Productivity Commission proposes allowing three-storey developments everywhere to improve housing affordability
The country’s sprawling suburbs of single-storey houses will be transformed under a plan by the Productivity Commission to make the property market affordable; Three-storey buildings will be allowed everywhere, and high-rise apartment blocks will be built near train, tram and bus stations.
Stating that state and local government planning regulations are the main reason why Australia has some of the most expensive homes in the world, the commission also wants to reduce the minimum size of house plots while allowing more European-style mixed commercial and residential developments.
Commission chair Danielle Wood said the regulation was a handbrake on new homes, with the time it takes for deposits to be cleared to rise by almost 30 per cent in the last 20 years.
“When people can’t live close to their jobs or families, the economy and society suffer. We can’t solve our housing affordability problem unless we build more homes where people want to live,” he said.
The commission was tasked by Finance Minister Jim Chalmers to examine the country’s building approval process, land use, access to infrastructure and construction methods.
The government, which allocated $2 billion to states and councils for housing-related infrastructure in the budget, is more than 100,000 properties behind its target of building 1.25 million homes between mid-2024 and mid-2029.
Despite the slowdown in the country’s real estate market since February, house prices are still at record levels of unaffordability. Median home prices are still rising in some cities; Perth is up 87 per cent since 2020, and 92 per cent in Brisbane.
In its interim report, the commission said state and territory governments should allow three-storey developments on all residential land, except on heritage sites where purely environmental factors, specific hazards or conservation benefits outweigh the costs.
State and municipal planning programs will allow four- to nine-story and high-rise apartments in high-demand areas with existing transportation infrastructure or where that infrastructure can be upgraded quickly.
Minimum lot sizes on new projects should be reduced, especially in areas identified as having high demand. Commercial zones that effectively prohibit residential development should also be overhauled to allow for mixed-use areas.
Commissioner Alison Roberts said there are too many regulations that increase construction costs or reduce supply.
“Regulation is vital, especially where it ensures that buildings are built safely and to high standards. But often other rules make it illegal or unsustainable to build the kind of homes people need in the places they want to live,” he said.
“The kind of rules that prevent you from adding a granny flat to your yard or replacing a single house with townhouses are at the heart of our housing problem.”
The rise in house prices has led to a drop of almost 18 percentage points in the number of people aged 25 to 34 who own their own home between 1981 and 2021, the commission said. Australia’s mortgage debt is among the highest per capita in the developed world.
To reduce construction costs, the Commission recommends reducing or eliminating parking requirements, particularly in areas where there is evidence of non-use of off-street parking or where public transportation is concentrated.
Broad heritage lists would be replaced by more specific protections subject to cost-benefit analysis. Instead of comprehensive heritage protections, specific buildings or small areas will be listed for heritage listings, with more options for buildings to be delisted.
A constant complaint of the housing industry is the imposition of developer contribution for new projects. The Urban Development Institute of Australia estimates that developer fees can be up to 20 per cent of the cost of bringing a new site to market.
The Commission found that developer contributions should be used where there is a “close link” to the proposed development and local infrastructure needs.
Estimates of developer fees should be made before land is released or rezoned, and project owners should be given the option of making payments within a certain period of time or later in the development process.
According to the commission’s recommendations, existing restrictions in areas such as minimum housing and balcony sizes and storage requirements in apartments will be abolished. Current housing and bedroom size requirements vary between states and territories.
The commission said “state, territory and local governments should refrain from regulating observable features that do not adversely affect society.”
Restrictions on housing types will also be lifted.
Another area the commission took aim at is the time many officials take to approve new housing.
In one case, a developer spent an extra three years on the reports, awaiting approval for a 1600-lot development on Melbourne’s urban fringe, Wood said.
The commission’s final report will be published by March next year.
Cut through the noise of federal politics with news, views and expert analysis. Subscribers can sign up for our weekly Inside Politics newsletter.
Shane Wright is senior economic correspondent for The Sydney Morning Herald and The Age.Connect with: X or email.
