Victoria should move beyond planning around a ‘compact’ city model for the future of Melbourne, a leading urban planner says.

And the state should expand Melbourne’s Urban Growth Boundary and allow for development based around corridors and nodes.

In a keynote address to the Victorian Growth Summit hosted by the Property Council of Australia in Melbourne last week, Brian Haratsis, Chief Executive Officer of town planning, urban economic and property research firm Macroplan, outlined his vision about how Victoria should grow as it seeks to deliver a new plan for the state’s development.

In his address, Haratsis hit out at a key document released by Infrastructure Victoria last year which argued that Victoria should pursue a ‘compact’ city model under which development would be primarily focused around high-density in inner-Melbourne (see below).

Instead, he said that the state needs both infill and outer urban and regional development in order to cater for its growing population.

This would include expansion of Melbourne’s Urban Growth Boundary and facilitating development around corridors and nodes.

“I’m her today to make an argument and about corridors and nodes and the new role for Geelong plus corrections to the urban growth boundary,” Haratsis told the summit.

“Because I believe that they will be less expensive to produce in infrastructure terms (compared with compact development) and more affordable from a housing perspective.

“Also, I am going to tell you that the Outer Metropolitan Ring Road and Gippsland, Geelong, Ballarat and Bendigo are essential to embed Melbourne in Victoria.”

Haratsis’ comments come as the Victorian Government is preparing a blueprint that will guide development of the state’s cities, suburbs, towns and regions between now and 2050.

The plan will deliver an updated version of the current Plan Melbourne document but will expand the strategy to include the entire state of Victoria.

The plan comes as the Victorian Government last year projected that the state’s population would expand from 6.8 million in 2023 to 10.3 million in 2051 (refer Victoria in the Future report published in December 2023).

This includes an additional 2.9 million people in the Melbourne Metropolitan Area alone, taking the city’s metropolitan population from 5.1 million to 8.0 million.

The plan also comes as the state has set a target of delivering 800,000 homes over the next decade.

To help guide the strategy, Infrastructure Victoria last year published a paper outlining five different scenarios for urban development. The paper was informed by a range of technical reports prepared by urban planning and economic consulting firms (refer p11 of aforementioned paper).

In its paper, Infrastructure Victoria argued that the Victorian Government should adopt a ‘compact’ model of urban development.

This model would focus development primarily around higher density urban forms such as high-rise apartment complexes in Melbourne’s inner suburbs.

Compared with a ‘distributed’ model that would see growth dispersed across the state, Infrastructure Victoria concluded that the compact model would deliver $43 billion in net benefits between now and 2056.

According to Haratsis, however, that analysis suffers from deficiencies across several areas.

In particular, according to Haratsis:

• The modelling fails to account for where and how people actually want to live. The compact city model ‘envisages a mono-centric design where professional, scientific and technical people cluster around universities, hospitals and quality food and beverage and is serviced by renters living in high-rise apartment complexes’. However, assumptions that people want to live this way are far from the mark. In fact, 2022 research from the Centre for International Economics indicates that 68 percent of people prefer to live in a detached dwelling whilst 73 percent would prefer to live in a regional outer or growth area.
• The modelling fails to include any assessment of social or cultural benefits which are associated with living in smaller communities.
• Infrastructure costs savings associated with compact city models are not overly significant. Whilst the IV report indicates an infrastructure cost saving of $59,000 per home, this is based on assumptions of relocated homes rather than new homes with a 20 percent housing shock upon relocation. In fact, the total infrastructure cost saving associated with a compact model is only $23,000 per dwelling – an amount which is not overly significant in light of overall housing costs throughout inner Melbourne. At any rate, this is more than offset by the additional private costs for households in compact cities due to the more expensive nature of property in inner suburbs.
• Other claimed benefits of compact cities are less significant when placed into context. The claimed $43 billion benefit to Victoria’s economy between now and 2056 would equate to only between 0.1 percent and 0.25 percent of GDP over that time. Claimed benefits of 30,000-hectare savings in land and 154,000 fewer cars amount to savings of only 3 percent in terms of land and 1-2 percent in terms of cars. Finally, claimed savings of 17.3 million tonnes of carbon emissions in compact cities out to 2056 amount to only 3 percent of overall carbon emissions. Even this relatively modest saving fails to factor in that apartment emissions are three times higher per dwelling compared with detached dwellings.
• The analysis fails to consider the capacity of the market to deliver upon each scenario. To deliver upon the compact city model, Victoria would need to build around 30,0000 apartments every year. This is double the number that were being constructed at the height of the apartment building boom in 2015 to 2017 and is quadruple the 7,500 annual total which is currently being delivered.

As a result of all this, Haratsis is scathing of the report’s conclusions.

“They are clearly wanting to promote a compact city,” Haratsis said, referring to Infrastructure Victoria.

“But in my view, they have totally failed …

“… I’m surprised that they (the Victorian government) are even considering a compact city.

“The Government has the responsibility not to pursue policies that will cause widespread societal harm i.e. by increasing house prices.

“These reports have proven that the benefits of a complex city ideology are non-existent when taking into account the pro and cons. The cost to society of proceeding with extreme densification in terms of living standards, home ownership rates and economic upheaval is untenable.

“It is incumbent upon the Government to look at alternative models of development for Melbourne that accepts that the twin boundaries of the 70 to 30 infill/greenfield model is not viable.”

Where Plan Melbourne Fell Down

During his presentation, Haratsis reflected on lessons from Plan Melbourne.

Originally released in 2014 and refreshed in 2017, Plan Melbourne aimed to integrate land-use, infrastructure and transport planning around a long-term vision for Melbourne.

According to Haratsis, Plan Melbourne was a good document overall but suffered from important shortcomings.

First, the document failed to anticipate technological change. In particular, it did not anticipate or allow for the growth in online retail and subsequent demand for industrial land and consequential intermodal freight traffic.

On a related note, the document was a static document which has not been able to adjust for booming housing and industrial demand.

Partly as a result, the city is now facing severe constraints in both residential and industrial land on its urban fringes.

Ideally, land economists believe that around fifteen years or residential land supply is needed in order to ensure that a sufficient volume of vacant residential land is available for development as it is required.

In the case of Melbourne, this amounts to 360,000 greenfield lots.

As things stand, however, only 270,000 lots are available.

Pointing to data provided by Urbis, meanwhile, Haratsis says that the city has only 1-2 years’ worth of industrial land supply remaining within its western region.

For both of the above reasons, he says that Melbourne’s urban growth boundary needs to be extended.

(Melbourne is fast running out of land on its industrial fringe)

Sydney Beats Melbourne

When it comes to planning for urban growth, Haratsis says that Sydney has adopted a much more effective approach compared with Melbourne.

Sydney is pursing a bold strategy to transform its metropolitan area into a polycentric city of three cities by 2056 – a strategy devised by the Greater Sydney Commission in 2016.

Sydney also built its first rail link to its airport as far back as 24 years ago in 2000. They are now thinking of building another rail link and are already well advanced in construction of building a rail link to their second airport which is currently under construction.

By contrast, Melbourne remains stuck with a mono-centric city based on development which is incremental at best – a phenomenon which Haratsis attributes to a lack of confidence.

The city also has two airports but no rail link to either one of them.

What should be done

Instead of focusing entirely on compact cities, Haratsis says that planning should focus on corridors and nodes.

In particular, he would like to see:

• Ongoing development of Geelong into Victoria’s second city with a population of at least a couple of million people. This will include GeelongPort, Port Wilson and Avalon Airport.
• Expansion of the northern growth areas within the urban growth boundary.
• Construction of the Outer Metropolitan Ring/E6 Transport Corridor – a 100-kilometre road transport link that will serve people and freight in Melbourne’s west and north.
• Construction of Geelong Fast Rail.
• Enabling development to expand outward up rail corridors, especially the Hume and Eastern corridors.
• Enabling development along the entire 1,000-kilometre rail network within Melbourne throughout a codified planning scheme that facilitates urban density within 400 meters along the rail corridor.

Haratsis says the opportunities which could be generated through these strategies should not be underestimated.

Whereas Melbourne has an overall network involving 1,000 kilometres of rail lines, the city currently has only ten major precincts in which high-rise is enabled.

Opening up the rail network to greater density could unlock more opportunities for new housing delivery.

Meanwhile, the Outer Metropolitan Ring Road would connect the northern and western corridors and would better connect Geelong, Ballarat and Bendigo to Melbourne.

Beyond Compact City Planning

Overall, Haratsis stresses the need to look well beyond notions of a compact city and to capitalise on multiple opportunities to accommodate population growth.

“Planning for a compact city is not planning Melbourne for Victoria,” Haratsis said.

“We have to plan Melbourne for Victoria. We have to make it net cost effective, more affordable and more integrated with Victoria.”