Victoria’s Residential Zones: Why Developers Must Act Now

Thursday, January 30th, 2014
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In July 2013, the Victorian Government introduced a new suite of residential zones which will govern the way residential land can be developed. Councils have until July 1 to implement the new residential planning controls.

Anyone with a current permit for a residential development needs to act now to make sure the application does not lapse, which could result in reduced development yield. If you have a site ready for development, there is still time to unlock the value of your land holdings, bring your vision to life and ensure your proposal is developed to its full potential. It is crucial, however, that development permits are lodged prior to July 1, 2014.

The most active councils will have already undertaken strategic work to facilitate the implementation of the new residential zones. Before the zones can be introduced, Councils will need to have prepared either a Residential Housing Strategy or a Neighbourhood Character Strategy or both.

The new residential zones include the Residential Growth Zone (RGZ), the General Residential Zone (GRZ) and the Neighbourhood Residential Zone (NRZ), while existing residential zones that are being reformed are the Mixed Use Zone, (MUZ) the Township Zone (TZ) and the Low Density Residential Zone (LDRZ)


Click to enlarge

The above diagram provides an indicative representation for the vision of building types and scales in each zone.

Of the three new residential zones, RGZ is more progressive and likely to be located in areas with existing transport infrastructure (transport oriented development). Intensification is encouraged within this zone and the planning framework is quite permissive. For example, a height limit of 13.5 metres will generally apply – although this is a non-mandatory control and can be varied by Councils as they see fit.

Conversely, the requirements of NRZ are far more restrictive. The purpose of this zone is to restrict residential development and growth in areas identified for urban preservation, and councils can seek the application of a mandatory height limit of as low as eight metres. We anticipate that this may be to the detriment of important socio-demographic development within Neighbourhood Residential Zones. Such developments may include retirement living and aged care developments.

If the NRZ is to be applied to a property that you have an interest in, it may result in significantly increased planning restrictions for your property, whether that is in relation to building height or the number of dwellings permissible on a lot.

Council will be able to apply multiple schedules to the new zones. In theory this provides Councils with the ability to tailor planning controls so that they are specifically applicable to the development potential of a certain area rather than the generic standardised zoning approach that was previously applied by the standard Residential 1, 2 and 3 zones. However, Council’s appetite for applying flexibility in zones is this manner remains to be seen.

Furthermore, we note that the new zones will provide certainty with respect to building heights and help maintain the character of established residential areas.

There are, however, weaknesses to the new zones. They are likely to include a limited supply of medium density housing in middle ring Melbourne, and an increased demand for housing on the basis of a slowing growth in or reduction of supply.

Based on the aforementioned assertions it is therefore possible that the new zones may potentially lock out certain buyers and demographic brackets (i.e. younger generations).

Maximum height limits across large plots of land will not account for the many anomalies of an evolving city – for example, uses such as medium density retirement living developments.

The potential implications of the new zones could also be costly for developers. Four and a half years ago a property developer purchased a piece of land in Glen Eira. He submitted a development application to Council and received approval for a multi-storey residential development with approximately 15 units.

Glen Eira was the first local government authority to introduce the new zones and the Neighbourhood Residential Zone (NRZ) was applied to approximately 85 per cent of the municipality’s residential zoned land.

This re-zoning had devastating implications for the developer. The permit had recently lapsed based on time limitation conditions. With the permit no longer valid, the proposed development was deemed contrary to the provisions of the NRZ.

The NRZ is a substantially more restrictive zone than the previous Residential 1 zone and limits development to a maximum of two dwellings on a lot (compared to the original 15 unit approval), and also contained additional design constraints.

As a result, the potential financial losses for the developer have been significant.

It is imperative that other developers act now to avoid the pitfalls of the new zones but, at the same time, also take advantage of the opportunities that they present.

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