Zoning Overhaul Could Slash Australian Home Prices by $100,000, Report Finds
A dramatic overhaul of zoning regulations in Australia’s capital cities could lead to a significant reduction in housing costs, potentially saving buyers over $100,000 over a decade, according to a new analysis from the Grattan Institute. The report calls for an end to restrictive zoning laws and a shift towards allowing greater density – specifically, three-storey townhouses and apartments – across all residential land.
The independent thinktank’s findings come as Australia grapples with a severe housing affordability crisis, fueled by a chronic undersupply of homes in desirable locations. The report argues that embracing increased density, particularly apartment and townhouse living, is crucial to addressing the issue and providing more accessible housing options, especially for younger generations.
“For decades, Australia has failed to build enough homes in the places that people most want to live,” stated Brendan Coates, director of the Grattan Institute’s housing and economic security program. “Now we have a housing affordability crisis that is dividing families and communities and robbing young Australians of their best chance in life.”
The proposed reforms represent what the Grattan Institute terms a “concerted policy assault on the housing crisis.” By easing zoning restrictions, the report estimates that over 1 million new homes could be unlocked in Sydney alone. Evidence from Auckland, New Zealand, is cited as a successful example of how relaxed planning controls can lead to increased housing supply and lower prices.
Grattan’s modeling suggests that these reforms could boost housing construction across Australia by up to 67,000 homes annually, exceeding the 174,300 dwellings built in the year ending June. This increased supply could translate to a 12% reduction in rents and a decrease of more than $100,000 in the median home price over the next decade – with potentially even greater savings in the long term.
Currently, restrictive zoning laws severely limit density in many Australian cities. The report highlights that approximately 80% of residential land within 30 kilometers of Sydney’s central business district is restricted to housing of three stories or fewer. A similar situation exists in Melbourne, where 87% of residential land faces the same limitation. Brisbane, Perth, and Adelaide also exhibit high percentages of land zoned for only two stories or less.
This restrictive zoning contributes to Australia’s status as having some of the least densely populated cities in the world. The report draws comparisons to cities like Toronto and Los Angeles, suggesting that increasing density in the inner 15 kilometers of Sydney and Melbourne could yield an additional 250,000 and 431,000 homes, respectively. “
Michael Fotheringham, managing director of the Australian Housing and Urban Research Institute, emphasized the economic benefits of increased density. “Australia should aim to get off the bottom of the table in urban density,” he said, adding that more affordable and well-located homes would be particularly beneficial for essential workers like nurses.
Recent reforms in Victoria, spearheaded by Premier Jacinta Allan, represent a step in the right direction, curbing the right to object to new building projects. However, Coates argues that these changes, while welcome, do not go far enough.
The Grattan report advocates for “upzoning” land around transport hubs to allow for higher-density living of at least six stories. It also calls for a review of heritage protections that currently restrict development in many inner-city areas. Furthermore, the report recommends streamlining planning application processes, allowing developments of up to three stories that meet clear standards to proceed without a permit, and implementing “deemed-to-comply” pathways for larger developments that also adhere to pre-set standards.
A key challenge identified in Sydney is the city’s planning system, which Coates describes as operating on a “no” by default basis. Addressing this systemic issue is seen as critical to unlocking much-needed housing supply. The proposed reforms aim to create a more streamlined and predictable development process, encouraging the construction of a wider range of housing options to meet the growing demand.
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