City of Melbourne adopts policy for mandatory inclusionary zoning as mechanism to deliver affordable housing

City of Melbourne adopts policy for mandatory inclusionary zoning as mechanism to deliver affordable housing
Alastair TaylorNovember 12, 2019

On Tuesday night (12th of November), the City of Melbourne's Future Melbourne committee endorsed the council's submission to the Victorian Government's Ministerial Advisory Committee on Planning Mechanisms for Affordable Housing, effectively making clear the council supports a mandatory and state-wide inclusionary zoning mechanism to increase affordable housing across the state.

The Advisory Committee was appointed in September, has been set up to operate for six months and, will deliver its final report containing advice to the Planning Minister on affordable housing models and options within three months of its initial meeting.

City of Melbourne's submission notes it is developing its own Affordable Housing Strategy that is set to build on its Homes for People: Housing Strategy 2014-2018.  Other research obtained by the City of Melbourne, namely a Housing Needs Analysis, found that there is a current shortfall of at least 5500 affordable rental homes in the municipality and that number is anticipated to increase to 23,200 by 2036.

The council's now-adopted report states,

"Current mechanisms in the Melbourne Planning Scheme which seek to encourage affordable housing are yet to deliver any affordable homes.  No affordable homes have been negotiated in private developments in the City of Melbourne since legislative changes to the Act. State and federal government programs are anticipated to provide 250 affordable homes in the City of Melbourne by 2036 [and] the introduction of a mechanism to the Victorian planning system requiring affordable housing will ensure a consistent supply."

The City of Melbourne’s submission to the Ministerial Advisory Committee recommends there is an introduction of state-wide mandatory inclusionary zoning, at a rate to be determined by modelling, with a cash-in-lieu option, complemented by:

  • Flexibility for local governments to increase the state-wide minimum requirement where there is strategic justification and evidence of need;
  • A voluntary uplift incentive that can be applied in strategic development areas to encourage a higher provision beyond the state-wide minimum or any local government-specific minimum; 
  • A commitment from the three tiers of government to work in partnership to create a holistic and integrated approach to ensure that policy, funding, incentives and governance is effective. 

SGS Economics and Planning was commissioned to undertake a Housing Needs Analysis that looked at current and future demand for affordable rental housing within the City of Melbourne, the inner Melbourne and metropolitan Melbourne.

For inner-Melbourne, the analysis found a shortfall of 29,500 affordable and social housing dwellings in the Inner Metro Partnership region (which includes the Cities of Melbourne, Port Phillip and Yarra).  Likewise, for metropolitan Melbourne, the analysis found 231,250 households are "currently in need of affordable and social housing," accounting for 13% of all households.

The council's submission, through research performed by SGS, references other jurisdiction's inclusionary zoning implementations including in South Australia, New South Wales, London and California.  In San Francisco for example, new private housing developments with 10 or more housing units are to include affordable housing units or pay a fee in lieu.

Non-residential development mechanisms to finance affordable housing are also cited - for instance in Boston - Melbourne's sister-city - approximately 5000 affordable units were financed through a levy of $8 per square foot on new commercial development that generated $45 million USD between 1986 and 2000.

The Advisory Committee's final report is set to be delivered by early December 2019.

To read the City of Melbourne's Ministerial Advisory Committee submission as well as its supporting evidence, see

Lead image: Artist impression of the Boyd development, which includes affordable housing via City of Melbourne

Alastair Taylor

Alastair Taylor is a co-founder of Now a freelance writer, Alastair focuses on the intersection of public transport, public policy and related impacts on medium and high-density development.

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