Most Australian cities make it hard to build homes, but Melbourne is bucking the trend

Melbourne is the only Australian capital that allows medium density housing to be built on most of its residential land, according to a new study of zoning restrictions from a pro-housing collective.

The Victorian capital, where housing is also more affordable than in the other five major capitals, is the clear outlier nearly four years on from a nationwide pledge to wind back planning restrictions to ease the housing crisis.

A comprehensive "atlas" of Australian zoning laws, compiled by the "YIMBY" group and published for free online, tracks the development rules for every residential site in Australia's eight capital cities.

A site is deemed "restricted" if it is capped at two storeys, heritage protected, zoned for detached housing only (preventing townhouses), or otherwise designated low density. Melbourne is by far the least restricted, with 45 per cent of its residential sites.

Every other capital is dramatically more restricted. Hobart has constraints on 97 per cent of its land, Adelaide 92 per cent, Darwin 88 per cent, Perth 87 per cent, Brisbane 86 per cent, Sydney 81 per cent and Canberra 74 per cent.

"The fact that most of the residential land in our cities is locked up under highly restricted zoning makes sense of why we can't build the homes we need," co-author Jonathan O'Brien said.

"We've systematically made it illegal to build them."

Housing target not on track, but some signs of progress

In a landmark housing agreement struck in 2022 and 2023, Australia's federal, state and territory governments signed onto the view prosecuted by leading economists that the dominant cause of the housing crisis was a lack of supply, held back by zoning laws.

Governments agreed to a target of 1.2 million new homes over five years, starting in mid-2024 and made up of individual targets for each state and territory. Governments pledged to review their zoning laws and have made varying progress towards doing so.

The target is not on track, set to reach roughly 1 million. No individual jurisdiction is on track for its own target either, although Victoria, Western Australia and the ACT are close. All other jurisdictions are at least a year behind, some several years.

Share of target builtEstimated completionVictoria23%September 2029Aus Capital Territory23%September 2029Western Australia22%September 2029South Australia19%September 2030Queensland17%September 2030New South Wales15%June 2031Tasmania12%September 2033Northern Territory5%After 2034 (not specified)

Note: the 1.2 million new homes target window began in June 2024 and will end in June 2029.

The zoning atlas, which is the first summary of its kind of Australia's notorious web of overlapping state, territory and local zoning laws, can also be used to assess how much progress each government has made on the promised reforms.

Mr O'Brien said the ACT had made the most progress, with its recent "Missing Middle" rezoning plan reducing Canberra's restriction score from 88 per cent to 74 per cent.

Analysis provided with the ABC using data from the atlas showed that Victoria and New South Wales had made more modest progress, improving their scores by three and two percentage points, respectively.

Economist Peter Tulip from the Centre for Independent Studies, a centre-right think tank, said those cities had the longest-standing affordability problems but were now "leading the country in terms of zoning reform," especially Melbourne.

"As more and more density is supplied in Melbourne, it has moved from being the second-most expensive city in the country to being passed by Brisbane, Perth and Adelaide," he said, an assessment supported by the latest Cotality data.

"It's too early yet to see the latest reforms translated into building numbers, as it can take a year or two or more to plan a block of flats … but I expect to see a sizeable step-up in construction over the next year," he told the ABC.

The progress has been less pronounced in Australia's other capitals, where affordability woes have not been as longstanding as in Melbourne and Sydney but where house prices are now growing faster.

"We focus a lot on Melbourne and Sydney, but it's those other cities that are hurting right now," Mr O'Brien said. His group advocates making townhouses or mid-rise developments legal across Australia, similar to a proposal from the Grattan Institute.

"That could unlock millions of new homes across every one of our capital cities … You have to be broad with 'gentle' density to get results," he said.

Mr Tulip, who is also a former senior researcher at the Reserve Bank, warned those cities could "go the way of Sydney" if they did not remove restrictions.

"They're changing from small cities to big cities … They've got the chance to allow extra building now to avoid the disaster that Sydney has imposed on itself, but that requires a clear change in policy,"

he said.

How your city compares

The atlas highlights differences in the kinds of zoning restrictions that apply in each city, and also the differences within cities.

In Adelaide and Hobart, the main restriction is the widespread use of two-storey limits. The vast majority of Hobart (97 per cent) is limited in this way, with almost the only exception near Franklin Wharf.

The same is true for 91 per cent of residential land within 20 kilometres of Adelaide's centre, with the city and a handful of northern suburbs such as Mawson Lakes and Davoren Park among the only exceptions.

Brisbane and Darwin also have widespread two-storey limits, but are distinctive for their requirement for detached houses to be built, preventing townhouses on 66 per cent of Brisbane's land and 73 per cent of Darwin's.

Canberra does not prevent townhouses, but applies low-density zoning to three-quarters of its residential land, limiting the number of homes per lot. Its recent reforms have "upzoned" large sections of Belconnen, Gungahlin, Woden and the inner north.

CityTotal restrictedTwo-storey capLow density zoneDetached onlyHeritage protectedHobart97971403Adelaide92913409Darwin888873730Perth87865403Brisbane868573661Sydney817769713Canberra74747402Melbourne454036211

Melbourne and Sydney are distinguished by their use of heritage protections, which apply to 11 per cent of residential land in Melbourne and 13 per cent in Sydney. These figures are small, but are highly concentrated in desirable, inner-city areas.

In Melbourne, for example, large swathes of Fitzroy, Carlton, Richmond, South Melbourne and St Kilda have heritage overlays, constricting the capacity to densify. The Boroondara and Yarra councils in isolation are more restricted than all of Sydney.

In Sydney, which is the only city to apply all four types of restrictions on a wide scale, there are also strong geographical variations, with affluent northern councils including Ku-ring-gai, Hornsby and Northern Beaches restricting almost all of their land.

By contrast, while Perth has a two-storey cap on 86 per cent of its land, the uncapped land is concentrated closer to the centre of the city, including in the Perth, Vincent and Subiaco council areas, although wealthier councils are still highly restricted.

Industry says zoning one of many barriers

The YIMBY group, a non-profit which says it does not accept property industry money, styles itself as a grassroots agitator against so-called "NIMBYs", a term sometimes applied disapprovingly to those who oppose development in their suburbs.

Mr Tulip, who is also a strident critic of NIMBYs, said obstructionist councils were behaving "terribly" and that state governments should take a more interventionist approach against local governments who do not meet housing targets.

"Australia has a housing crisis, which means every neighbourhood needs to allow more building. Some councils are doing their bit, others are not … If that is obstructionism, you then want the state government to override local controls."

But while most housing industry groups have welcomed the national aspiration to boost the supply of housing, some also warn that zoning restrictions are just the first of many hurdles to achieving this.

Matthew Kandelaars, who leads policy and advocacy for the Property Council, the peak lobby for builders, said the ambition to loosen zoning was "welcome and ambitious" but that "permits in supply cabinets" would not be enough to get houses built.

"The [target] has shifted the conversation from whether we build homes to how quickly we deliver them … but there are still significant feasibility challenges,"

he said.

"An approval is a legal permission to build, but it doesn't mean you have the financial capacity to build … We've been in a high-cost environment for a number of years now, and on top of that you have skill shortages … We now need to focus on those levers."

Mr Kandelaars said an array of fees and regulatory hoops were also affecting viability. Analysis from one developer seen by the ABC is that a Melbourne greenfield site would take 28 months after approval to be construction-ready.

That delay is also a business cost, compounded by the more than a dozen fees and levies and taxes developers must pay during the construction process. The Property Council estimates this accounts for 40 per cent of a new home's cost.

The federal government has recently moved to reduce these costs and has begun a process to work with the industry to simplify the construction process and boost productivity in the construction sector.

It also committed $2 billion in the May budget towards a local infrastructure fund to build sewerage and water connections and access roads to unlock new housing, and is negotiating deals with state and territory governments to unlock specific sites.

Though the Property Council is a strident critic of the government's property tax changes, Mr Kandelaars welcomed the local infrastructure fund, as did the YIMBY group and Mr Tulip.

Nicole Bennetts of the Planning Industry of Australia, which represents urban planners, also welcomed that investment and the broader national target, saying it was "the first time in a long time we've seen all governments working towards a common goal".

But she said urban planners should be used more frequently to create cohesive plans including infrastructure and amenities, which she said could "bring people on the journey" and minimise community opposition.

"You can't live in a zoning map, you can only live in a home," she said. "Success comes when all the parts work together."

Ms Bennetts said a national data set was needed to understand how many homes had been approved but had not proceeded because of other barriers, suggesting this was a "huge pipeline".

Mr Tulip said the government should instead let the private sector work out where homes should be built, rejecting suggestions by some progressives that governments should build homes themselves or take an active role in planning.

"The private sector is busting to provide more housing, it just needs the government to get out of the way," he said.