions. Fifth, compare total ongoing costs with a freehold alternative. Finally, get independent conveyancing or legal advice about exactly what is being transferred.

Buyers should also think about their exit plan.

A leasehold property may suit someone who values a lower entry price, intends to hold the property for rental income or is comfortable with the tenure. It may be less suitable for a buyer whose main goal is long-term land-value appreciation or who wants the simplest possible resale and refinancing options.

There is no universal answer to whether a college-lease home is “better value”.

The system changes the balance between upfront price, ongoing cost and ownership rights. What looks cheap in an advertisement can be attractive for the right buyer, but only after the lease is included in the calculation.

For Mildura’s schools, the arrangement continues to do what its founders intended in broad terms: land set aside more than a century ago still produces education funding.

The college-lease model also separates two different sources of property value that are usually bundled together in an Australian home purchase: the value of the building and the value of the land beneath it. In a strong property market, land appreciation can account for a large share of the growth in a conventional home’s price. A college-lease buyer does not acquire that land asset in the same way.

That can make the initial purchase more accessible while changing long-term wealth outcomes. A buyer may spend less upfront and still have a secure home or investment, but future resale value depends more heavily on the building, lease terms and buyer demand for the tenure.

The system also shows how public land can be used without being sold permanently. The Education Minister retains ownership, schools receive ongoing income and private or community occupants can still use the land under leases.

Social-housing providers see potential in that structure because the cost of acquiring land is one of the biggest barriers to new housing. If government land can be leased on long terms, more of a project’s capital can be directed to construction rather than site acquisition.

But any attempt to copy Mildura elsewhere would need safeguards. Lease terms must be long enough for households and lenders to have confidence, rent-setting must be predictable, and buyers need clear information so a lower advertised price is not mistaken for full freehold ownership.

For home buyers, the important lesson is to look beyond the sale price. A college-lease home can be a legitimate and useful housing option, but the buyer is purchasing a house on leased education land — not a conventional freehold property.