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Victoria’s push to curb urban sprawl by building more homes in established suburbs is faltering, with new data revealing the proportion of new housing approved on the city’s fringe is now higher than the five-year average.
Two years after the state government re-committed to its ambitious goal to build 70 per cent of new housing in established areas, analysis shows approvals in those suburbs sitting at just 48 per cent in June.
Two years on from the housing statement, the government’s plans are off track.Credit: Joe Armao
The latest density figures cast fresh doubt on the government’s ability to meet its 2023 housing statement commitment – made in the dying days of Daniel Andrews’ premiership – that 800,000 homes would be built by 2034. The government fell 20,000 homes short of the annual 80,000 target last year and forecasts predict continued major shortfalls despite expectations of Melbourne’s population exceeding 9 million by 2050.
But the Allan government insists its strategy of changing planning laws to allow higher-density developments and setting local housing targets will provide more housing and rein in urban sprawl.
New analysis from Andrew Perkins, research director at real estate financier Wingate, shows 52 per cent of new home approvals in June were in greenfield areas, up 40 per cent on the same month in 2023. That figure is not only higher than the five-year (51 per cent) and long-term (41 per cent) averages, but also well above the government’s official 30 per cent target.
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Linda Allison, chief executive of the Urban Development Institute of Australia, said the government’s housing strategy had failed to shift development patterns after two years of reforms.
“In fact, the proportion of building approvals in the greenfields is above the five-year average,” she said.
Allison said the policy ignored the preference of most Victorians for detached homes, and until the feasibility of building apartments improved, it was the greenfield sector that could deliver the amount of housing needed.
“If the higher-order priority is to deliver 80,000 homes a year, a reality check about how we do that is needed,” she said.
The Housing Industry of Australia’s Victorian executive director, Keith Ryan, agreed, arguing the government must abandon its 70/30 policy to meet its housing targets because it is “not aligned with the expectations of consumers”, who prefer detached homes.
The group’s forecasts of building commencements show the government will fall an average of 20,000 dwellings short each year of its housing target over the next decade.
Developers have warned that the soaring cost of apartment construction as well as high investor taxes have constrained new supply in established suburbs. They warn that only high-end developments with large profit margins are financially viable, choking off the supply of more affordable infill housing.
The Victorian president of the Planning Institute of Australia, Patrick Fensham, said sticking to the 70/30 ambition was crucial, but there was a major disconnect between the target and the on-the-ground support.
“Just to rely on rezoning and some of the more permissive development pathways won’t be sufficient to achieve their goals,” he said. “One of the things I think is missing is signalling where infrastructure is going to be delivered.”
Fensham said the government must also lead a culture shift among consumers, the greenfield-focused development industry and lobbyists by investing in the high-quality design and local infrastructure that makes higher-density living an attractive alternative.
The Allan government has put the onus on local councils to put a halt to the city’s urban sprawl, suggesting they have been responsible for blocking approvals.
In February, the government declared “there would be consequences” for councils which failed to meet new long-term targets set for every local government area.
“It’s simple – work with us to unlock space for more homes or we’ll do it for you,” Premier Jacinta Allan said.
The government said its targets were about fairness, to take pressure off outer suburbs like Melton, which grew by 433 per cent in 30 years, while inner councils like Bayside grew by only 28 per cent.
Under a key state government planning change already announced, it will seize control from councils in 50 designated “activity centres” to approve higher-density housing in locations in inner and middle-ring suburbs near strong public transport links.
Councils have rejected the suggestion they are holding back supply. Municipal Association of Victoria president Cr Jennifer Anderson said the crisis was about much more than planning approvals.
“New homes need new infrastructure. Financial barriers, labour shortages and rising construction costs mean it’s often cheaper to buy an existing dwelling than build a new one,” she said. “Faster planning decisions alone won’t see more homes being built.”
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In a sector brief to be provided to councils, the Municipal Association said the pace of construction in Victoria would need to increase to an unprecedented level to achieve the government’s 2023 ambitions.
The Property Council’s Victorian executive director, Cath Evans, said the results of the housing statement had not followed the government’s ambitions.
“Victoria is growing at pace, and so is the housing crisis. We’re not just behind schedule, we’re off track,” she said. “The 20,000-home shortfall in just one year is deeply concerning.”
Evans called on the government to slash property taxes to level the playing field with other states.
A state government spokesperson said Victoria continued to build and approve thousands more homes than any other state.
“We want more Victorians to be able to have the same opportunities their parents had – that’s why we’ve introduced bold reforms to boost housing supply in areas where people have been locked out for far too long,” they said.
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