Melbourne’s residential development: what’s really going on?

The Victorian Government has recently released a series of detailed reports to inform the ‘Managing Residential Development’ Advisory Committee submissions process. They raise many important questions not only about the residential zones but the wider issue of ‘who and what are we planning for’ over the coming decade and beyond.

What follows is a summary of some of the more attention grabbing parts of the reports, together with our own observations about the bigger picture issues that the forthcoming Advisory Committee might need to address.

Urban redevelopment is finally a dominant part of Melbourne's housing supply

According to the State of Play report:

  • Redevelopment of exiting commercial, mixed use and former industrial areas has accounted for 42% of Melbourne’s housing supply in recent years. This includes major redevelopment sites identified in the Urban Development Program, as well as land within Commercial, Mixed Use, Capital City, Docklands and various Priority Development/Comprehensive Development zones.
  • Melbourne’s growth areas have provided around 31% of the annual new housing supply over the past four years. This is a much lower share than in previous periods.
  • Residential infill development still provided for around 25% of Melbourne’s overall housing supply over the past four years. This remains a vital part of the housing diversity and affordability equation for our city.

After years of debate, urban consolidation is now writ large in Melbourne’s streets and suburbs. It appears set to remain a major part of our city’s future growth for decades to come.

The State of Play reports provide a very useful snapshot of where higher residential development is currently permitted under residential and other zones across Melbourne. Only about 5 percent of land in metropolitan Melbourne is included within zones that support higher density development.

This includes the Residential Growth Zone (RGZ), Capital City Zone, Commercial 1, Activity Centre and Mixed Use zone.

At the other end of the spectrum, of all the zones that allow for residential (including commercial) almost 13 percent of residential land supply in metropolitan Melbourne is included within the Neighbourhood Residential Zone (NRZ).

There are also some significant differences in how residential land across Melbourne is zoned - notably, 30 percent of land in the eastern metropolitan region is included within the NRZ, compared with 7.4% in Melbourne’s western region. Some will argue that this reflects historic and environmental differences between Melbourne’s east and west, but many others will have a different interpretation.

What do we know about the early impact of the new residential zones?

The State of Play report notes that it is too early to track the impacts of the new zones on development trends, because much of the recent development are based on planning approvals that pre-date their implementation. It rather tactfully notes that:

It is possible that the supply of new medium density dwellings in [Boroondara, Glen Eira and Bayside] will decline in response to the NRZ and while this is unlikely to generate supply impacts of metropolitan significance, at a local level this might add to issues of housing diversity, choice and price…

The report also notes that whilst the mandatory nature of the new residential zones fundamentally increases certainty over the likely development outcomes, it may also have unintended consequences, for example by limiting the development potential of larger lots and impacting on the pitch of roofs (for example).

The challenges facing planning for residential growth in Melbourne

“Alice: Would you tell me, please, which way I ought to go from here?

Cheshire Cat: That depends a good deal on where you want to get to.

Alice: I don’t much care where.

Cheshire Cat: Then it doesn’t much matter which way you go.”

What is the overall housing policy that residential zone reform is intended to achieve?

The current State planning policy contains some general directions for facilitating housing growth near services and public transport, and it also requires planning to consider Victorian Government population projections (Victoria in Future). The big question right now is whether or not the zone reforms are expected to contribute towards realising the 70% infill/30% growth area housing distribution target identified in the Plan Melbourne Refresh.

What might a 70/30 housing target mean for realising infill development?

VIF 2015 suggests that Melbourne will need an additional 388,000 new homes in the next decade. Under a 70/30 policy, this equates to almost 272,000 homes being built in established areas.

The latest Urban Development Program (2015) suggests that a staggering 128,000 dwellings will be constructed on major residential redevelopment projects (i.e. those yielding 10 dwellings or more) over the next two years alone (notably, this is almost double what the 2014 UDP estimates for the same period). But even with this level of development, a further 144,000 homes will still need to be built in Melbourne’s established areas between 2016 and 2026.

The Advisory Committee will therefore need to turn its mind to how planning schemes across Melbourne can actively facilitate this scale of change, whilst still addressing heritage, character, environmental and other factors.

Local population forecasts have their limits.

Councils will often argue that their housing strategies are justified because they demonstrate a capacity to meet forecast housing needs. At face value, this seems reasonable. However, what rarely gets discussed is the extent to which municipal forecasts are ‘self-fulfilling’ because of the housing capacity assumptions that they are based on in the first place.

It is refreshing to see this point acknowledged in the Residential Zone State Of Play report:

At a metropolitan scale, Victoria in Future projections rely on demographic factors such as births, deaths and migration, and the link to household growth to explain expected demand for new dwellings. However, at the municipal and suburban level, the distribution of future population growth is determined by the relationship between strong overall housing demand and knowledge of locations that are expected to add new dwellings.

Population growth is, therefore, projected to be the strongest in locations where the most number of dwellings can be accommodated. These locations include sites such as disused industrial land, and Melbourne’s Central Subregion where development occurs at the greatest densities.

In other words, municipal-scale population forecasts are heavily influenced by the assumptions made about the capacity for new housing growth at the local level. If it is assumed that an area doesn’t have capacity, then the metropolitan distribution of population growth to that area will be limited by such assumptions.

More analysis of housing capacity is needed to inform housing plans and zone reform.

Whist Echelon Planning would debate various aspects of the recent ‘Melbourne at 8 million’ report (RMIT, October 2015), I wholeheartedly agree with its authors that more work is required at the metropolitan and local level to understand housing capacity in different parts of our city.

I think that the review of residential development frameworks should be informed by a better understanding of housing capacity in different locations.

The RMIT report provides a useful starting point for such an analysis. There is a clear role for the Victorian Government to lead such a process, and I suspect that much of the data needed to underpin this sort of analysis already exists within State and local government.

We need to look beyond just the residential zones.

Much of Melbourne’s future housing growth will occur in activity centres, commercial mixed use and former industrial areas. Again, it will be critical to understand the capacity of these areas to accommodate future housing growth.

The planning frameworks for these locations should enable higher densities – if the desire to ‘protect the suburbs’ prevails then it will be more important than ever to avoid placing onerous height restrictions on local activity centres and larger infill sites.

Zoning controls should more clearly give effect to policy outcomes.

It is clear that the rollout of the new residential zones has already created a myriad of zones and schedules that threaten to rival the labrynthine zones of the 1980’s ‘pre-VPP’ era.

The general housing types and densities permitted within each zone should be clear, and getting approval for ‘complying’ development should be streamlined. It also seems obvious to say that if land is included in a General Residential Zone then the resulting development should not end up resembling what might be permitted under the Neighbourhood Residential Zone.

Footnote: Suggested improvements to the Residential Zones.

The Victorian Government has also identified a list of 82 possible improvements to the residential zones. These are well worth reading, and submitters might well wish to make comment about specific suggestions contained within this list.

For further details go to:

Submissions on the review close on Monday 29th February.

Mark Woodland is Director at Echelon Planning, a Brunswick-based boutique urban planning consultancy.

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