The crisis-driven plan to build 800,000 new homes – and reinvent Melbourne

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Melbourne’s hulking public housing towers will be torn down and replaced over coming decades as the city’s face is remade in response to a housing crisis, but experts warn councils need to be pushed to allow more densely built neighbourhoods to rapidly address the shortage of available homes.

City office blocks will be transformed into apartments and government land will be sold off as part of the state government’s ambitious plan to build 800,000 homes over the next 10 years. Renters’ rights will also be strengthened in the overhaul, as Victoria’s population jumps by 126,000 people every year.

Premier Daniel Andrews described the housing statement as “the most comprehensive shake-up of one of the most important policy areas in decades”, but the government could intervene even further to achieve its aim of building more homes closer to the city.

“What’s more important than somewhere to live?” Andrews said on Wednesday. “Nothing is. We know that we’re simply not building enough houses right now.”

In its long-awaited housing statement, the state stopped short of taking planning powers from councils or introducing enforceable density limits, prompting concerns from planning experts that the government’s goals will be difficult to achieve.

Instead, rewriting the state’s planning laws and adding housing targets for councils have been pushed out for further consultation, while other measures roll out immediately.

Andrews on Wednesday announced 30 new initiatives as part of the policy reveal.

They included knocking down Melbourne’s 44 public housing towers and replacing them with mixed public and private housing, putting an extra 1000 people into public homes and creating space for 19,000 people in private homes to be sold off.

The first three towers, in Flemington and North Melbourne, will be knocked down and redeveloped by 2031, with the remaining 41 to be rebuilt over coming decades.

Approvals for significant housing developments – worth at least $50 million in Melbourne and $15 million in regional Victoria – will be streamlined if they deliver at least 10 per cent affordable housing, including build-to-rent projects.

A public housing tower in Alfred Street, North Melbourne.Credit: Chris Hopkins

Planning Minister Sonya Kilkenny will immediately become the decision-maker for projects that meet these criteria, with the faster approvals claimed to cut the process from 12 months to four months.

In an Australian first, Victoria will introduce a tax on short-stay accommodation, and small second homes such as granny flats will no longer need a planning permit if they are below 60 square metres.

The government has pledged to create 210,000 new homes across activity centres including Broadmeadows and Ringwood, and priority precincts such as Fishermans Bend and Arden.

Although the housing statement outlines significant incentives for faster building, it does not detail how goals will be enforced. The policy instead said the government would update its 30-year strategy, Plan Melbourne, and this would include housing targets for each council area.

The Andrews government will consult about major changes to the state’s planning laws, with industry figures telling this masthead the state was moving towards a model where decisions in key precincts would be made by a lead minister or metropolitan planning boards.

This would require further talks amid concerns of a backlash in areas where councils were sidelined.

The housing statement also commits to banning all rental bidding and features a simplified process to resolve disputes between tenants and landlords. Notices to vacate or increase rent will be extended from a minimum of 60 days to 90.

The Grattan Institute’s Brendan Coates said that in avoiding taking all planning powers off councils, the state government would be “hard-pressed” to reach 800,000 homes in a decade.

“They’ve chosen not to take on councils and, in the absence of that … it’s not clear you are getting 800,000 homes,” he said. “Taken as a whole, it’s a good step in the right direction, but it won’t fulfil the ambition the premier has.”

Australian Bureau of Statistics figures, when seasonally adjusted, show about 59,000 new dwellings were completed in Victoria in the year to March.

Coates also questioned the location of 10 activity centres around Melbourne, in which the government planned to build 60,000 additional homes.

“The activity centres are a long way out of the city and not necessarily in job-rich areas,” he said.

“It doesn’t shake the city as much as expected, which means housing affordability might get worse.”

Swinburne University’s Dr Stephen Glackin, who specialises in urban planning and density, said the state needed to step in if it wanted to make inner-Melbourne suburbs more dense.

He said in Brisbane, where a larger council oversees much of the city, priority development areas had specific targets for housing, and the Andrews government could adopt a similar model.

“Councils are too close to their constituents,” Glackin said. “To achieve this [density] in any major city, you need a larger body overseeing the process.”

When asked if Victoria could build 80,000 homes a year, he said it would be difficult to surpass existing levels given there were not enough workers and builders were under financial pressure.

Infrastructure Victoria chief executive Jonathan Spear said that earlier this year the agency had recommended housing targets for council areas as part of its report on providing more housing choices.

“We say this should be done in collaboration with councils,” he said. “Then you can prioritise the right areas in terms of transport, infrastructure and amenity.”

Spear said these targets needed to be accompanied by incentives such as streamlining approvals for well-designed developments and expanding use of zoning for low-rise apartments.

Adding to the state’s social housing stock, including redeveloping dilapidated public housing, was also a key recommendation in Infrastructure Victoria’s 30-year strategy.

Spear said other areas of reform yet to be addressed were changes to developer contributions towards infrastructure costs and removing the first home buyers’ grant.

The government will also sell 45 unidentified parcels of government land to property developers for up to 9000 additional homes, with 10 per cent allocated as affordable housing.

The tax on short-stay properties including Airbnb will be a 7.5 per cent levy on revenue, usurping local council fees for short-term rentals.

Andrews said money raised from the tax on the state’s 36,000 short-term rentals would be reinvested in social housing.

A short-term stay levy will be imposed, taking in 7.5 per cent of revenue from platforms such as Airbnb and Stayz.Credit: Elke Metizel

The government estimates the levy, which Andrews described as a modest charge, would raise $70 million a year after it is introduced on January 1, 2025.

Other cities around the world already tax short-term rentals. Holidaymakers in California are slugged with a 14 per cent levy, and the charge is 6 per cent in Toronto.

Victoria Tourism Industry Council chief executive Felicia Mariani said the tax could not come at a worse time, with spending in regional Victoria falling by more than 20 per cent in May and 16 per cent in June, compared with the same times last year.

“We can’t afford another handbrake on tourism. Our industry has not fully recovered from three years of fires, floods and COVID, and the latest data shows regional tourism spending is crashing compared to the same period last year,” Mariani said.

The change will require the support of the Greens and at least two crossbench MPs to pass in the upper house, where the government does not have a majority.

Victorian Greens leader Samantha Ratnam said the party was concerned the levy would not go far enough. “It won’t release the rentals we need onto the long term rental market,” she said.

The government will also accept all 35 recommendations from a recent parliamentary inquiry on improving apartment design standards, which will mean new properties need more natural light, better storage and more family-friendly designs.

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