Your hottest YIMBY Queries, Answered

Yes, all of them!

YIMBY Melbourne has members from across the entire political spectrum. We're united by one thing—the overwhelming evidence that building more homes where people want to live reduces rent and housing costs.

No single political ideology is “NIMBY”, and neither are any of them “YIMBY”.

Housing abundance is the only guiding principle of our movement, and this principle unites people across partisan and ideological lines in service of a better future for Melbourne, and other cities around Australia and the world.

Many of Melbourne’s apartment builds are of high quality. However, it would be naive to deny that a portion of builds in the past have fallen below the minimum standards Melbourians expect to see. This is why the state government has pursued several major reforms to improve the outcomes of apartment standards. 

From 2013 to 2014 the Office of the Victorian Government Architect (OVGA) conducted extensive research into the quality of apartment design in Victoria which informed a number of changes in the way apartments are regulated. 

This first started with the 2017 Better Apartments Design Standards which introduced many controls around room sizes, natural ventilation, natural light access, storage requirements and private open space.

Then in 2021 there was an update to the standards that aimed to improve requirements around green spaces, external materials, wind impacts, and integrations with the street and balconies. 

Furthermore, the National Construction Code—which is revised every three years—was updated in 2022 to include significant improvements to energy efficiency, condensation management, accessibility, and more.

Due to the long timelines associated with apartment construction, many of these new standards are only materialising in the most recently completed builds. But the good news is that we can be confident: modern builds are complying with the highest building and environmental standards ever enforced within the state.

This is not to say that work in the space of ensuring high build quality is complete. YIMBY Melbourne endorses the findings and recommendations of the 2022 Inquiry into apartment design standards, which the Department of Transport and Planning is in the process of implementing. Additionally, as of late 2023, the state government is actively conducting a full Victorian Building System review, aiming to fully reform the Building Act 1993 to meet modern expectations, with the final stage set to be released in 2024. 

Apartment quality is an important part of ensuring abundant housing and high standards of living for all Melburnians. However, it is important that as we continue to advocate for high build standards, we do not allow the builds of the past to block the builds of the future. Melbourne needs more housing, and the housing we're building now is the best we've ever built.

The research is clear that tax concessions drive up the demand for housing and that removing them would decrease house prices. In 2019, it was estimated the effect of tax reform would be an approximately a 3.3% reduction in existing home prices and a 2.9% reduction in new house prices on average across Australia (in Greater Melbourne, the effect would be 8.3% and 6.3%, respectively). There also is a strong case against these concessions on grounds of perpetuating both wealth and generational inequality.

However, this is only a complementary explanation for the high home prices, because the tax concessions themselves can only be inflationary if there is a supply constraint—because prices increase as a function of scarcity. 

Zoning restrictions increase home prices far more than 3.3%. We can highlight the difference in the effect between tax concessions and zoning restrictions through the work of Jenner and Tulip (2020) undertaken at the Reserve Bank of Australia. They found that planning restrictions inflated home prices in Melbourne by 20%, and in Sydney by an astronomical 68%. This means that, as Peter Tulip argues, of the $873,000 average 2018 sale price of a new Sydney apartment, $355,000 was attributable to the costs relating to planning restrictions. In Melbourne, planning restrictions added $120,000 to the cost of an apartment in Melbourne.

While YIMBY Melbourne supports tax reform, we also recognise that it is not the core contributor to the housing crisis. Addressing tax settings will only provide temporary relief to prices, as the supply-demand balance (the number of houses demanded vs the number of houses built) in the medium term is projected to trend downward into the negatives. 

This means that over time the chronic undersupply of housing will put upward pressure on prices and, in particular, rents. This is because the rent a given landlord charges is an explicit expression of housing supply and demand—landlords in general will always charge exactly what the market is willing to pay.

Now, this does not mean that policies aimed at reducing demand for housing should be ignored. The revenue increases possible from tax concession reforms are vital to providing governments with the financial capacity to deliver critical priorities such as infrastructure and social housing—tax concession reform needs to be seen as a part of a policy mix rather than a catch-all solution.

When compared to densifying inner suburbs, the status quo of relying on greenfield developments to take the bulk of Victoria’s housing growth results in worse outcomes for residents, the city, and the environment.

Greenfield households emit an additional 4.4 tonnes of carbon dioxide annually than equivalent infill counterparts. It has been substantiated numerous times (Minx et al. (2013), Ala-Mantila et al. (2014) and Muñoz et al. (2020)) that urban living in developed economies produces the smallest relative carbon footprint. A major contributing factor to the differential gap in carbon footprints is the urban fringe-induced car reliance.  

A survey on people who moved to greenfield sites in Sydney showed that after relocating to greenfield sites, one-way commute times blew out from 34 minutes to 50 minutes which was “significantly associated with lower mental health scores and decreased [measurement] of subjective wellbeing”. The same study found that after moving to a greenfield site, car usage as a proportion of mode of transport increased significantly at the expense of public and active transport. This means that greenfield developments force their residents into worse commute times and physical and mental health outcomes.

The nature of greenfield developments means unlike infill developments, there little to no infrastructure is present in these regions before they’re redeveloped—however unlike in established suburban infrastructure, the relative costs of delivering it cost substantially more. An Infrastructure Victoria analysis suggests that infrastructure to support new greenfield homes can cost up to 4 times more than in established suburbs. This in essence means that low-density inner-city living is subsidised excessively by taxpayers paying high premiums for outer suburban infrastructure.

Newer greenfield sites are also often located in areas with much higher flood and fire risk. As the National Growth Areas Alliance stated: “we're building right on the outskirts of the city in places more vulnerable to climate change and natural disasters and yet we're putting thousands and thousands of families into new houses there every year.” Furthermore, urban sprawl is pushing further and further into Victoria’s food bowl areas which produce almost half the vegetables grown in the state. 

Lastly, one of the core reasons people choose to live in outer suburbia is the relatively cheaper housing costs—however, once you factor in transportation costs, the cost-benefit vanishes. Research suggests due to the aforementioned car dependency of greenfield areas combined with the lack of public transport options, residents face not only higher base transportation costs but are more sensitive to fuel shocks. 

All this forces us to ask: are the numerous trade-offs associated with greenfield developments worth it?

For Melbourne to grow sustainably it has to grow up, not out.

Foreign ownership is not a major factor in the housing crisis. In fact, it's not a major factor in the housing market at all. At most, 2 per cent of the total housing stock is foreign-owned—and just 0.75 per cent of total sales in 2021 went to foreign buyers. 

While it’s intuitive to assume all foreign ownership of housing adds to the total demand of the domestic housing market, there are many situations that it does not. An example of this would be when a parent purchases a home in Australia for their child who is coming here to study. Thus this eliminates the need for the child to rent a separate property when studying. 

Additionally, when a property purchased by a non-resident is leased out, this property increases the rental stock the same as if it were purchased and rented out by an Australian resident or citizen. In these examples, you can see that the initial foreign purchase doesn't directly contribute to the increased demand for housing.

Under current policy settings, Australia maintains some of the tightest restrictions on foreign ownership in the world, further constraining their ability to affect our domestic housing market. The Grattan Institute report Housing affordability: re-imagining the Australian dream highlights the various restrictions of foreign property ownership legislated over the past decade in order to direct foreign investment towards increasing the supply of new housing and limiting the upward pressure on prices:

Foreign investors cannot legally buy existing residential property in Australia. They can buy new residential property in Australia if they receive approval from the FIRB (Foreign Investment Review Board) and after paying a fee. These properties can be rented out. Temporary residents may purchase one established property as their place of residence while in Australia if they receive FIRB approval…

About 90 per cent of the FIRB approvals for foreign investment in 2015-16 were for new housing, with the remainder for established properties (which can be purchased by temporary residents to live in while they reside in Australia).

The Commonwealth Government announced additional charges on foreign investment in the 2017 Budget, including curbs on [capital gain tax] exemptions, a tax on vacant properties, and higher application fees. State governments also tax foreign investors more than other owners of residential real estate. Most states levy a stamp duty surcharge on foreign investors, and some have introduced a land tax surcharge. Some states are also introducing a vacant property tax.

In 2016, a Treasury Working Paper "Foreign Investment and Residential Property Price Growth” concluded foreign investment only pushed up prices by a small amount—0.5 per cent to 1 per cent of the average increase in Melbourne and Sydney—in the period between 2010 and 2015. It’s worth noting that since this paper was written further taxes have been put on foreign buyers to further disincentive their involvement in the Australian housing market.

The insignificant nature foreign ownership plays in Australia’s housing market and the numerous tight regulatory regime already in effect highlights that new policy in this area will do very little to help ease housing affordability.

To begin, it is important to note that using immigration statistics as a rebuttal to YIMBY positions is a fundamental misdirect. YIMBY Melbourne, and YIMBY groups worldwide, want to see legislative and planning reform to ensure more homes can be built where people want to live. Even if we halted immigration tomorrow, there would still be a systemic shortage of homes in the key areas of our cities where land prices are high and density is restricted.

The zoning and planning reforms required to create bigger, better cities cannot be substituted by a reduction in migration. The positive economies of scale associated with allowing our cities to densify around infrastructure and employment are beneficial regardless, and these reforms should therefore be enacted regardless of immigration policy settings. 

The benefits of broad upzoning and other reforms go well beyond affordability arguments, and have positive impacts on the environment, liveability, and economy of a given place. These positive impacts of densification are laid out thoroughly in our flagship report, Melbourne's Missing Middle. 

Insofar as immigration affects house prices, the overall effect is by no means the most significant factor. While it is true that immigration increases demand, and therefore puts upward pressure on prices, 2019 research from Moallemi and Melser finds that between 2006 and 2016 "Australian housing prices would have been around 1.1% lower per annum had there been no immigration”. This is not insignificant, of course, but cannot be treated as the defining factor in housing unaffordability, when prices over that same period increased by 5.95% per annum. 

At least 80% of house price growth is unrelated to immigration. YIMBY Melbourne holds the basic position that addressing the significantly larger portion of house price growth is more important than addressing the 20% associated with immigration, especially given the externalities of a more restrictive immigration policy. 

It would be a grave mistake to address an economically destructive, reactionary housing policy with an economically destructive, reactionary immigration policy. Instead, we should focus our energy on reforming the byzantine restrictions that lie at the heart of our cities' housing misallocations, which is what we will continue to do.

As a member of the Abundant Housing Network Australia, we at YIMBY Melbourne help draft the following as a part of a submission to the federal rental crisis inquiry:

While we are focused on facilitating greater housing abundance and believe that—in the long term—greater supply will have significant impacts on renters’ bargaining position in housing markets, we acknowledge that supply-side solutions to the rental affordability crisis will take years to have significant downward pressure on prices. 

We also recognise that merely improving rental affordability does not address the multitude of other disadvantages while renting.

This is why regulatory changes need to happen to improve the position of renters in the short term and cushion them from retaliatory or knock-on effects that these other much-needed reforms might create.

There will be people—typically on very low incomes—who fall through the cracks. People who are on the social housing waiting list or don’t even try to get on in the first place. 

Stronger regulation is both a sword and a shield for these people, whose low market power makes them vulnerable to exploitation but whose economic position means they are unable to access other services.

Many of our members are young renters and many of those have been homeless at some point in their life, so our membership brings broad insights as consumers of rental housing—particularly in the rapidly changing context we face now driven by rapidly growing rents, low vacancy rates and a preponderance of digital intermediaries that sit between renters and their landlord, many of which bring their own hidden fees and extra costs with very little benefit to the renter.

Any reform of renters’ rights—whether these are better lease conditions, price controls, building standards or anything else—should recognise the fundamental power imbalance between a renter and a landlord and improve renters’ bargaining position in the housing market.

Overly bureaucratic systems that expect renters to know and act to enforce their rights fundamentally do not work. This is particularly the case when vacancy rates are so low and landlords have few incentives to keep around “problem” tenants. 

National leadership to improve rental regulation is important at this juncture, not least to make renting more easily tractable as people move around our country—but any measures should be assessed for their impact over the short and long term against more than just short-term relief and in particular minimises adversely affect overall housing supply.

A national renters rights accord

By international standards, Australia’s rental regulation overwhelmingly privileges landlords and affords poor protections to renters.

National Cabinet has the opportunity to raise the floor of rental regulation in Australia by setting minimum national standards for renting with a national renters rights accord. 

The United States is currently investigating a similar agreement which seeks to set both minimum standards and best practice across access to safe, quality, accessible and affordable housing, clear and fair leases, the education, enforcement, and enhancement of renters rights, renters’ right to organise and on eviction prevention, diversion, and relief.

This, like in Australia, is in the context of rental regulation being seen primarily as within states’ jurisdiction.

In particular, we believe a national renters rights accord should aim to improve renters’ security of tenure, access to information, and lease conditions. It should also aim to reduce the administrative burden borne by renters in enforcing their rights.

Such an accord needs independent oversight and National Cabinet should investigate including a national renters’ voice—whether that is a new agency, a rental commissioner like NSW and Victoria have introduced, or formalising the role of the National Association of Tenants Organisations. 

We do not have a strong position on what needs to be in such an accord—but it is important to make sure that any measures introduced are evidence-driven, are best practice, and learn from international experiences. 

Likewise we believe it is important that any changes improve renters’ bargaining position in the rental market and have appropriate enforcement mechanisms that do not necessarily rely on the renter initiating a complaints process—whether they rent from a private landlord, a large commercial landlord, a community housing provider or a government agency.

The costs of renting

Even regulatory changes will take some time to make major impacts which will come as small comfort for the third of renters at a conservative estimate currently facing rental stress—especially since that rate is likely to grow precipitously for the first time in decades if current trends in advertised rents growth continues much longer. 

And like we have stated before, housing affordability must be measured in real and absolute terms, which means prices need to come down or incomes need to go up—and ideally both. 

As a short term solution, the Commonwealth should review Commonwealth Rent Assistance payments—and other income support payments like JobSeeker and Youth Allowance— to make sure they are fit for purpose in addressing the cost of living for low income people, and in particular keep up with rental increases. Anglicare has outlined a number of reforms of cut-in rates, rate calculations, documentary evidence and indexation that would improve Commonwealth Rent Assistance.

We do not—in general—support price controls for private rentals except where they create more certainty for renters. In particular, we do not believe blanket “rent caps” and “rent freezes” would improve certainty or affordability and will largely function to encourage retaliation or regulatory avoidance. 

However, controls that restrict how often rents can be increased, restrict the reasons for increasing rents, require greater transparency, or constrain rent increases within a lease by requiring fixed amounts or formulae for increases to be included in leases when signed or even advertised would, in our view, help without causing significant negative disruption to the housing market.  

To paraphrase ACT Chief Minister Andrew Barr, any price controls should be constructed as flexible safeguards that improve the bargaining position of renters and must be combined with a dramatic increase in both public and private housing supply and robust minimum standards for rental properties and lease conditions.

It is important to remember that there are more costs to renting than just rent prices. 

The role rents play in reducing people’s capacity to save money—particularly a home deposit—is well litigated. 

Less well-understood are the cost peaks created every time a renter has to move.

These moving costs are a shock, having to pay upfront deposits, bonds, removalists, cleaners and often crossover rent weeks—and increasingly extra fees for applying for rentals, request maintenance or pay rent through “renttech” platforms imposed on renters. 

A recent report found that, in NSW at least, the cost of moving house is at minimum $2,000 per person, with the average closer to $3,500 per person.

Renters move far more often than owner-occupiers and in a regulatory context that incentivises high rental turnover and assumes any rental is temporary rather than a long-term home by default, these moving costs are borne by renters over and over again. 

In fact, that report found that in the last five years, four in five private renters have moved, one in three have moved multiple times, and one in ten have moved at least once every year—and over a third of those moves are involuntary, a proportion that is likely to grow as rent increases accelerate.

Reforms that aim to improve rental affordability need to also address the causes of involuntary moving—whether that is uncertainty, poor housing conditions or evictions—and also need to smooth out the price peaks associated with moving. 

However, as we have repeatedly said, over the long term the only thing that will keep rents down is high rental vacancy rates which we can only achieve through much greater supply of public, community, commons and private housing.

Those who point to displacement as a reason to block new developments or attempts at urban renewal are pointing towards a fabricated option. 

Due to the nature of supply and demand, displacement cannot be prevented through the blocking of new private developments. Fewer developments mean less supply and less supply means more competition for renters and homebuyers—leading to higher prices and, following that, displacement. In other words, the blocking of new developments doesn’t remove the demand, it just means the demand is further concentrated among the existing homes. 

The forces that produce displacement and gentrification are broad and produced externally by local communities.

As highlighted in this paper by the Australian Housing and Urban Research Institute:

Under current planning provisions and social/affordable housing investment, the prospects for low-to-moderate-income households appear bleak. With supply scarcities, the effects of gentrification pressures are more pronounced as high-income households are attracted to look at cheaper housing cost areas. We know that traditional new owners are spending longer in the private rental sector, because of the growing costs of entry to ownership and this adds further pressure as these high-income tenants seek low-cost accommodation so they can save for a large enough deposit.

This suggests that the factors that produce displacement and gentrification are outside of local authorities' direct control, and they therefore need to work within its confines. Only a stronger provision of market-rate and affordable housing supply can effectively reduce displacement. Without expanding supply, one family’s gain needs to be another's loss. 

This is further substantiated by Kate Pennington, in her 2021 research on the San Francisco housing market, states the following:

Building more market-rate housing benefits all San Francisco renters through spillover effects on rents. However, these spillover effects do not reduce gentrification and they may not continue to reduce displacement in the long term. As the city gentrifies over time, these reduced rents will become less effective at retaining lower-income people because there will be fewer low-income people to retain. Affordable housing can effectively reduce both displacement and gentrification by targeting people at higher risk of displacement and preserving housing for low-income people. The high rent elasticity of displacement also suggests that policies like rental assistance or a universal basic income (UBI) could be efficient, cost-effective ways to meaningfully reduce displacement and preserve income diversity in the short term while more housing is built.

Building more homes rather than fewer, then, is the best way to combat displacement.

Put simply, no: the binary measure of permits approved versus permits denied misses the nuanced problems embedded within current planning processes. 

While high council approval figures, sometimes to the tune of 99 percent, are often cited—including by sources such as The Age—these figures are somewhat misleading. 

Firstly, these figures consider permit approval rates for all planning matters, from minor home renovations to brand new skyscrapers. Narrowing the permit approval rates solely to multi-dwelling permits (two dwellings or more) the rate drops to a number much closer to 85 per cent in the inner to middle urban areas when measuring the same period as The Age’s.

A close to 1 in 5 chance of a development being denied thus condemning it to a lengthy VCAT process can make these sorts of projects highly risky to embark on. 

Secondly, this binary measure ignores that within the approval figures developments can be approved with amendments. Whilst these amendments are often bargained between local councils and developers in good faith to improve the overall outcomes, sometimes such significant changes are made to the permit which makes the projects economically unviable. This means that effectively in some cases a permit approval with amendments is akin to a denial.  

Thirdly, a denial of a significant apartment project means the denial of potential hundreds of homes, however, this is only expressed as a fraction of a per cent of the total approvals. The true weight of this permit is inadequately expressed as it is given the same weight as something potentially as small as a veranda extension.

Fourthly, the time it takes for a permit to be processed has significant implications for the feasibility of a project—“lengthy delays and uncertainty in development applications and planning approvals makes it harder for developers to access finance from banks”. A Planning Institute of Australia paper on the subject states that “even small shifts in the regulatory assessment period can significantly affect housing affordability”. 

Lastly, these statistics are subjected to a major selection bias as developers will not waste time and money submitting for permits that will not be approved—highly restrictive planning plays a significant role here. 

To be clear, local councils are not the only problem restricting supply, but to deny that they don’t play a role in the dynamic ignores the on-the-ground reality.

When new market-rate housing is built and occupants move in, a chain of moves begins, as households vacate their previous, older residences to move into new homes. This opens up older homes to people further down the 'chain', whose homes in turn open up to others, and so on.  

This process is known as filtering, and while the people moving into new homes often have above-average incomes, the full chain of moves provides better quality and cheaper housing for lower-income groups. In 2021, Evan Mast looked at the individual chains of moves that were caused by new development and found that by the 6th move in the chain, 40% of households are below median income.

A different paper by Rosenthal in 2014 looked at how household income changes as a building ages and found that older buildings rent for less and less over time, before rising again for houses that are more than 50 years old. The paper found that the average real household income required to live affordably in a 50-year-old building was just 30% of the income required to live in a new building. This highlights the importance of building homes that last and upzoning broadly enough that sites with high-density housing on them don’t need to be redeveloped frequently for higher yields.

Repeat Income Index, with income adjusted for inflation. Source: Rosenthal, 2014.

Market-rate housing is not, however, a solution for everybody and every household. As The Guardian reported in 2023, Victoria has an alarming shortage of social housing and is building far too slowly to meet needs. The policies we advocate for at YIMBY Melbourne would enable faster and larger social housing builds—the same effect they would have on market builds. 

Because most Victorians rent on the private market, ensuring strong supply, affordability, and point-in-time vacancy rates will ensure that our already-strained social housing sector does not receive additional pressure from those who are able and willing to pay for market-rate housing. This lessens the burden on subsidised housing and allows it to be directed to those who need it most.

While new developments in existing suburbs tend to be expensive relative to older builds, this doesn’t mean that it doesn’t help those on lower incomes. New housing developments can have far-reaching indirect effects through a “moving chain process” (also sometimes referred to as “filtering”). Bratu, Harjunen & Saarimaa (2021) describe this process as the following:

As new residents move into the newly constructed units, they vacate their old units. These vacant units then get occupied by a new set of residents whose old units become vacant and so on. Through this process, new market-rate housing can have moderating price effects in the city’s lower-income neighborhoods, not just in its immediate neighborhood, by effectively loosening the housing market in these areas through vacancies.

Their research, in tandem with numerous others (Mast (2021), Rosenthal (2014), Liang & Kindström (2023) and Zuk & Chapple (2016)) suggests that new developments, even those aimed at higher-income earners, assist with tackling housing affordability on a broad scale.

In the Australian context, The Grattan Institute found that each “1-percentage-point increase in the amount of new housing constructed in a local government area resulted in rents growing 3.7 per cent slower over the decade”.

This is sometimes referred to by critics of supply-side economics as being no different from ‘trickle-down economics’—but this misunderstands the way these two theories work. 

Trickle-down economics assumes that cutting taxes to the wealthy will allow them to spend and invest more thus increasing economic activity—think boosting wages and creating jobs.

However, supply-side economics just theories that expanding the supply of goods reduces the bargaining power of the suppliers, thus reducing the prices of the goods. 

They are completely different in their modes of action.

Another way to describe the moving chain process is a game of musical chairs. When there are not enough chairs, the weakest misses out. But with more chairs, everyone can get a seat.  

However, this does not mean targeted affordability measures such as increasing the Commonwealth Rental Assistance and building more social housing are not worth pursuing. We just believe that building more homes where people want to live needs to form the bedrock of dealing with the affordability crisis. 

In a competitive market, developer margins remain thin no matter how many dwellings they're able to build. Research has shown that broad upzoning makes markets more competitive, and enables more small developers to operate viably. 

Since restrictive zoning significantly increases the costs associated with development, upzoning increases competition while reducing costs to increase supply, bringing about lower prices. For instance, research by Ryan Greenaway-McGrevy on the effects of city-wide upzoning in Auckland, New Zealand suggests that it caused dwelling approvals to surge which has flowed through to increased supply and significantly lower rents in real terms.

Key points from the paper:

Six years after the policy was fully implemented, rents for three bedroom dwellings in Auckland are between 22 and 35 per cent less than those of the synthetic control, depending on model specification. Moreover, using the conventional rank permutation method, these decreases are statistically significant at a five percent level. Meanwhile, rents on two bedroom dwellings are between 14 and 22 per cent less than the synthetic control, although these decreases are only significant at a ten percent level in some model specifications.

Another benefit of wide scale upzoning is the abundant excess zoned capacity it creates. As highlighted in our Missing Middle Housing Targets report, limited zoned capacity creates the potential for land speculation and landbanking. Where there are only a few plots of land where it is possible to build, a small number of speculators can feasibly control and exploit that scarcity to inflate prices. This creates a vicious cycle where the cost of land is driven up, making it harder for developers to build, and for people to buy homes.

This is why our reforms create a large increase in zoned capacity. We do not expect the capacity to ever be met in any given LGA. What we do expect, though, is for landbanking in these LGAs to become unviable. By making developable land abundantly available through broad upzoning, each landholder will face much more competition, making it harder to withhold housing supply.

Furthermore, planning remains one of the big barriers to building social housing, with many social housing projects either facing fierce community resistance or councils just denying them the permit. An Australian example of planning rules negatively affecting the ability to roll out social housing can be found in the following research from AHURI:

In Randwick a councillor gave the example of two planning applications, both for eight units, one of which was for social housing in which the spec-built scheme received two or three objections, but the social housing application received 245 objections. It would seem therefore that those that have been actively involved in the gentrifying of an area can have a vested interest in seeing that the area continues to lose its diversity.

As with all housing policies, zoning reform isn’t a silver bullet—but as far as bullets go, it's pretty good. The key advantage of zoning reform, beyond its proven effectiveness, is that it is essentially free for governments to implement. 

Through the implementation of a windfall gains tax it could bring in significant tax revenue, the proceeds of which can be directed to public and social housing. This is the model we advocate for in our flagship report, Melbourne's Missing Middle, as part of a holistic approach to combating the housing crisis.

Many Victorian councils have poor track records in weaponising planning powers.

Recently announced changes that move planning decision-making from recalcitrant local councils to a central state planning authority is broadly welcomed by YIMBY Melbourne.

However, we believe that while some blame for delaying or blocking housing development lies with local councils, it is not councils’ existence or political make-up per se that causes those roadblocks.

These roadblocks are often misattributed to councils’ being politically captured rather than to a deeper problem—the failure to redesign local governments to reflect how most people in our cities live.

The very nature of planning politics means it has a high threshold for participation. It involves specific knowledge and expertise, time for frequent meetings, political access, and privileges arguments against specific projects over larger strategic visions for the city that most people would have. The way decisions are made excludes people who might have dissenting views.

In our view, the structure of local government privileges the views of time-rich existing residents—and overwhelmingly those who favour a more conservative planning approach—at the expense of renters and aspirational future residents, who support housing abundance.

The democratic boundary problem

This is largely due to the democratic boundary problem which is concerned with the inherent conflict between boundaries as defined geographically and how people relate to each other and power.

In this case, the problem relates to how we define the city and how we elect those who make decisions over the future of it. The city as understood intuitively by most people is the metropolitan boundaries, most easily defined as the urban growth boundary—but no elected decision-makers represent that metropolis.

Rather, we elect state representatives who are concerned with a much larger area, or local councillors who are concerned with small (and shrinking with the introduction of mandatory single-member wards) councils which reflect historic communities of interest rather than current ones.

Metropolitan disenfranchisement

Melbourne urbanists have coined the term metropolitan disenfranchisement to describe how geographically-small councils, particularly those that no longer represent a clear community of interest, systematically and often unconsciously privilege existing residents over future or aspirational ones.

In fact, councillors in the proper execution of their duties cannot privilege future or aspirational residents.

This results in a situation where economic pressures like rising rents or house prices displace someone further out of the city—but that dislocated person has no political influence over the council they were forced to leave in order to pressure that council to take steps to avoid similar displacement happening to others or to facilitate changes that would allow the dislocated person to return.

For example, a young family in Melton wanting to move closer to work in the city has no way to influence an inner urban council to facilitate more affordable housing for them. Nor can a renter in Richmond who is forced further from the city, their work and their community influence their local council to permit changes to their urban fabric that would prevent their friends being forced out too.

This also means the cost of population growth is unevenly borne by councils themselves. If one council fails to deliver housing supply, it shifts the burden onto others. Outer suburban councils who have seen the majority of population growth in recent decades already have an infrastructure shortfall due to starting from a lower base than high-amenity inner-urban councils, and this deficit continues to grow. 

YIMBY Melbourne believes the Victorian Government needs to radically reconceptualise how our councils are designed in order to improve the democratic inclusion for the currently-alienated groups like renters and young families.

In particular, YIMBY Melbourne echoes the views of those Melbourne urbanists in replacing our existing structure of atomised and unfit-for-purpose local councils with a single city-wide government or the systemic amalgamation of smaller councils.

These models are common around the world with many major cities like London, Barcelona, New York and Auckland—and closer to home in Brisbane and Canberra.

Council reform

While the wholesale amalgamation of Melbourne’s 31 metropolitan councils might be extreme, a less radical suggestion might be to merely reverse the 2018 changes that forcibly shifted local councils to single-member wards. Victoria’s small councils and recent move to requiring single-member wards creates geographically-tiny areas—some as small as a few neighbourhood blocks—where people wanting to run for council or even engage with local politics are expected to be rooted for years. Renters move house far more frequently than homeowners, often involuntarily, and do not have the luxury of restricting themselves to only looking in single council areas—particularly where those areas are very small like between the cities of Melbourne, Yarra, Darebin and Merri-bek.

This extends as far as locking renters out of the franchise, with many renters moving annually or more often, with having their address updated for a postal ballot low on the priority list.

Recent reforms like forcing councils to adopt single-member wards has exacerbated the problem, by forcing councillors to be responsive only to a shrinking pool of homeowners, and confusing councillors on how they are meant to represent their communities.

In fact, research from the United States has shown that moving from at-large or multi-member districts on councils to single-member districts suppresses housing construction by as much as 25 per cent—even more so for apartment developments, an effect exacerbated by the district having a higher proportion of homeowners resident.

The aesthetics of new buildings provoke a range of strong opinions, but it’s worth keeping a few things in mind. The look of buildings has changed along with the tastes, technologies, and use of buildings throughout the course Melbourne’s history. For example, newer buildings are more efficient to heat and keep cool, are more generously daylit, and reflect our changing needs, such as the provision of home offices in a post-COVID city. New homes may not always look like what we built in the past, but we can, and are, doing better in terms of sustainability and amenity. 

It is worth noting also that many of Melbourne's most iconic buildings are illegal to build across a large proportion of our inner-city—a status quo enforced by our restrictive planning system. The three-storey terrace houses on our most desirable streets such as South Yarra, are illegal to build in the Neighbourhood Residential Zone (NRZ) that covers most of the city and imposes a 2-storey limit and large setbacks. Six-storey Hausmann-style buildings face even greater barriers. In the meantime, the Cardigan House car park has been heritage listed, locking the inner Carlton site away from more economically productive—and attractive—uses.

From rows of terrace houses to the boulevards of Paris and Barcelona, many traditional urban forms that Melburnians love and draw inspiration from have been made illegal to build anew in vast swathes of our city.

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When we do build 6-storey mixed-use, it is often the design rules intended to improve aesthetics that result in unimpressive design. Where a Parisian street will be flanked by high facades, even sympathetic attempts to build up along Melbourne’s commercial corridors will be compromised by hard setbacks and concerns about monolithic blocking.

Melbourne remains one of the most architecturally interesting and vibrant cities in the world, and the old-to-new bricolage of our inner suburbs plays a large part in this. In attempting to proscribe what others may build on their land, we should be mindful that many of our prior attempts to tighten control over the look of our built environment have backfired.

But times are changing. With 58 percent of people in Greater Melbourne having parents born overseas, we now draw on a much broader range of European and Asian examples that show how urban life can be both densely walkable and humanely designed. And great, iconic builds such as Austin Maynard Architects' ParkLife are demonstrating how housing can be beautiful, affordable, and accessible to a wide range of Melburnians. Zoning for more medium density, as we at YIMBY Melbourne call for in our Missing Middle report, will enable more builds of this calibre to be built across this city of ours.  

Considering the preferences of the local community is important—but it cannot be the only voice our planning system hears. The voices of incumbent landowners are heard loud and clear—meanwhile, the voices of people who want to live somewhere but can't, are not heard at all. 

This entrenches a deep status-quo bias within our planning system, which fails to engage with the needs and preferences of potential future residents. This bias is most deeply felt during development-by-development consultation, creating a large number of problems:

1. It creates an additional burden on our planning system, requiring planners to go to great lengths to defend fully compliant development applications to councillors and certain sub-sections of the community.
2. It creates uncertainty and additional costs for developers, as even a fully compliant development can be knocked back for arbitrary reasons. 
3. It gives the vibes-based decision-making of some elected non-professionals primacy over the professional opinions of planners.
4. It leads to a reduction in the delivery of social housing, which usually sees a greater community pushback than market-rate equivalents.

A better option than development-by-development consultation and objections would be a more robust consultation on strategic planning at the council level. These plans should set clear parameters for where development is zoned to happen and to what intensity, telegraphing clear by-right development thresholds. This should be paired with ambitious housing targets, ensuring that saying no to more housing supply is no longer a viable option.

To combat the housing crisis, homes must be delivered across all of Melbourne's Local Government Areas. Better, more equitable community consultation and planning processes must be a part of that, standardised across all councils to ensure better outcomes for all.

If you count apartments as a proportion of land use, rather than a proportion of dwellings, it becomes easy to see that we absolutely need more apartments.

One of the counterintuitive things to take into account when measuring a given area's dwelling composition is that a single apartment block, containing (for instance) a total of 50 apartments, can fit on the same amount of land as a single detached home.

This means that if 1 in 50 lots in an area is a medium-density build of 50 apartments, and the other 49 are single detached homes, the area will appear to have more than 50 per cent apartments. Increase this to 2 in 50 lots and two-thirds of the dwellings in an area are apartments.

As you can see in the chart above, just if 50-apartment blocks comprise just 10 per cent of the lots, apartments will comprise 85 per cent of the dwellings. 

So while there may be a lot of apartments compared to single detached homes, there are not a lot of apartment buildings. 

If you want to learn more about Melbourne's density deficit, we do a full analysis, comparing Melbourne to Paris, in our flagship report, Melbourne's Missing Middle.

Parking is not a reason not to build. It is a reason to build differently. David Mepham's work, Rethinking Parking, offers insight into many good parking reforms, and the transit-oriented development championed by our flagship report, Melbourne's Missing Middle, enables people to live densely and connected to transport—reducing car-reliance and congestion in our cities. [Update: YIMBY Melbourne hosted David Mepham for a live discussion on Rethinking Parking which can be watched here].

One key advantage of density and densification is that it allows people to live near where they work, reducing their commute distance, and their use of road infrastructure.

YIMBY Melbourne strongly endorses the removal of mandatory parking minimums—a low-hanging fruit for housing affordability, and a policy change endorsed by Infrastructure Victoria and other leading policy and advocacy groups. 

Putting a specific number on the cost of parking, Merri-bek Council showed that each parking space added upwards of $56,000 to the cost of an apartment—more than 10 months of wages for the median working Victorian. Meanwhile, RMIT researchers estimated in 2018 that up to 40 per cent of residential parking spaces in Melbourne are empty.

Under several existing planning schemes in metropolitan Melbourne, one- and two-bedroom apartments require a single car park each, and three-bedroom apartments require two car parks—meaning that family apartments are an estimated $112,000 more expensive due to parking minimums, which are applied regardless of whether the family owns any cars at all.

The lack of medium density near our vast public transit networks combined with the reliance on greenfield developments for housing may be a major factor for our current traffic congestion. There is research highlighting how pushing people further into car reliance is a primary contributor to this congestion. Denying people access to housing in high-demand areas only further encourages car reliance therefore increasing traffic congestion.

The ~1 million vacant homes (or 10 per cent of all dwellings) statistic from the 2021 Census is often brought up as evidence of short-term rentals and land banking being primary contributing factors to the housing crisis. However, this misses a lot of context. 

Firstly, in every census from 1981 through to 2021, around one in ten dwellings was registered as vacant or empty on census night. The 2021 census confirmed that 9.6 per cent of the dwelling stock was vacant, which was the third-lowest proportion recorded. If vacant homes are a primary cause of the housing crisis, why is the problem only particularly acute now, as opposed to at the time of every other census? 

Secondly, it is important to understand why this ~10% of dwellings are vacant. Unfortunately, the 2021 Census didn’t include questions about why a given property was vacant, though by using the 2016 Census as a proxy, the team at SGS Economics and Planning highlighted:

It appears that most dwellings that were unoccupied on Census night were unoccupied for a very valid reason. The two largest categories of unoccupied dwelling are Holiday homes or the Residents absent, which accounts for two-thirds of all unoccupied dwellings. 

Other reasons why these homes were unoccupied on census night range from being on the market for sale to awaiting demolition. It is key to remember that this is a point-in-time statistic—a snapshot of a single night of the year, and not measuring beyond that.

More in-depth data from the ABS, measuring electricity usage, found that just 1.4 per cent of dwellings across Victoria had no activity over three months. While this data is not perfect either, the longer period does demonstrate very clearly that the proportion of unoccupied homes is far fewer than 10%.

The third thing to understand is where these vacant homes are located. Analysis suggests that the majority of these unoccupied houses are outside of our main cities, with a large number of vacancies attributed to empty holiday homes. The current housing crisis is caused by the lack of supply in key locations, most notably within our cities—not housing stock as a total. Unlocking empty homes in sparsely populated regional areas will not ease this crisis experienced by Melburnians every single day. 

Taking this evidence on the whole, it’s unlikely any policy geared toward reducing vacant housing will have a significant alleviating effect on the housing crisis overall. However, there are clear cases such as popular holiday destinations in regional areas where these sorts of policies will greatly assist with housing affordability. We do note, though, that a policy like this needs to be carefully calibrated to not negatively affect accommodation options for people visiting regions that heavily rely on a strong tourism sector.

YIMBY Melbourne welcomes policies aimed at disincentivising the use of homes in supply-scarce areas as short-term rentals (such as Airbnb). However, this should be seen as only a marginal complementary solution to dealing with the housing supply shortage. 

Land banking is only possible where development opportunities are scarce. The strongest antidote to land banking, then, is broad upzoning.   

Broad upzoning

As highlighted in our Missing Middle Housing Targets report, limited zoned capacity creates the potential for land speculation and land banking. Where there are only a few plots of land where it is possible to build, a small number of speculators can feasibly control and exploit that scarcity to inflate prices. This creates a vicious cycle where the cost of land is driven up, making it harder for developers to build, and for people to buy homes.

The New Zealand Productivity Commission highlighted this in their 'Using land for housing' report:

“Where expected demand is high, or land is scarce, the incentives to hold land can be strong. Land banking is therefore a symptom, rather than a primary cause, of land supply shortages. Strategies to encourage owners of land to develop it for housing rather than holding it should focus on

• increasing certainty about what can be developed on a site;
• reducing the scarcity value of land, through a commitment to ensuring that zoning and servicing land is responsive to demand; and
• influencing holding costs, at the margin, to reduce the expected future returns on land development”

The certainty is why a piece of land plus an approval is worth so much more than just the land alone is because it is hard, and time consuming, and tedious to get a permit. 

YIMBY Melbourne's proposals aim to make the permit process easier and faster to navigate. This will reduce the value of any given permit, and in turn reduce the incentive to 'bank' any given approval on any given piece of land.

In addition to broad upzoning, many of our other proposed policies would work to strongly discourage land banking. We will give two additional examples: mandatory height controls, and a land value tax.

Mandatory height controls

Our proposed Missing Middle Zone—six storeys mixed-use around fixed rail—notably has a mandatory height limit. This gives developers certainty about what can be built: it removes the wiggle room about what height a council might approve based on the specifics of the site and nearby developments. 

Mandatory height limits, then, remove the potential for land speculation, because each stakeholder—council, landowners, developers, and the community—has the same understanding of what size build is possible.

Land value tax 

A robust tax on the value of land, excluding any buildings or improvements on that land, also discourages speculation. This is because the landowner has to pay the same amount of tax regardless of whether they choose to develop the site. 

Under a strong land value tax, landowners will rack up a much larger tax bill over the course of holding the land without developing it for productive use.

We believe everybody should have a choice in the type of place that they live, whether that be an apartment, detached home, or townhouse. 

As of the 2021 census, 70 percent of dwellings in Australia were detached houses while only 16 per cent were apartments and just 13 per cent were townhouses. Currently, there is a big mismatch between existing housing stock and the housing types that people would prefer for themselves. The Grattan Institute examined this mismatch in their 2011 report, The Housing We’d Choose. For the report, a survey was commissioned asking Melburnians and Sydneysiders about the tradeoffs they would make between location, dwelling size, and dwelling type for their budget. They found that throughout Melbourne, there is not enough semi-detached housing (for example, terraced cottages) and taller (4 or more storeys) apartment buildings, while there were significantly more detached dwellings than people wanted.

Australia already has detached homes in abundance. YIMBYs want to ensure a strong mix of housing types is available to meet the various needs and preferences of all Melbourians, this idea is called 'housing diversity’ and is a key pillar of our ‘Missing Middle’ report. The lack of housing diversity in Melbourne means that our choice of housing type is often dictated to us rather than by us.

Not only is it important to have a wide range of options for prospective buyers and tenants, but increasing density and abundance by delivering the missing middle will have positive flow-on effects for all buyers. This has been demonstrated in Auckland where upzoning efforts supporting housing diversity have led to reduced prices for all housing types, including detached houses.

Building setbacks, whilst often argued for with good intentions, have a large number of negative ramifications that make our housing outcomes worse. 

The issues with setbacks fall into two main categories: increasing building complexities and decreasing amenities.

To put it simply, buildings with a traditional “boxy” shape are just simpler (and cheaper) to build and maintain whilst more complex shapes do the exact opposite. The more setbacks required the more complexity goes to the building foundations, waterproofing, service/infrastructure, etc. All these factors add up and not only just significantly increase the construction costs, they make the long term performance of buildings likely to be worse. 

This is backed up by research from the City of Toronto Planning and Development Department, who found that the elimination of setbacks would lead to "the greatest reductions in both embodied and operational carbon and have the additional benefit of simplified structures and envelopes - a move that would allow a wider range of structural materials to be employed and greater energy efficiency in envelope systems".

There is research to suggest that setbacks—via the extension of internal floor slabs—can cause buildings to lose thermal efficiency due to thermal bypassing. This is in addition to them being less thermally efficient from the onset due to having a larger surface area to their volume, compared with buildings without setbacks. These two factors combined means that setbacks cost more and produce more emissions due to their much higher energy requirements. These increased amounts of points of potential water ingress also create more unnecessary risk for timber rot and for the growth of mould. 

Whilst the rationale for setbacks is often based around improving the amenity of the streetscape (i.e. how tall the building appears on the street level) this often comes at the cost of amenity of the residents of the building and relies on the assumption streetscapes are inherently better when the building height is obscured. 

The nature of setbacks means that the bottom levels of the building needs to be long enough to meet the required setback requirements of the upper levels. However, this means that the housing on lowest levels are built deep into the building with more limited access to light and airflow when there are other buildings surrounding the rear. This issue is one exacerbated by setbacks and could be solved by removing setbacks and allowing for a thinner rectangular building with plenty of rear open space. 

On the upper levels, the long setbacks completely block residents' views of the streetscape, cutting off their connection with the street whilst removing the safety benefits of “passive surveillance”.

Moreover, setback requirements force developments to have reduced floor area ratio (FAR)—otherwise known as ‘density’. In practice this means the number of homes a project can supply is either reduced or the apartment sizes/number of bedrooms are reduced. The former has implications to housing affordability whilst the latter limits the type of housing diversity that can be delivered by these projects.  

Many advocates for the current setback regime argue that they play a vital role in preventing urban canyoning or wind tunnelling—which are fair concerns and worthy of addressing through policy and planning tools. However, the height buildings need to be for these concerns to be valid is significantly disconnected from when setbacks requirements kick in. For example with wind tunnelling, buildings need to be around 20 stories or 76 metres tall before it becomes an issue whilst setback requirements can start as low as 2 storeys or 8 metres!

Another notable argument for setbacks surrounds overshadowing and sunlight. The current controls operate under the assumed supremacy of goals to minimise the amount of shadow cast and maximise the amount of sunlight. However, this assumption is falling under greater scrutiny in a world where heat is seen as a great threat to urban public health. Is minimising shade in urban spaces worth prioritising above all other amenity concerns? In Melbourne—a city famous for its cloudy weather—is overshadowing such a major concern for a majority of the year if the sunlight is mostly diffused? These are questions that have yet to be explored thoroughly in Melbourne. 

When considering the number of trade offs associated with mandating setbacks, it’s hard to see why they’re worth it for the limited scope, and questionable nature, of the perceived benefits. Setback controls in Melbourne are in desperate need of a rethink.

Decentralisation is not an effective solution to the housing crisis. The main appeal of decentralised models is that they effectively maintain the status quo for all current homeowners while putting the full burden of change onto renters and newer Melbournians who, under this model, would be forced to relocate to regional centres.

There are many issues with this approach.

The foremost is that general trends towards urbanisation are a natural occurrence. People simply want to live near Melbourne’s centre—the state’s cultural and economic centre. This is why home prices in the inner-city are high: because that's where people most want to live. With planning restrictions artificially limiting the supply of inner-to-middle suburb housing, this demand is unable to be met, and both prices and rent continue to skyrocket. This is the impetus to build more homes where people want to live. 

Decentralisation advocates operate on the assumption that the emergent behaviour of centralisation and agglomeration can be circumvented. It seeks to distort the natural trends towards urbanisation by making regional cities more economically attractive to the average person and business. However, because this does not happen naturally, mass amounts of government subsidies would be required to shift large numbers of people away from Melbourne. 

This of course begs the question: would all this public money be best spent on making decentralisation viable? Is this the most effective way for the state to spend its money, when there are many vital services such as health and education in critical need of the limited funds available to the state?

The high costs of regional infrastructure mean that decentralisation will likely be very expensive, and in many cases, incredibly difficult to even do at all—even for basic, essential infrastructure such as stormwater and effluent discharge management. This bears out in the analysis: a 2023 Infrastructure Victoria report highlighted that Victoria will be 31 billion dollars worse off in terms of infrastructure spending by 2056 if we pursue a decentralised ‘network of cities’ model over a more compact city.

Another fundamental flaw with decentralisation models is how it works with dual-income families—the norm in modern Australia. Under a single-centre model, a majority of jobs are collocated, meaning that both partners will likely be able to find jobs that suit them within a reasonable distance.

With Melbourne’s strong radial public transport connections this means this family could live in most of our inner-to-middle suburbs with no major commuting issues. However, in a decentralised model with jobs spread across a wider number of centres, finding the best place to work and live while maintaining short commute times for both partners will become increasingly difficult, increasing the number of tradeoffs families are forced to make.

Australia’s history is filled with examples of failed attempts at decentralisation—we ought not to repeat the same mistakes. (See Greater Canberra’s convener Howard Maclean’s Twitter thread on the subject)

Decentralisation when broken down to its core is a subsidy program for status quo homeowners at the expense of marginalised and future Melbourians. YIMBY Melbourne simply believes we should build more homes where people want to live.

Due to their limited tax powers and responsibility for the bulk of service delivery, state governments have little ability to spend amounts as large as would be required for universal public housing. 

The delivery of any public housing at all is hampered by the fact that state governments have to pay GST on the goods and services they consume—including building & maintaining public housing. In addition to this, public housing tenants are not eligible for Commonwealth Rental Assistance (CRA), preventing public housing providers from charging more to capture the CRA amount. 

This is in direct contrast to non-profit community housing providers, who are exempt from paying GST, and who can receive CRA. This makes it much more cost-effective for state governments to provide social housing through funding of community housing providers, rather than administering public housing directly. 

While YIMBY Melbourne endorses the urgent addressing of public housing disincentives, we also recognise that we need more housing now, and right now it is extremely difficult for the government to deliver any significant amount of public housing.

The private sector has more resources available to invest in housing, and the majority of employees with relevant skills are employed by private developers. This means the private sector has more ability to ramp up their rate of development due to already existing expertise, allowing us to construct more housing units faster.

The private sector also can provide a wider variety of housing types, providing people with more choices. Not only does the low rate at which the government delivers public housing leave no real room for housing diversity, they also lack incentives to take risks, meaning that they may struggle to provide the diversity in housing stock demanded by our diverse demographics.

Market-rate housing is not, however, a solution for everybody and every household. As The Guardian reported in 2023, Victoria has an alarming shortage of social housing and is building far too slowly to meet needs. The policies we advocate for at YIMBY Melbourne would enable faster and larger social housing builds—the same effect they would have on market builds.

As the RBA highlighted, the pandemic fundamentally changed the type of housing we sought after:

During the COVID-19 pandemic, lockdowns and health concerns meant that people desired more space and to live with fewer people. This shift in living preferences contributed to average household size declining to its lowest level in at least a quarter of a century. 

The decline in average household size since the start of 2020 – around 1 per cent – is estimated to have contributed to around 120,000 additional households being formed and, as a result, additional demand in the rental market. Average household size has remained low in the face of the recent tightness in the rental market and rising rents. Solid growth in incomes (and, for some, increased working from home [WFH]) has underpinned demand for space.

What this suggests is that one of the drivers of increased housing demand during COVID-19 was the decline in household size, due to factors such as the rise of work-from-home arrangements and the desire for more space per person inside the home due to various lockdown restrictions. 

After the lockdowns ended and interstate and international migration to our cities restarted, the smaller average household size meant there was not enough capacity to accommodate the same number of households as pre-COVID.

Furthermore, the sudden rent rises after the initial decline can be explained more simply. When people left prices fell and people consumed more housing. When people returned, we couldn't simply return to the way things were. It takes time for leases to be renewed etc. As a result, there was a flood of new people trying to get access to a very small number of newly advertised properties. In those conditions, advertised rents will inevitably rise. 

Some imply that advertised rents magically went up when lockdowns ended, when in reality they went up because a flood of new people returning to Melbourne caused demand for new rentals to outstrip supply. 

The COVID-19-induced rental crisis is not evidence against supply shortages being an issue, but in fact, is further evidence that supply is at the core of housing affordability.

While it's true that councils themselves do not build housing, this paints a misleading picture of the relationship between local councils and housing supply. 

Through the strategic planning process, local councils create a maximum potential housing capacity through zoning and overlays—this is the on-paper capacity. It is then primarily up to the private sector to build and construct the homes within the zoning regulations. 

However, the specifics matter here, and on-paper capacity can be highly misleading. 

For example, consider an area zoned Neighborhood Residential Zone (NRZ, two-storey limit) which is comprised of 100 detached homes on double blocks. Assuming all blocks are able to be subdivided once, the on-paper capacity for this area would be 200 homes. However, to reach this capacity would require all 100 lots to be redeveloped—a lengthy process to add just 100 more homes.

Meanwhile, a single six-storey development on one double block can deliver upward of 40 homes. This means that just 5 double-blocks zoned for six storeys would have roughly the same on-paper capacity as the aforementioned example of 100 double-blocks zoned NRZ.

It’s in setting these parameters that councils distort the private sector's ability to meet demand.

Another way councils control the private sector's ability to build more homes is through the inconsistent or cynical enforcement of the planning system. While many councillors and the vast majority of planning officers act in good faith, a small number of bad faith or politically captured actors seek to pull every lever possible to block new developments. This creates significant uncertainty within the planning process—adding additional risks and making development more expensive.      

This is the issue with on-paper capacity targets, they can be gamed, and there is no guarantee that they will translate to meaningful material increases in housing supply. This is why we at YIMBY Melbourne advocate for broad upzoning that grants planning certainty for all stakeholders and enables the delivery of homes across all of Melbourne, in the places where people most want to live.

Heritage overlays—as currently applied in Melbourne—are incredibly expansive and heavily limit new housing in much of the inner city.

The Centre for Urban Research’s report “2015 Melbourne at 8 million” modelled the maximum dwelling yield for the 3,291 lots over 2,000 sqm along tram lines under then-current zoning allocations. 

The maximum yield for these lots, without heritage considerations, was 81,895 dwellings. With heritage factored in, this yield was reduced by more than 63 per cent, to a total yield of 29,822 dwellings. Of this reduction, 36,230 sites (44 per cent) were excluded due to an explicit heritage overlay, and 15,843 (19 per cent) were excluded due to being built before 1945.

But it’s easier to see the sprawl of heritage overlays for yourself:

Everything shaded pink is covered by heritage overlays where changes are heavily restricted—unfortunately, it mostly covers the inner-city suburbs with the best access to public transport and the city. 

The consequence of trying to keep so many of our most desirable areas locked in amber means that we are heavily restricted from being able to build more homes where people want to live. We are restricting Melbourne as a city only built for the past rather than the future. 

Make no mistake, heritage is a vital part of our cities, but with overlays being increasingly weaponised to block housing, bad faith actors have begun reshaping heritage overlays into a tool to lock people out of the most amenity-rich areas, while keeping it increasingly exclusive to the wealthy established residents. There is a better balance that can easily be struck. 

Furthermore, heritage overlays further skew towards homeownership within their areas predominantly to the wealthy via higher ongoing housing costs. This is due to a variety of factors from higher insurance premiums, the need for specialist contractors to maintain facades, the need to engage with heritage consultants, etc. 

So, given the number of negative externalities of heritage overlays, what metrics do the council hired heritage consultants use to evaluate what is or isn’t heritage? 

It seems that it is fundamentally built around one thing only: age! From brutalist multi-level carparks in Carlton to fourteen disused substations are all preserved via heritage overlays. The latter example directly stopped a development for 333 apartments until the minister intervened—approving a far more limited 168-dwelling development due to the prioritisation of preserving the substation over housing. Recent examples have highlighted that consultants are moving towards classifying seemingly anything built pre-1970s as heritage-worthy.

The consultants and ‘experts’ recommending these overlays to councils directly benefit from providing their services in assisting overlay-beleaguered owners navigate the difficult approvals system for modifying their property—the current system is little more than a rort for heritage consultants, and a scarily effective means of closing off communities in the most amenity-rich areas of Melbourne, where housing is most needed.

YIMBY Melbourne does not advocate the abolition of heritage protection altogether, simply reforming it to a far more reasonable level, with an emphasis on preserving individual buildings of genuinely significant worth, instead of the huge indiscriminate swathes of land currently favoured, which have a far higher—and unacceptable—cost.

Mandatory inclusionary zoning (MIZ) is a well-intended policy, however, when implemented poorly—or used in bad faith—it can contribute to worsening the housing crisis by restricting housing supply while creating little to no additional affordable/social housing. 

While it’s understandable why there are common myths around developers being able to absorb the large amounts of price-controlled housing seen in many implementations of MIZ policies, the bulk of the existing evidence (Mock et al. (2023), Bento et al. (2009), Means & Stringham (2015) and Schuetz (2010)) suggests that MIZ, without well-calibrated incentives, substantially restrict new housing supply—thus making housing affordability worse. In essence, mandatory inclusionary zoning policies work as an implicit tax on new homeowners.

This is not to say that IZ as an idea is inherently unworkable, nor do we need to lose its cost neutrality. When it’s paired with the correct incentives it can provide a potent solution. This is why YIMBY Melbourne endorses incentivised IZ models such as that seen in our Missing Middle report or the Victorian government’s Development Facilitation Program. Additionally, we acknowledge that there are limited small-scale examples of MIZ working in Australia, for instance, within Sydney’s Ultimo Pyrmont urban redevelopment precinct—which aimed for and exceeded a 6% affordable housing target.

Another key question around inclusionary zoning policy is why the burden of providing affordable and social housing should be borne predominantly by those building new housing, rather than by society as a whole. 

This is why we support policies such as Victoria’s Airbnb levy—the revenue from which goes straight to Victoria’s social housing authority—and a broad-based land tax. The state government needs to build more well-located social housing and cannot rely on shifting the responsibility and costs to private developers and new homeowners in order to meet the current shortfalls. 

The reason, then, that we favour incentivised inclusionary zoning models, is that they align the interests of both the developer and society on the whole, with planning authorities rewarding the inclusion of affordable and social housing with incentives such as third-party appeal protection, additional height allowance, and other increases in yield or stakeholder certainty. While these models do need to be carefully calibrated to ensure cost neutrality for both the government and developers, YIMBY Melbourne believes that policies that align all stakeholders to create better outcomes for Melburnians are the policies we should pursue most intensively.