Planning for more homes will create a better capital

In the 1970s, the city’s planners developed the “Y-Plan” to focus growth in new towns on the urban fringe, rather than near the existing city centre.

And after a spike in construction of dual-occupancies in the 1990s, the Stanhope government introduced policies that limited new development in established suburbs.

These policies have defined Canberra’s urban growth but divided its residents. While a lucky few have been able to purchase large blocks in Canberra’s leafy inner suburbs, many Canberrans have found themselves priced out of the neighbourhoods they grew up in – and in too many cases, out of homeownership altogether.

Now the Barr government, with its plans to allow “missing middle” townhouses and low-rise apartments across the territory, is finally taking real steps to bridge this divide.

It’s long been clear that Canberra needs to build more homes to ease runaway housing costs and accommodate future population growth.

In 2001, a median-priced home in the ACT cost about three times median household income. By 2024, that figure had doubled to six times median income.

Housing is even less affordable for people on income-support payments, who don’t benefit from the ACT’s high average wages.

To afford the cheapest 25 per cent of one-bedroom homes, a Canberra renter in 2024 needed to be able to spare $420 per week, whereas a cheap one-bedroom home in Melbourne or Brisbane costs at most $330 per week.

At the heart of these problems is that Canberra – like many cities in Australia – has adopted planning rules that limit construction of infill housing in well-located areas.

As it stands, more than two-thirds of the city’s urban land is locked up in the restrictive “RZ1” zone, which generally allows for only one home per block.

These policies are no longer fit for purpose for a rapidly growing city like Canberra, which is expected to see its population increase to nearly double by 2060.

It’s these barriers to new housing that the ACT government is looking to lower with this week’s reforms, which would allow multi-unit housing and subdivisions in RZ1-zoned areas, modestly lift height limits on blocks already zoned for medium-density development, and reduce parking mandates for newly constructed homes.

These reforms could enable tens of thousands of new homes to be built over the coming decades.

Evidence from overseas shows these kinds of planning reforms can substantially boost housing construction and improve affordability. In 2016, Auckland rezoned about three-quarters of its suburban area to promote denser housing.

These reforms boosted the city’s housing stock by up to 4 per cent, with most of the extra homes coming in the form of townhouses and low-rise flats, rather than high-rises.

Researchers later estimated that this new housing had reduced rents in Auckland by up to 28 per cent, compared to where they would have been otherwise.

The benefits of pro-housing planning reforms don’t just go to people with the means to buy newly built townhouses and apartments.

By allowing families of all kinds – from expectant newlyweds to ageing downsizers – to move into homes that better suit their needs, these reforms take pressure off of an overcrowded rental market, and free up more affordable housing for people on lower incomes.

And because planning rules also constrain public and community housing developers, reforming them can help to turbocharge social housing construction, as has occurred in Auckland.

Closer to home, Canberrans have already seen how a boost in new housing construction can make a difference to housing affordability. Between 2018 and 2023, the ACT built more new homes per capita than any other state or territory.

Unsurprisingly, rents in Canberra – as measured by the consumer price index – rose by just 2.3 per cent in the two years to March 2025, even as rents in Melbourne, Brisbane, Sydney, Perth, and Adelaide grew by more than 12 per cent over the same period.

Building more homes where people want to live will also make Canberra a livelier, more prosperous, and more sustainable city.

Urban economists have long shown that denser cities lead to more productive firms and higher wages for workers. Research by the e61 Institute found that the incomes of young Australians who move to a capital city were $15,000 per year higher than for similar young people who remained in the regions.

Increased density can also reduce a city’s carbon emissions, largely by decreasing the amount of time people spend commuting in cars. One US study found that doubling the density of an urban area reduced vehicle use by half.

While it’s natural that some residents of Canberra’s inner suburbs are concerned this new denser housing will change local neighbourhood character, that change is likely to be both modest, and gradual. Even if the population of suburbs such as Griffith doubled, they would still be only about as densely populated as the leafy, sought-after suburbs of Hawthorn in Melbourne or Mosman in Sydney.

The ACT government’s planning changes also retain protections for Canberran’s much- valued backyards, keeping in place rules that limit infill development in low-density zones to at most 45 per cent of the block.

These reforms come at a crucial time for the ACT housing market. With approvals for multi- unit housing having fallen from more than 5000 in 2019 to less than 2000 over the past year, planning changes are sorely needed to help kick-start housing construction.

But while “missing middle” homes can play an important role in this rebound, the ACT should also look to learn from best-practice planning reforms being implemented elsewhere.

In particular, the ACT government should go further by providing for greater housing uplift in areas that are well-connected by public transport, as has occurred in Sydney and Melbourne, and scrapping parking mandates in new apartment projects, as has occurred in New Zealand.

The ACT should also follow the lead of other jurisdictions around Australia by introducing a codified approval pathway for low-impact housing projects, and exempting these projects from third-party appeals.

By allowing compliant developments to quickly receive planning approval, these pathways remove the uncertainty created by discretionary approval processes, and lead to more homes getting built.

Even without these additions however, the ACT government’s reforms represent the most meaningful boost to the housing aspirations of Canberrans in decades. They show that Canberra doesn’t have to choose between protecting the “garden city” and building more affordable housing. It can, and it should, do both.