The Victorian Government has progressively ticked off items from its September 2023 Housing Statement.

These include new development controls at 10 ‘Activity Centres’, setting ambitious housing targets for councils and streamlining approval processes for higher density housing across the state’s residential zones.

But the job is far from finished. The government needs to move to a focus on housing delivery.

We’re planning for 1.36 million new homes in the next 25 years or so in the established parts of Melbourne alone. That means more than two new houses for every three that already exist. It’s 25 years since the underwhelming millennial bug passed without incident or since Sydney hosted the Olympics. It doesn’t seem that long ago. Now, we’ve got roughly the same time in the future to fit one and a half Perth’s into our current urban boundary.

The state of the macro economy and construction and labour costs will be the fundamental driver and constraint on the cycles of private market land release and house building. These are mostly outside the influence of state government. But beyond planning controls and approvals, which have been the recent focus, three things are state levers which need to be used at scale. These include infrastructure commitments and sequencing; a system of infrastructure funding that captures uplift in land values when government allocates development rights, and – thirdly and crucially – government-led land assembly to create the sites and precincts required to enable a step change in housing densities alongside provision of public space and amenities.

The government needs to identify where infrastructure will be provided or upgraded to signal and provide confidence to the market about where to invest. We don’t know exactly but prior to the Housing Statement, there was probably theoretical capacity within planning controls for well over 5 million new dwellings in metropolitan Melbourne. The Government’s recent changes to zones and codes might have added to that by another million or so. We know that much of this capacity for housing is not feasible to develop at this time.

The government can significantly add to feasibility and development certainty by concentrating the next 10 years of spending on local active transport infrastructure, local open space, school upgrades and new social and affordable housing in priority areas. This isn’t necessarily about new spending. It’s about directing planned expenditure in a conscious way to underpin and leverage private market investment. The state should work in partnership with councils to co-ordinate local infrastructure priorities to support areas targeted for intensification. A rolling series of ‘state and local infrastructure compacts’ would be a game changer in providing certainty for the development sector.

Money for the infrastructure needs to be found. Through the signalling of where infrastructure is to be provided in future, and from the granting of approvals for more development in these locations, land values will rise. This value comes from the actions of state and local governments, not landowners. It is therefore fair that the community captures the increased value of the development rights. Just as in Canberra where additional development rights are paid for through what is known as a Lease Variation Charge (LVC), Victoria needs such a system to fund infrastructure and other public benefits. A ‘development licence fee’ would achieve this.  It could vary by area depending on land values and could even replace many existing development contributions.

We’ll get nowhere near the housing targets with a city of endless Fisherman’s Bends, where development rights are increased but their prospective value is only captured by landowners.

The preferred locations for renewal need sites and precincts for development at scale. The long and narrow lots of land which characterize the suburbs developed over the last 100 years aren’t a great platform for transformational urban renewal. If developed one by one at best, we might average 3 or 4 for each single dwelling removed. And we can picture the built form that results. Our suburbs are already dotted with two large garage dominated dwellings which have replaced a single-family house which had front and back gardens; or three or four town-houses jammed along the length of a block, driveway down the side. The loss of private open space and vegetation cover is profound.

We need a targeted program of land assembly to create larger development sites which can accommodate a mix of different housing types of different heights supported by the new private and public spaces necessary for quality living environments. Development Victoria is the government’s development arm. It hasn’t been called into action in the service of the housing agenda. It should be tasked with identifying sites and opportunities in partnership with local councils, in the preferred development locations, and negotiating site purchases (including compulsory purchases if necessary) to create larger development sites with high quality development plans.

The government has reached base camp in the planning reform journey since the release of the Housing Statement. To get any further toward the housing supply summit the infrastructure, value capture and land assembly delivery levers need to be activated with a degree of urgency.

Patrick Fensham is President of the Victorian Division of the Planning Institute of Australia

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