A radical plan to allow three-storey apartments and townhouses to be built anywhere in Australia’s capital cities would deliver 67,000 extra homes a year, slash rents and give young people a chance at living close to their local CBD.
The independent Grattan Institute think tank estimates Melbourne could build an extra 431,000 homes within 15 kilometres of the city centre if property owners were freely able to build three-storey townhouses and apartments without a specialist planning permit.
Three storey apartments and townhouses would be allowed on any residential block in all capital cities under a radical plan to deliver millions of new homes.Credit: Justin McManus
Across all of Sydney, the institute estimates up to an extra one million homes could be commercially feasible if planning rules were overhauled.
Larger apartment blocks of six storeys or more would be given default permission around major transit centres such as railway stations and key commercial centres, upending current regulations that force proponents to deal with a gamut of state and local council planning laws.
According to the institute’s housing program director, Brendan Coates, such a huge change in planning rules would ripple through every capital city as more homes were made available to potential residents.
He estimates new housing construction, currently tracking at less than 200,000 annually, would be lifted by 67,000 a year. Rents would be shaved by 12 per cent over a decade and the cost of a median-priced home, currently $870,000, would ease by $100,000.
Coates said it would also boost Australian GDP by $25 billion a year and reduce greenhouse gas emissions while also enabling more people to live closer to transport, schools and better-paying jobs.
“Australia needs a housing policy revolution,” he said.
“The equation is simple: If we build more homes where people most want to live, housing will be cheaper and our cities will be wealthier, healthier and more vibrant.”
Currently, about 80 per cent of land within 30 kilometres of central Sydney and 87 per cent near central Melbourne is zoned for housing of three storeys or fewer. In Brisbane, Perth and Adelaide, about three-quarters of land is zoned for two storeys or fewer.
Australian capital cities have some of the lowest population densities in the world. Among centres with at least one million residents in developed nations, three cities, Adelaide, Perth and Brisbane, were in the bottom five for population density.
Grattan found restrictions on new homes across most residential property in capital cities, particularly the network of red tape that faces developers looking to build townhouses or apartments, were destroying the chances of young people from living closer to job opportunities.
It found that between 2001 and 2024, 16 inner-Sydney suburbs and three in Melbourne suffered a drop in the number of residents under the age of 30.
Between 2016 and 2021, about 35,000 people between 30 and 40 moved into Sydney but 70,000 in that age group left, most looking for affordable housing.
Grattan also said heritage listings were restricting the construction of new homes. Almost 30 per cent of residential land within 10 kilometres of central Melbourne has a heritage overlay.
Further adding to housing delays and cost increases is the legal system. The Victorian Civil and Administrative Tribunal overturned 49 per cent of council rejections of new home developments and varied another 9 per cent.
Where an initial rejection was overturned, applicants waited an average of 193 days for a decision.
While the NSW and Victorian governments have begun major planning reforms, Grattan says they don’t go far enough to provide the necessary lift in affordable properties in well-located areas.
Data from Cotality this week shows home values nationally climbed by 1.1 per cent through October, the strongest monthly gain since mid-2023. Over the past year, values have grown by 6.1 per cent.
Housing Minister Clare O’Neil says new figures show people are using the government’s expanded 5 per cent house deposit policy.Credit: Alex Ellinghausen
The figures prompted claims by the Coalition and some property analysts that the government’s expanded 5 per cent deposit scheme for first-time buyers was largely behind the October lift.
Opposition housing spokesman Andrew Bragg said the government had “effectively forced the prices up because they’ve failed to build houses and they’ve opened up this 5 per cent deposit scheme to everyone”.
Data from Housing Minister Clare O’Neil showed there were 5778 guarantees under the 5 per cent deposit scheme issued last month, an increase of 1878 on the same month last year. There were about 57,000 property transactions in October.
Of the 5778 guarantees granted, 2700 were newly eligible under the government’s expanded scheme.
The median price for properties used in the scheme was $710,000, almost 20 per cent below the $870,000 median for all home sales.
O’Neil said the increase in people using the deposit scheme was in line with estimates from the Treasury, which has estimated it will lift house prices by 0.6 per cent over 6 years.
“We promised first home buyers we would bring down the deposit hurdle for first home buyers, and we’re delivering on that,” she said.
Another issue putting pressure on housing costs is insurance.
A roundtable of insurers, banks and governments was held in Canberra on Wednesday. The focus was on building more homes without increasing their risk to natural disasters such as bushfires and floods.
Insurance costs have soared by twice the rate of inflation in recent years. Residents in areas hit by natural disasters such as Lismore in NSW and Mildura in Victoria are finding it difficult to buy insurance due to soaring premiums.
Suncorp CEO Steve Johnston said it was vital that in the push to build more homes, they were not located in areas that would expose occupants to disasters that would make insurance prohibitively expensive.
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