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Victoria's Housing Statement: Exploring Challenges and Opportunities in the Decade Ahead

By Terry Montebello

• 08 December 2023 • 12 min read
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In September 2023, the Victorian Government released Victoria’s Housing Statement – The decade ahead 2024 – 2034 - in response to the affordability issues confronting those that need to find a home. The root cause was identified as housing supply.

To that end the solution identified a simple proposition: “build more homes and they’ll be more affordable”. For those in the industry who are required to pay increasing taxes, levies and charges imposed on housing development, it might be thought that the solution is over simplified. But there is no doubt that at least part of the solution is to increase the supply of housing.

To that end, the Housing Statement outlines the Herculean and ambitious target to provide 800,000 homes in a decade or 80,000 homes per year. To put that in perspective, between 2016 - 2021, Victoria added ~57,000 homes per year. The all time high number of annual dwellings was 75,000 in 2017-2018. While the Housing Statement outlined both planning and non-planning related policies, the key planning initiatives to meet these targets are arranged around four prongs:

  1. Identifying areas where more housing is to be provided, principally in activity centres and around key transport nodes. This initiative also includes unlocking government land for new housing.
  2. Streamlining planning pathways for certain types of development.
  3. Removing red tape for certain types of housing.
  4. Incentivising the provision of affordable housing as part of significant housing developments.

It is fair to say that the Department of Transport and Planning has looked across the whole spectrum of housing typology to unlock supply from so called significant housing developments with a cost of over $50 million to mum and dad lot owners by enabling so-called ‘granny flats’ in backyards. So what are the changes and where are the opportunities?

Activity Centre Planning

Ten activity centres have been identified as a focus for the provision of increased housing choice.

Broadmeadows, Camberwell Junction, Chadstone, Epping, Frankston, Moorabbin, Niddrie (Keilor Road), North Essendon, Preston (High Street) and Ringwood.

While a number of these centres already have structure plans, it is understood that the Department of Transport and Planning wants new or refreshed structure plans for each of these centres prepared in early 2024 with a view to approval by the end of 2024. Then, coupled with new planning pathways (see discussion below), it is hoped that the centres will provide housing for thousands of new dwellings.

In addition to the ten centres, the five Suburban Rail Loop stations at Cheltenham, Clayton, Monash, Glen Waverley, Burwood and Box Hill are currently subject to a process of precinct planning which is intended to be largely in place by early 2025. This will see large areas up to 1.8 km from SRL stations reimagined with higher density housing.

VC243

At the same time as the release of the Housing Statement, Amendment VC243 was approved. VC243 made some key changes to the Victorian Planning Provisions.

Small Lot Housing

Up until late September 2023, a council had the ability to include a variation to its residential zones relating to the construction or extension to a single dwelling on a lot. Instead of the ‘default’ 300 sq metres below which a planning permit was required to construct or extend a dwelling on a lot, the council could increase the lot size to up to 500 sq metres. Where a council varied the lot size a planning permit was required to construct or extend a dwelling on a lot of less than 500 sq metres.

This has been changed so that a council can no longer vary the default 300 sq metres. In all planning schemes, the construction or extension of a dwelling on a lot less than 300sq metres no longer requires a planning permit unless an overlay (e.g. for flooding, heritage, vegetation) applies.

For housing proposals on lots of 300sq metres or less, a new planning pathway has also been introduced into the VicSmart provisions. VicSmart which is essentially a “code assess” pathway, guarantees a planning permit within 10 days if you satisfy the 12 or so design standards. For those that don’t satisfy the design standards, the standard permit pathway applies, although it is not clear whether the assessment is limited to the area of non-compliance or is more broad.

Future Homes Program

For land that is either within 800 metres of a metropolitan, major or neighbourhood activity centre or a passenger railway station in Metropolitan Melbourne, or 800 metres from an activity centre outside of Metropolitan Melbourne, new clause 53.24 of the Victoria Planning Provisions (VPP) allows for apartment buildings based on licensed exemplar designs.

The land must be in a General Residential Zone and not affected by a Heritage Overlay or Neighbourhood Character Overlay.

Permit applications that must be pre-certified by referral authorities within 3 months,will then be exempt from third party notice and review rights, and exempt from planning policy and normal decision guidelines. Car parking is limited to 1 space per dwelling or less.

Essentially, Future Homes facilitates apartment buildings up to 3 storeys with around 14 apartments (as per current exemplar designs) on two standard side by side lots in the General Residential Zone close to facilities or transport.

Granny flats

The Victorian Government media release on 14 November 2023 headed “Making it Easier to Build a Granny Flat”, announced a further reform to the planning schemes “to commence next month”. According to the media release,

small second homes under 60 square metres, also known as granny flats, will no longer require a planning permit on properties 300 square metres or larger where there are no flooding or environmental overlays’ and there “will be no restrictions on how a small second home can be used – they can be used flexibly, whether it’s keeping family members closer, providing temporary housing or being rented out for additional income”.

The ‘catch’ is that the second home will need to meet ResCode (residential design code) setback,siting requirements and cannot be subdivided or separately sold off from the main home.

We need to wait and see how the reform will be implemented. Presumably the residential zones will be amended to exempt such homes from the need for a planning permit in a manner similar to Dependent Person’s Units. Given that Dependent Person’s Units have always been permitted without a planning permit, it remains to be seen whether this new initiative involves creating a separate category of land use or development, or simply amends the Dependent Person’s Unit use to remove the necessary association with the primary dwelling on the residential lot.

This might, however, be a trap for home owners by converting what is currently a capital gains tax free primary residence into a taxable asset.

Significant housing developments

Clause 53.23 promises speedier approvals for significant housing developments that have a certified cost of at least $50m in metropolitan Melbourne or $15m outside of metropolitan Melbourne.

Under this pathway, a responsible authority is not bound by minimum garden area requirements, building height or setback requirements (whether they are discretionary or mandatory) or a condition opposite a use in section 2 of a zone or zone schedule. Third party rights are removed but the views of the Office of the Victorian Government Architect must be considered as appropriate.

A key requirement of clause 53.23 is that 10% of the dwellings must be affordable housing and there must be an agreement or other mechanism in place to provide for that outcome. The responsible authority can reduce the 10% figure or dispense with the need for an agreement.

The attractiveness of the clause 53.23 pathway is not currently clear. The incentives for this pathway are:

  • increased development potential beyond specified height and setback provisions (uplift)
  • shorter approval timeframe
  • Minister as responsible authority.

Ultimately, proponents will need to assess the cost of providing 10% affordable housing against the benefits of increased development opportunities and a shorter approval time frame.

Apartment buildings permitted under this pathway also have the benefit of a broader range of land uses in residential zones thanks to a change to the residential zones to permit certain retail (but not food and drink) and office (but not medical centres) within apartment buildings in residential zones.

Clause 53.23 and Affordable housing

Given that one of the central aims of the Housing Statement is to facilitate the provision of more affordable housing, it is surprising that the provision of affordable housing has still not been mandated except via applications under clause 53.23. Therefore, the standard planning pathways will still present as attractive particularly if the timing of planning applications is not a critical matter. This is especially the case as many height controls are already discretionary and allow some scope for exceedance.

Where timing is a critical consideration and the development qualifies for clause 53.23, consideration should be given to whether the incentives under clause 53.23 are sufficient to justify the 10% provision of affordable housing. The incentives of clause 53.23 are the ability to exceed mandatory and discretionary height provisions and setbacks (i.e. get development uplift), the availability of broader land uses in residential zones and the promise of a faster decision. Logically, to commit to this pathway, a development proponent would likely want to ‘lock in’ the potential up side by identifying and securing the decision timelines and the minimum uplift required to make the proposition viable. This could be done under the section 173 agreement under which the affordable housing is to be secured and must be in place before a decision is made. However, it remains to be seen how this pathway will be managed.

Development Facilitation Program

Although not part of the Housing Statement, the Development Facilitation Unit within the Department of Transport and Planning has been playing a significant role in facilitating larger housing developments in recent times particularly where a planning scheme amendment is required via the Development Facilitation Program. The Development Facilitation Program offers proponents that qualify against certain criteria, an accelerated assessment pathway for priority projects in identified sectors. Bespoke planning pathways that comprise anything from facilitation of rezoning or the use of a Specific Control Overlay provides a potential to remove any technical and practical blockages in the planning system to enable a particular development.

One of the favourite planning tools used by Development Facilitation Unit is the Specific Control Overlay (SCO) and Incorporated Plan. This combination allows a bespoke planning permission to be crafted to authorise a development. The SCO and Incorporated Document enables the authorisation to override other inconsistent provisions in the planning scheme, so can be a potentially very powerful planning tool coupled to an expedited planning pathway.

These proposals are usually referred to a Standing Advisory Committee Process managed by Planning Panels Victoria which then report to the Minister for Planning. Importantly the Terms of Reference of the Standing Advisory Committee was amended in September of this year to remove references to the Covid related economic recovery to a more general objective to stimulate economy activity.

Back to the future

In May 2012 the then Victorian Planning System Ministerial Advisory Committee1 which was tasked with a root and branch review of the Victorian Planning System, made a number of recommendations to the then Minister for Planning including:

  • Develop a system of planning permit application streams for different land use and or development categories. These streams should align with revised notice provisions, referral authority procedures and adjusted timelines for decision making
  • Develop a Code Assess process for a variety of buildings and/or works and/or nominated subdivision proposals.

The Housing Statement breathes some life into the recommendations of this decade old report.

The Housing Statement provides some clear opportunities for the provision of housing via both new pathways, identification of ‘go-go’ type areas and clear messaging on the necessity to increase supply. Particularly for the 10 identified activity centres and more so the substantial precincts around 5 suburban loop stations, these areas will present varied opportunities for new housing supply. Coupled with the prospect of an expedited planning pathway afforded by clause 53.23 with the potential for uplift, activity centres are likely to be even stronger candidates for enhancing the supply side. Developers will need to carefully negotiate the potential costs of these processes to secure the claimed benefits via the required section 173 agreement.

If the Future Homes program has its repertoire of exemplar designs increased it will also present valuable new opportunities. The ability to secure planning approval for 3 storey apartment buildings in the identified areas around many activity centres and train stations without notification requirements, means that there are now large areas of Melbourne and regional Victoria where the planning pathway for this typology of housing is considerably more simple, at least in theory.

Reform

An important cog in the wheel of reform will be a review of the Planning and Environment Act 1987. The Town and Country Planning Act 1961 was 26 years old when it was replaced by the Planning and Environment Act 1987. That Act is now 36 years old so a substantial review is timely. The review will likely visit the decision making processes associated with the standard planning permit pathway and focus on timelines associated with decision making as a means of unlocking supply.

Read more from The Lot - December 2023 Edition

[1] The author was a member of this Advisory Committee.

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