Melbourne needs lots of new homes – quickly – to ease the housing crisis and let more people live where they want.
Melbourne’s planning reforms are world leading: they permit substantially more housing where Victorians most want to live.
The government’s new Townhouse Code makes building townhouses easier. The Activity Centre Program will allow new apartments around 60 transport hubs. And further announced changes should streamline planning approvals.
Grattan Institute calculates that these reforms could allow for an extra 1.6 million homes. And around one third of those homes can be profitably built today, despite higher construction costs.
But Melbourne faces bigger challenges in getting new housing out of the ground than most cities, especially Sydney.
Housing in Melbourne is among the most affordable in Australia. More affordable housing is a good thing, and successive Victorian governments have delivered.
But this doesn’t mean Melbourne is now free of planning and housing challenges.
Few mid-rise apartments in the Activity Centres are commercially feasible to build today, because the big jump in construction costs since COVID has made them unviable. And new apartments in some more distant Activity Centres, such as Broadmeadows and Epping, are in low demand.
Instead, it’s the Victorian Townhouse Code, which now allows three storey townhouses across most of Melbourne, that will do the heavy lifting. The Townhouse Code has unlocked capacity for nearly 1 million extra homes, of which 400,000 can be profitably built today.
The challenge now is to build more of the homes that people want where they want them, with a forensic focus on regulation, infrastructure and tax policy settings.
In this presentation to Property Council’s Victorian Residential Outlook for 2026, our Housing and Economic Security Program Director Brendan Coates shows what needs to happen next.
The Victorian government should be commended on its pro-housing reforms, but there is still more to do – and much more to build.
