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Victoria's Housing Policy Reforms and Construction Progress Examined

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Victoria's Housing Reforms: Progress and Scrutiny

The Victorian government has implemented a series of major planning reforms aimed at increasing housing supply, with progress on construction and the viability of developments under ongoing scrutiny. The state's performance is also set against a national backdrop of housing construction falling behind government targets.

Summary of Key Reforms

The Allan government’s housing strategy, centered on the 2023 Housing Statement, includes two primary mechanisms to accelerate development:

  • The Development Facilitation Program (DFP), which fast-tracks approvals for specific projects by bypassing local councils and third-party appeals.
  • The Activity Centres Program, which rezones 60 transport and commercial hubs across inner and middle-ring Melbourne for higher-density housing, with final planning controls for 35 of these centres now released.

These reforms occur alongside political debate, with the state opposition proposing an alternative plan focused on expanding high-density development in inner Melbourne and accelerating growth on the urban fringe.

Progress of Fast-Tracked Development Program

Internal government figures indicate limited construction outcomes to date from the DFP, a program branded for "shovel ready" projects.

  • Since the 2023 Housing Statement, only six homes have been completed under DFP pathways.
  • Construction has commenced on 12 projects, totaling 2,471 homes.
  • Approximately 75% of the 9,524 homes approved through the program (7,053 units) have not started construction.
  • Department officials now anticipate an average lead time of at least two years between planning approval and construction commencement for significant residential projects.

A spokeswoman for Planning Minister Sonya Kilkenny stated that thousands of homes fast-tracked through the DFP would otherwise have faced prolonged delays at council or the Victorian Civil and Administrative Tribunal (VCAT).

Reported Challenges and Perspectives:

  • Critics, including Greens housing spokeswoman Gabrielle de Vietri, argue the program has not yielded significant results despite circumventing usual planning checks.
  • Industry representatives, such as the Property Council of Australia's Victorian executive director Cath Evans, note that while the DFP aids planning, post-permit requirements and delays from referral agencies like Melbourne Water continue to slow projects.

Finalization of Activity Centre Planning Controls

The government has finalized planning controls for 25 designated activity centres, establishing new building height limits and development boundaries.

  • Maximum height limits of up to 20 storeys are permitted in core areas near transport hubs in suburbs including Brunswick and Coburg.
  • Other areas, such as parts of Oakleigh, Middle Brighton, and Kew Junction, have maximum limits between 12 and 16 storeys.
  • Developments conforming to the rules within these zones will be "deemed to comply," bypassing VCAT review and requiring only council approval.
  • The government estimates these "Train and Tram Zones" will create capacity for over 300,000 homes by 2051.

Political and Community Response:

  • Premier Jacinta Allan stated the changes are intended to reduce delays, establish clear rules, and enable more housing in well-connected suburbs.
  • Opposition Leader Jess Wilson has stated that if elected, the Coalition would repeal the state-mandated activity centres and restore planning powers to local councils.
  • Planning Minister Sonya Kilkenny contends the opposition's proposal would result in fewer homes being built in Melbourne.

Analysis of Development Viability and Historical Context

Analysis from the Grattan Institute suggests commercial viability is a significant challenge for the activity centres program, estimating only about 110,000 of the planned 600,000-home capacity are currently feasible to build, citing increased construction costs and variable demand.

Long-Term Housing Trends:

  • Confidential briefings to the incoming Andrews government in 2014 warned of the need for planning reforms to increase housing in established suburbs.
  • More than a decade later, the government is not meeting its objective for 70% of new housing to be built in existing neighborhoods. Australian Bureau of Statistics figures show only half of home building approvals since the 2023 Housing Statement have been in inner and middle areas.
  • Property researcher Angie Zigomanis notes development remains concentrated in growth areas where land is more available and infrastructure is pre-planned, while infill housing faces challenges like fragmented land ownership and rising costs.

Local Government and Market Factors

Melbourne councils have disputed being the primary cause of housing delays, citing market conditions and state-level bottlenecks.

  • Data from councils shows a gap between approved projects and completed construction. For example, the City of Maribyrnong reported 84% of dwellings approved between 2023 and 2024 had not started construction.
  • Councils and the Municipal Association of Victoria cite factors including increased construction costs, financing challenges, interest rates, and land banking.
  • The state government maintains its planning overhaul is necessary to cut red tape and enable more homes.

State and National Construction Data

Victoria's overall home construction has fallen short of its stated targets.

  • The state government has a target of building 800,000 new homes over a decade (80,000 per year). In the year to September 2025, 54,323 homes were completed.
  • Despite this shortfall, Victoria continues to build more homes than most other states, completing 10,000 more than New South Wales in the year to September 2025.
  • Nationally, Australia is 77,500 homes behind the federal government's five-year target of 1.2 million new homes, 18 months into the plan, according to data on construction commencements.

Alternative Political Proposals

The Victorian Liberal Coalition has announced a competing housing plan.

  • The proposal would expand the Capital City Zone to include inner-city areas like Southbank, Parkville, and Fishermans Bend to allow for higher-density development, including skyscrapers.
  • It would remove state-imposed high-density overlays in the 60 suburban activity centres, returning planning control to local communities.
  • The plan also aims to accelerate the delivery of homes in outer suburban growth areas.
  • A government spokeswoman stated this plan would cut 300,000 new homes from activity centres and return power to "council blockers."

Regional Development Challenges

Similar challenges are evident in regional Victoria. In Geelong, civic and business leaders are proposing a special economic zone with tax incentives to stimulate development in the CBD, which they say has low residential density and empty shopfronts despite rapid growth in outer suburbs.