What if the biggest problem in Australia’s housing market isn’t greedy landlords, foreign buyers, or even population growth?
What if the real culprit is something far more mundane – the way we’ve drawn lines on maps?
A new proposal from the Grattan Institute claims we could knock more than $100,000 off the price of the typical Australian home simply by changing how we zone our suburbs.
No new taxes. No housing targets that never get met. No radical government schemes. Just smarter planning rules and permission to build the types of homes people actually want to live in.
It’s a bold idea. Some will call it visionary. Others will call it reckless.
But one thing’s for sure – if the numbers are right, this could rewrite the future of every capital city in Australia.
At its core, the Grattan proposal argues that restrictive planning laws, especially low-density zoning and complex approvals, have artificially inflated the cost of housing in Australian cities.
Garttan’s key policy recommendations:
- Allow three-storey townhouses and apartments on all residential-zoned land in capital cities.
- Permit six-storey (or higher) apartment blocks as-of-right (or via streamlined approvals) near major transit hubs and commercial centres.
- Use “complying-development” or “deemed-to-comply” pathways for developments that meet pre-set design and safety standards — avoiding slow, subjective planning approvals.
Through modelling, Grattan estimates these changes could lead to 67,000 extra homes per year nationally.
Over time this supply boost, concentrated where demand is highest, is predicted to relieve upwards pressure on prices and rents.
Why Grattan thinks this works — and it has merit
1. Our cities are under-utilised, low-density urban sprawl
Currently, approximately 80% of residential land within 30 km of Sydney's CBD — and 87% in Melbourne — is zoned for buildings of three storeys or fewer.
That helps explain why our cities occupy so much land per person, yet still struggle to stock sufficient housing.
In fact, compared with international peers (cities like Toronto, Copenhagen or Vienna), our capital cities are far less dense despite similar incomes, amenity levels and economic scale.
By allowing higher-density development in places people actually want to live - near jobs, transport, schools and existing infrastructure - we could dramatically increase the housing capacity without sprawling further outwards.
2. Supply constraints are central to affordability pressures
Grattan argues that restrictive planning regimes are a primary cause of our housing affordability crisis.
Approvals are slow, uncertain and expensive. Many potential developments are “killed by process” long before becoming homes.
By shifting the default from “no, unless specially approved” to “yes, if meets clear standards,” supply speed and volume could increase. That, in turn, directly eases price pressures.
3. Economic and social gains beyond cheaper homes
The report points out broader benefits: higher dwelling density close to jobs and amenities boosts productivity (agglomeration effects), reduces commute times, and lowers greenhouse emissions by reducing travel.
From a social equity lens: for younger Australians, essential workers, and people priced out of traditional detached houses — better access to well-located, affordable rentals or ownership options is a major win.
But let’s be real: it’s not that simple
As an investor and someone who has worked in the property markets for over three decades I see promise. But I'm also cautious.
Here are the important caveats and challenges that need to be addressed to make Grattan’s plan work.
- Infrastructure capacity - more people in established suburbs will strain existing services: roads, public transport, water, sewage, schools.
Without commensurate upgrades, quality of life could decline. This is often the unstated downside of densification plans. Some developers already warn about “devastating long-term impacts” of unchecked up-zoning. - Community resistance — “NIMBYism”. Local residents often resist density, citing character, amenity loss, privacy, congestion. Even well-designed townhouses or apartments can trigger strong backlash.
- Planning culture and bureaucracy. It’s not just zoning rules — many state and local planning regimes are geared to entrench existing neighbourhoods. Unless there's a cultural shift in how approvals are handled (towards certainties rather than discretionary assessments), developers may still face delays and compliance hurdles.
- Amenity trade-offs. Higher density doesn’t automatically mean better amenity. If not carefully managed, increased density may reduce green space, increase noise, parking pressure, and so on — which can degrade neighbourhood liveability over time.
My view (through the investor lens)
I strongly believe the Grattan proposal is one of the more sensible, evidence-based and necessary reforms we’ve seen recently.
Especially for cities like Melbourne, Sydney, Brisbane where housing affordability has been pushed to extremes by chronic undersupply in inner and middle-ring areas.
For investors seeking long-term gains, and for everyday Australians chasing homeownership or decent rentals, this kind of “gentle intensification” creates opportunity.
More supply in well-connected suburbs could restore balance between demand and prices, make middle suburbs more accessible again, and lower entry barriers for first-home buyers.
That said success hinges on execution. Without parallel investment in infrastructure, transport, local amenity, public services and thoughtful urban design, density alone could create new problems.
In short: I view Grattan’s plan as a strong foundation for a better housing system — but it must be part of a wider, coordinated strategy.
What needs to happen next
If governments – both federal and states- take this seriously, they should:
- Adopt clear “low-rise” and “mid-rise” standards. Set out exactly what qualifies for “as-of-right” development (design standards, height limits, building footprint, environmental compliance).
- Align planning reforms with infrastructure upgrades. Before massive up-zoning, fund public transport, roads, utilities, open space and local services to match expected population growth.
- Provide incentives for infill + redevelopment of underused land. Encourage conversions of old commercial sites, low-density blocks, and disused buildings into medium-density housing.
- Engage communities — but manage opposition. Education campaigns to explain benefits (affordability, shorter commutes, better access), while incorporating design guidelines to preserve liveability and amenity.
- Monitor outcomes — track density, affordability, amenity, liveability, infrastructure load. This should be data-driven, to learn and adapt over time rather than assuming “build more = good.”
Given my own stance and experience in property investment, I think this proposal reflects a rare moment where policy realism, economic logic and social need align.
If implemented well and cautiously, it could reshape our major cities for the better.
