Authors:
Anthony Jansen & Klare Zhang
May 2026
Executive Summary
“Melbourne recently won Time Out’s best city in the world and continues to be the fastest growing city in Australia. The demand for housing is incredibly strong. Although we are a pro-development Council, more than 15,000 homes have permits yet no shovels in the ground due to commercial feasibility challenges. It is critical we find a path to overcome them.”
-Deputy Lord Mayor Roshena Campbell, City of Melbourne
Victoria’s housing challenge is not simply a planning issue, but a broader delivery system constraint. Strong population growth – driven largely by migration – continues to underpin housing demand, while planning approvals and reform efforts are increasing supply capacity.
However, housing is not being delivered at the scale or diversity required. The presence of over 15,000 unacted planning permits highlights a growing disconnect between approvals and actual delivery.
While planning reform is necessary, it is not sufficient. Feasibility pressures, infrastructure constraints, construction capacity, and land fragmentation are now the primary barriers to supply.
A shift in focus is required – from facilitating approvals to enabling outcomes – through a coordinated, whole-of-system approach.
1: The Challenge: A Delivery System Challenge
Victoria continues to experience strong population growth of approximately 120,000 people per annum. While approvals are increasing and planning reform is underway, housing delivery continues to fall short of required targets.
Victoria does not have an approvals problem – it has a delivery problem.
The challenge is not the absence of policy ambition, but the gap between approved capacity and deliverable outcomes.
2: Why Planning Reform Alone Is Not Enough
Recent planning reforms, including codified pathways, VicSmart processes, reduced third-party rights and activity centre upzoning – represent a significant shift toward faster and more certain approvals. The Planning and Environment Act amendments provide a strong framework for facilitating development. However, implementation remains ongoing, and guidance will be critical to ensuring consistent outcomes. Importantly, planning is no longer the primary constraint. It is now one component of a broader delivery system.
As observed through the Development Facilitation Program, targeted intervention can improve certainty and timelines. However, planning powers remain limited and do not extend to critical external stakeholders such as infrastructure provision and referral authority requirements.
“Planning is not enough to get housing delivered but without it we get nothing.”
There is a risk of over-reliance on planning reform as the primary solution, when broader systemic issues remain unresolved.
3: The Real Constraints on Housing Delivery
Feasibility as the Dominant Constraint
Housing delivery is now primarily constrained by project feasibility. Key pressures include rising construction costs, interest rates, taxation, labour shortages, productivity constraints, and reduced purchasing capacity.
As a result, many approved projects are not proceeding, development risk has increased, and affordability outcomes are further challenged. Feasibility is no longer purely a market issue—it is a policy and system issue.
The Approval–Delivery Gap
Strong approval volumes are not translating into construction. The presence of over 15,000 unacted permits highlights a structural disconnect between planning approvals and delivery outcomes. Planning approval does not guarantee housing delivery.
Infrastructure and Coordination Constraints
Housing supply is further constrained by misalignment between planning outcomes and infrastructure provision. Key challenges include delays in infrastructure funding and delivery, servicing limitations in growth areas and activity centres, and fragmented coordination across agencies.
Effective delivery requires stronger alignment between planning authorities, infrastructure providers, referral authorities, and the private sector.
Land and Market Constraints
While planning controls enable increased density, delivery is constrained by fragmented land ownership, site consolidation challenges, and market preference for lower-risk development. This results in a gap between theoretical capacity and deliverable supply.
4: The Evolving Role of Government
The role of government is shifting from regulator to facilitator and participant in housing delivery.
Key initiatives include planning reform implementation, the Development Facilitation Program, government land activation, public-private partnerships, and intervention models observed in other jurisdictions.
Housing delivery is a multi-system coordination challenge, requiring integration across planning, infrastructure, finance, and construction.
5: The Missing Middle and Changing Housing Models
“To meet the housing targets housing choice must be an “and” not an “or” and we need more of all”
– Carolyn Viney (CEO at Assemble)
The missing middle remains a critical gap in housing supply.
Middle-ring suburbs continue to underperform, while market preference remains toward outer suburban development, despite long-term infrastructure and sustainability considerations favouring infill development.
The housing market is also evolving, with increasing reliance on diverse delivery models including Build-to-Rent, Build-to-Rent to Sell, co-living and land lease communities, modular and prefabricated construction, higher-density housing, and social and affordable housing.
There is also evidence of shifting market demand, with increasing balance between detached housing and medium-density typologies.
Planning and policy frameworks must adapt to support these emerging models
6: What Needs to Happen Next
1: Unlocking housing supply requires a coordinated, whole-of-system response, including:
2: Align planning reform with infrastructure delivery to ensure zoned capacity is serviceable.
3: Address feasibility through policy settings, including taxation, funding and risk-sharing mechanisms.
4: Strengthen cross-sector coordination between planning authorities, infrastructure providers and the private sector.
5: Unlock the missing middle through consolidation mechanisms, incentives and flexible planning controls.
6: Support emerging housing models to diversify supply and improve delivery outcomes.
7: How do we unlock housing supply?
Victoria’s housing challenge is not driven by a lack of planning reform, but by a misalignment between policy ambition and delivery capability.
While planning reforms are necessary and progressing, they must be supported by coordinated action across infrastructure, feasibility, and market conditions.
The focus must now shift from enabling approvals to enabling outcomes.
