City of Melbourne’s draft affordable housing strategy (March 2030) – the move to a mandatory inclusionary zone

14 May 2020

City of Melbourne’s draft affordable housing strategy (March 2030)

The City of Melbourne published the City of Melbourne’s draft affordable housing strategy (March 2030) (Strategy) in March 2020, as a mechanism to address the municipality’s growing affordable housing crisis and the current shortfall of affordable homes.

The Strategy is significant as it sets out a number of priorities to increase the supply of affordable housing in the City of Melbourne, including advocating for a mandatory inclusionary zone to be introduced into the Melbourne Planning Scheme (Scheme).

What is the affordable housing crisis?

The City of Melbourne is in the midst of an affordable housing crisis, with 1,725 people said to be experiencing homelessness, and a shortfall of 5,500 safe and affordable rental homes and emergency accommodation for people on moderate, low, or very low incomes. This is expected to increase to a shortfall of 27,100 homes in 2030.

The Strategy identifies that when people on moderate, low or very low incomes chose to live in the municipality of Melbourne, they typically need to spend more than 30 per cent of their gross household income on housing.

The Strategy also outlines a number of factors that have resulted in the shortfall of housing, including a rapidly growing population, rent increasing faster than wages and insufficient investments in social and affordable housing over many years.

What is the current response to the affordable housing crisis?

A number of initiatives are currently in place, including an uplift incentive which is created by offering additional development rights where affordable housing or other community benefit is provided, as well as voluntary agreements for the provision of housing.

However, the Strategy has identified that the current uplift incentives are inconsistent and are not delivering affordable housing. The opportunities to deliver affordable, publicly owned land has also been ad hoc and provided limited stock.

Changes to the Planning and Environment Act 1987 relating to voluntary agreements have had limited impact on the delivery of affordable housing. The Strategy notes that affordable housing targets for new developments are not being met due to the voluntary nature of affordable housing agreements.

The Strategy’s solutions to address the crisis

To address the shortfall in affordable housing, the Strategy provides that action is required from a range of government, non-for-profit and market sectors.

The Strategy establishes the City of Melbourne’s policy and action for the next ten years with a focus on increasing the supply of affordable rental housing in the City of Melbourne which can be developed and managed through community housing organisations.

The Strategy sets out the following priorities to achieve this:

  • Advocate for mandatory inclusionary zoning;
  • Develop affordable rental housing on City of Melbourne Land;
  • Strengthen internal affordable housing processes; and
  • Advocate and partner for affordable housing.

The mandatory inclusionary zoning seeks to implement a planning control which requires a percentage of affordable dwellings to be provided with a new development. Where a direct contribution by the developer is not appropriate, the zoning will require a financial contribution toward the delivery of affordable housing in lieu of providing dwellings.

This contribution is proposed to be calculated as an equivalent percentage of the net developable floor area and transferred at a minimum cost to a community housing organisation.


The Strategy expects the introduction of mandatory inclusionary zoning to enable 4,980 affordable homes to be built in the city of Melbourne by 2036.

In terms of addressing development feasibility, the Strategy suggests that the residual land value will decrease, as over time, the land will absorb the cost of affordable housing through a reduction in its value.

However, the introduction of the mandatory inclusionary zoning will require adoption by the Victorian Government. On this basis, while the City of Melbourne can advocate for this change, it is not able to implement the mandatory inclusionary zoning independent of the Victorian Government.

How can we help you?

James Lofting and HWL Ebsworth Lawyers have extensive experience advising and representing developers, registered housing providers and local government in relation to affordable housing. Please do not hesitate to contact us to discuss the implications of this policy for your potential matter.

This article was written by James Lofting, Partner and Disha Kamal, Solicitor.

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