Three-storey townhouses and apartments should be allowed on all residential land across Australian capital cities, a new report suggests.

And housing developments of up to six-stories should be allowed as-of-right around major transit hubs and key commercial centres.

In its latest report, the Grattan Institute has provided 11 recommendations to address Australia’s long-term housing challenges.

According to the report, Australia’s housing system has failed for the past 25 years.

Since the turn of the century, new dwelling construction has lagged behind adult population growth.

As a result, housing has become increasingly unaffordable.

In the early 2000s, average households needed to pay around four times their income to purchase a median priced home.

Nowadays, median dwelling prices sit at more than eight times average household incomes.

The effect has been particularly severe on the nation’s most vulnerable.

Over the past 30 years, the proportion of overall income which is spent on housing among the poorest 20 percent of Australians has increased from around 20 percent to nearly 30 percent.

Meanwhile, those able to afford housing need to go further out to urban fringes and travel greater distances to access the best employment opportunities in or near CBDs.

Restrictive planning making housing unaffordable

In its report, Grattan argues that restrictive planning controls are responsible for many of the problems.

In particular, state and territory land use planning systems say ‘no’ to new housing by default and allow a ‘yes’ only by exception.

In Sydney, around 80 percent of all residential land which lies within 30 kilometers of the CBD is zoned for housing with three stories or less.

In Melbourne, this number rises to 87 percent.

Meanwhile, at least three quarters or more of residential land in Brisbane, Perth and Adelaids is zoned for one or two stories only.

As a result, Australian cities have a low population density relative to those in other developed countries.

This matters.

If Sydney had similar densities to Toronto within a fifteen-kilometer radius of the CBD, the city would already have an additional 250,000 homes more than it does today, Grattan says.

If Melbourne was as dense as LA over the same distance, the city would have an additional 431,000 homes.

In particular, the report argues that under current planning systems:

• planning controls forbid too many homes on valuable inner-city land
• planning approval processes are long, complicated and uncertain
• governance of land use planning regimes is biased against change.

Current reforms not enough

The report acknowledges that recent efforts to unlock more homes in established areas across New South in Victoria will have a positive impact.

In particular, it praises Victoria’s Townhouses and Low-Rise Code, which it says will enable up to 420,000 dwellings lots which are commercially feasible.

The Code creates deemed-to-comply standards for flats and townhouses of up to three stories in residential zones.

However, it said that these actions fall short of those in Auckland under the Auckland Unity Plan.

Implemented in 2016, that plan has allowed for medium density housing of 2-7 stories on around three quarters of the New Zealand city’s residential land.

It has seen the zoned capacity of the city’s housing increase by around 100 percent of existing housing stock.

11 actions to make homes $100k cheaper

In response, the Grattan report has provided eleven recommendations.

It says that these actions could boost the rate of housing construction by up to 67,0000 homes each year.

Over the next decade, this could reduce average rents by more than 12 percent and slice more than $100,000 off the cost of a median sized home.

Furthermore, the report argues that greater density would create further benefits.

These include higher incomes, lower carbon emissions (transport related), improved construction productivity, better quality of life, cheaper infrastructure for governments (compared with urban sprawl) and reduced inequality.

Proposed reforms include:

• Adoption of a Low-Rise Housing standard. This would permit three-storey townhouses and apartments on all residential-zoned land in capital cities, with no minimum lot sizes.
• Adoption of a Mid-Rise Housing Standard. This would permit at least six-storey developments on all residential-zoned land within walking distance of transit hubs and key commercial centres.
• Other measures to relax planning controls. These include upzoning other high-demand locations for even higher densities (esp. around capital CBDs) and reviewing systems of heritage and character controls to allow greater housing density.
• Improving consistency and certainty in approval processes. This could be achieved by allowing modest-density developments of up to three stories to be certified as complying rather than needing a planning permit and creating ‘deemed to comply’ pathways for higher density developments.
• Improving planning governance. This could be done by subjecting planning rule changes to regulatory impact assessments and regularly reviewing existing planning rules, implementing higher housing targets for local councils in areas of substantial unmet demand and having the federal government task the Productivity Commission with performing regular assessments of state and territory land-use planning systems.
• Improving federal incentives which are paid to the states to incentivise new housing. This could include paying the New Homes Bonus in installments rather than at the end of the five-year period and having the federal government pay the states to adopt specific land-use planning controls such as those which are outlined above.

(As much as 87 percent of Melbourne’s zoned residential area allows only low density dwellings of three stories or less. Image: Frederick Street, Balwyn (Melbourne). Image via Google Maps)

A necessary change

In its report, Grattan said that aforementioned measures would deliver a necessary change.

“Australia needs a housing policy revolution,” it says.

“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.”

Planners strike back

However, urban planners expressed concern about the recommendations.

In a statement following the report’s release, the Planning Institute of Australia (PIA) expressed support for the idea of greater density in well-located areas.

However, it said that the Grattan proposal for blanket upzoning risked creating more congestion, further straining services and creating adverse livability impacts.

In particular, PIA warned that new housing development needs to be effectively sequenced through robust planning.

Simply upzoning everywhere all at once would create infrastructure pressures all over the nation’s cities.

Since governments cannot upgrade roads, schools and pipes in every suburb all at once, this would create an infrastructure backlog and could force communities to wait longer for services that make neighborhoods livable.

It points to recent examples in New South Wales and South Australia, where homes have been constructed before sewer connections are in place.

In some cases, this has forced sewerage to be trucked away by road.

Moreover, PIA questions Grattan’s assumptions about an additional 67,000 homes being delivered each year.

As things stand, it says that the construction industry is struggling to keep pace with the existing volume of approved housing projects.

“Simply rezoning more land won’t deliver more homes if the construction industry can’t build them and if the infrastructure isn’t in place,” PIA CEO Matt Collins said.

“Good planning is how we make sure new housing is supported by transport, schools, and infrastructure like running water and sewerage that communities rely on.  Simpler processes and better planning systems are essential, but weakening planning just adds pressure to infrastructure, increases congestion, and makes communities worse off.

“We absolutely need more homes, but they must come with the services people need and be in communities where they want to live. Good planning is how we ensure all of these things, while weakening planning achieves the opposite.”

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