CEDA proposes subdivision changes to aid housing crisis in Sydney, Melbourne

A million new homes could be delivered to the nation’s five largest capital cities by allowing Australians to subdivide their properties, new research suggests, in a move that will ease price pressures and give people more choice of where to live.

The Committee for Economic Development of Australia (CEDA) will argue on Tuesday that allowing default approval for so-called “soft density” dual-use would reduce pressure to build large unit towers in suburbs while maximizing the use of existing infrastructure.

While the federal government is already 60,000 homes behind its goal of building 1.2 million homes by 2029, home price growth has accelerated since the Federal Reserve began cutting official interest rates in February.

Figures released on Monday confirmed the median home value in Sydney has reached a record $1.584 million, while the median value in Canberra and Brisbane is now above $1 million.

CEDA’s research examined how planning reforms implemented over the last decade in New Zealand’s largest city, Auckland, have increased affordability and supply. The key element was to allow property owners to subdivide their homes with few (if any) restrictions.

Senior CEDA economist Danika Adams, who co-authored the report, said that if just a quarter of detached land was developed for dual use, total housing supply would increase by 9 per cent, or about 1 million homes.

If the plan is implemented, housing supply in Sydney will increase by 12 per cent, while housing supply in Melbourne will increase by 15 per cent, with most new homes located close to workplaces or transport hubs.

Adams said housing supply solutions often focus on outliers such as high-rise apartments or homes in sprawling outer suburbs.

“But light density can deliver more housing in the middle-ring neighborhoods where people want to live, while making better use of existing infrastructure and transportation networks,” he said.

“We need to make better use of the land, transport and services we already have and give people more choice about where and how they want to live.”

When planning reforms were introduced to Auckland, property values ​​were rising as fast as in Sydney and Melbourne.

CEDA claimed the Auckland changes increased building permits by 50 per cent in five years. Home prices were predicted to be 15 to 27 percent lower than they otherwise would have been.

The report estimates that more than 1,000 strata-titled sites within 15 kilometers of Melbourne’s CBD would deliver an additional 100,000 homes if redeveloped.

The proposal is similar to one suggested by the Grattan Institute last month that three-storey apartments and townhouses could be built anywhere in the nation’s capitals without special planning permission.

It is estimated that Melbourne could build an extra 431,000 homes within 15 kilometers of the city centre, and up to 1 million extra homes could be commercially possible in Sydney.

Adams said the NSW and Victorian governments had already begun to implement reforms but the whole country needed to do much more, starting with planning reforms to allow homes to be built quickly.

“We need a sustained effort and an ongoing ‘if yes’ culture that encourages speed and predictability and gets more people into homes in neighborhoods that are already rich in amenities,” he said.

As well as increasing the number of homes allowed per hectare, CEDA believes state governments should reward councils that meet housing targets and penalize those that fail to meet them.

The federal government is already offering $500 million to municipalities to help them provide the necessary infrastructure for new homes. Most of this already flows to suburban and regional local governments.

Another $1 billion went to encourage state governments to provide infrastructure or plan reforms that would increase the number of housing projects underway.

The housing boom is expected to soften the real estate market, which is on track to experience a nationwide increase in prices of more than 8 percent for the year.

AMP chief economist Shane Oliver said on Monday the rise in prices was likely to slow in 2026 due to affordability pressures, the possibility of a rise in interest rates and the Australian Prudential Regulation Authority’s plans to tighten lending standards from February.

“While some slowing in population growth and improving housing completions have brought the real estate market into better balance on an annual basis, there is still an accumulated housing deficit caused by inadequate construction over the past few years,” he said.

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