If anyone wanted to find out what’s wrong with the way housing markets and new housing provision is working throughout major cities in Australia, all they would need to do is talk to former Grattan researchers Jane-Frances Kelly and Paul Donnegan.

In a book they published last year, the pair talk about half of all employment growth within the nation’s five largest cities occurring less than 10 kilometres from the city centre but more than half of all population growth being forced out more than 20 kilometres from the CBD.

Kelly and Donnegan also talked about outer areas within Australia’s biggest cities, where less than 10 per cent of all available employment opportunities throughout the relevant metropolitan area are within within 45 minutes’ drive; about how one in four full-time workers in big cities are being forced to spend more time commuting to and from work than what they spend with their children; about how the average full time job located 20 or more kilometres from the center of Australia’s biggest five cities pays only $56,000 per year as against $77,000 per year for full-time job averages in the CBD; about how the housing market was creating a divide between older homeowners and a younger generation which was either locked out of home ownership or pushed to the fringes of cities; and about how an army of renters is being forced to live in some of the most insecure tenancy arrangements in the world.

Asked last year about what had gone wrong, Donnegan pointed to a lack of creation of medium density housing options within the middle suburbs, which balanced the need for reasonable proximity to employment opportunities with that for family friendly living. Whereas previous Grattan research had shown that around four in 10 residents throughout Sydney and Melbourne would actually choose semi-detached housing or low rise apartments (up to three storeys) in the middle suburbs as their preferred housing option given a range of trade-offs, the majority of new dwellings going up were either massive apartment complexes in the CBD or inner suburbs or new stand-alone houses right out on the urban fringe.

Others, it seems, agree. In New South Wales, for example, a discussion paper prepared by SJB Planning and released by Planning Minister Rob Stokes last November laid out a proposed new standard for terrace houses, with developers who build according to the standard set to be afforded an expedited process of approval. The state also wants to see greater use of dual occupancies and manor style dwellings which combine three or four homes into two-storey buildings in a similar way to a low scale apartment block but with more privacy.

Speaking of the Melbourne situation in particular, Urbis director Stuart McGurn says opportunities for medium density housing cannot be understated.

“There is no question given population increases and pressure on housing that all segments of the city need to play their part,” he said. “There is great opportunity in the middle ring suburbs, they are well resourced in terms of public transport and availability to commercial and retail facilities. They are ideal locations close to the CBD and close to employment clusters.

“So there is no question that in the right locations in the middle ring suburbs, there is opportunity for further medium density than what has (thus far) occurred.”

Again speaking about Melbourne, SJB director of planning (Melbourne office) Hugh Smyth, meanwhile, says development throughout the city has historically been polarised between large apartment towers in the CBD and inner suburbs and detached housing on urban fringe, and that the concept of greater levels of medium density development in middle suburbs was a ‘ no brainer.’

What, then, are the barriers?

Speaking primarily from a Sydney-based perspective, Sydney University head of urban and regional planning and policy professor Peter Phibbs said as well as the need to deal with community anxiety, there were also challenges with regard to developer finance. Whereas Meriton and other large developers in the CBD and surrounds are generally able to draw on their own finance to a degree, smaller developers are more heavily reliant upon banks and are thus constrained at various stages within the cycle with regard to what banks are willing to lend. Demand for multi-residential developments, too, can be patchy outside of CBD and inner urban markets.

In order to overcome this, Phibbs says more could be done to look at institutionalised forms of finance such as housing bonds, and also that councils when rezoning areas should talk to developers to ensure that the types of developments envisioned will indeed be financially viable. In terms of community resistance, he says this is generally less pronounced in areas which are carefully selected for density such as in and around transport links.

Whilst few people living in houses now wished to downsize to an apartment, meanwhile, acceptance of the concept of smaller houses, townhouses and detached units was growing as people saw opportunities to move into dwellings which allowed for private space and activities such as barbecues yet did not entail chores such as mowing the lawn and was within walkable distance of shops, he said.

Meanwhile, in places such as Bankstown, a modest area of opportunity for new housing provision was opening up through subdivisions, which Phibbs says are gaining popularity as homeowners seek to create places for children to live or top up retirement savings and do not generally create the same level of community angst which can more often to be attributed to projects of larger scale.

In Melbourne, both McGurn and Smyth point to concerns about the way new residential zones are being applied in some jurisdictions and about the uncertainty which arises in what is a highly politicised process of development assessment and approval. Under new residential zoning laws introduced in 2014, residential zones in Victoria are now classified as either residential growth zones, general residential zones or neighborhood residential zones. The last of these involves mandatory building height limits of eight metres.

Despite some of the land in question being close to transport corridors, councils in Bundoora, Glen Eira and Bayside have all placed significant levels of land within the neighborhood residential zones and have thus curtailed opportunities for even modest levels of multi-storey development.

In terms of development assessments, meanwhile, McGurn and Smyth feel a limited propensity on the part of councillors to delegate decision making to council officers leaves in place a politically charged process which delivers uncertain outcomes.

In terms of solutions, both McGurn and Smyth welcome a review currently underway about how the new residential zones are being applied. They want a de-politicised process for development assessments. Ideally, Smyth says, elected councilors would determine policy settings for the local area in the context of broader policy settings for Melbourne in general as set by the state government. Subsequently, council officers rather than elected councillors would then assume responsibility for the assessment of individual development applications.

At a broader level, Smyth says there is a need to challenge our perspective about change and for change within neighborhoods to be seen as an opportunity and rather than necessarily a threat. Indeed, in some inner to middle suburbs of in Melbourne’s east, he says the ‘threat’ to neighborhood character lies not so much multi-residential development but indeed single detached dwellings, which provided they are under given sizes require only building permits as opposed to planning applications.

In places like Camberwell, for instance, there were cases of existing stock being demolished in favour of new housing which can extend from site boundary to site boundary without any requirement for landscaping or trees and a fairly blunt set of site requirements which have delivered very large single dwellings with no oversight of architectural quality.

McGurn, meanwhile, would like to see fewer and larger councils. He admires the Brisbane municipality in Queensland – being a much larger municipality – as what he sees as a better model in terms of coordinating policy. He noted, however, that the current Melbourne model is workable so long as the politics are taken out of current processes.

Australia has an enormous opportunity to unlock medium density housing in middle suburbs.

Whether or not we grasp this will depend upon the adoption of critical strategies required to make this happen.