‘Apartments for the rich’: Developments fast-tracked with no affordable housing

Fast-track planning powers meant to deliver developments that include affordable housing are being used to build luxury properties as developers sidestep requirements to provide cheaper apartments in some new projects.

Critics say the Victorian government’s Development Facilitation Program (DFP) has failed to deliver enough projects with attainable homes, pointing to a loophole that allows developers to make a cash payment instead of providing a proportion of affordable homes.

Real estate listings from recently approved developments through the program reveal some apartments are being sold for millions of dollars – even achieving suburb records – and marketed as luxury properties. Experts say these high-end projects are the most likely to be financially viable, as their profit margins can absorb the cost of affordable housing provisions.

Expanded in September 2023 as a key part of the government’s Housing Statement, the DFP was designed to deliver Victoria with more affordable housing. Under the program, the planning minister can fast-track residential projects – which cannot be contested by communities or councils at VCAT – on the condition that at least 10 per cent of new homes are affordable.

However, a planning provision allows developers to bypass this requirement by paying a 3 per cent levy on the project’s value into a government housing fund.

David Hayward, an emeritus professor of planning and economics at RMIT University, believes the payment option is being used as a way of getting around the policy’s core promise. “I have no doubt many would much prefer paying this than including affordable housing,” he said.

Among the DFP developments recommended for approval is a 134-home apartment complex by the Yarra on Victoria Street, Abbotsford. It will have no affordable housing; the developers will instead pay the 3 per cent levy to the housing fund.

Yarra City Council Mayor Stephen Jolly said the provision showed developers could use the program to create “wall-to-wall expensive apartments for the rich”.

“Let’s let young people, people on minimum wages, have a taste of apartments in these areas, not just these really expensive apartments,” Jolly said.

“No amount of tricky, shifty little alternatives [to mandated affordable housing] like 3 per cent levy is going to get around the fact we’re going to get a product that’s going to be apartments for rich people, and your average person, the people who keep the local economy alive, they are the ones who are missing out.”

He also expressed scepticism about where the levy funds would end up. “God knows where it will go, and if it’s ever going to make its way back to inner-city housing and people that have been priced out of the area,” he said.

In Brunswick, development Prince and Parade, which was approved through the DFP last year, is now under construction, with homes selling off the plan.

The 166 apartments in the complex, which have between one and four bedrooms, have been advertised from $955,000 to $4.1 million.

Listings website apartments.com.au – which specialises in off-the-plan properties – said a $4.4 million sale at the development recently broke the local price record for any house.

The state government said the development would be required to include either 10 per cent affordable housing, or a cash contribution to a social housing fund – but did not say which one would apply.

The DFP has fast-tracked apartments that include a majority or even all affordable housing, including a 17-storey apartment block in Greensborough that has been subsidised through the Housing Australia Future Fund.

The government said about 1300 affordable homes had been approved through the DFP so far.

But according to property developer Maxwell Shifman, a former president of the Urban Development Institute of Australia, the affordability criteria perversely incentivised high-end projects because their larger profit margins could more easily absorb the 3 per cent levy or the cost of including affordable homes.

He argued the program was sidelining the “missing middle” of housing supply.

“The Melbourne apartment market is being dominated by either high-end, owner-occupier projects or developments subsided by social housing,” Shifman said. “There is no mid-market for apartments at the moment.”

Shifman said adding costs such as the affordable housing levy was “another barrier from a feasibility perspective” to getting projects off the ground, and would likely result in less overall housing supply, not more.

Shifman said the DFP should be expanded to remove affordability criteria altogether and instead prioritise approvals for large-scale projects that deliver more homes.

Hayward said the program was not leading to a meaningful increase in housing stock to meet the government’s target of 80,000 new homes a year – a figure he believes is too high and not justified by evidence.

“I don’t think [the DFP] has led to an overall uplift in housing, and we’re nowhere near meeting housing targets,” he said. “All we’re getting is a redistribution of low-level activity towards where regulation is less onerous.”

He said the housing crisis should be tackled by direct government intervention – for example, building social and affordable housing – rather than by changing planning laws.

The Property Council’s Victorian chief executive, Cath Evans, said while the industry welcomed efforts to speed up approvals, deeper reform was needed.

“While the DFP can help fast-track some projects, the program is limited in compelling other referral authorities to play their part,” she said.

“This requires deeper planning system reform to resolve structural issues that stand in the way of outcomes like more affordable housing.

“We would welcome further initiatives under the DFP such as including subdivision applications, but the most effective way of making housing more affordable is to reduce the significant tax burden on projects through lower land taxes, infrastructure charges and stamp duty.”

A state government spokesperson said since the DFP was expanded for residential use in 2023, the government had approved more than 5000 homes, with 27 per cent of those homes designated social or affordable housing.

The spokesperson did not say how much money the government had received for affordable housing funds through the program.

A spokesperson for Mirvac, the developer of Park and Parade, said the company supported initiatives that help deliver a diverse range of housing and is committed to providing affordable housing in line with the relevant planning approvals.

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