The ‘gentle’ yet profitable solution to Melbourne’s housing crisis

Townhouses and terraces could be the quiet, affordable and profitable solution to increasing density in Melbourne’s inner-urban ring, experts and developers say.

They are already popular with Victorians. Over the past 35 years, approvals for semis in the state have trended strongly upward, eclipsing Queensland and NSW, analysis of official figures by this masthead shows.

State government reforms to the Townhouse and Low-Rise Code last year, which encourage development by setting out simple “deemed to comply” rules for setbacks, room sizes and overlooks, are making approvals for new townhouses even easier.

Despite public attention on the Allan government’s plan for high-rise apartments in suburban activity centres, Grattan Institute economic policy program director Brendan Coates said increasing townhouse approvals will have a more significant impact on increasing density and supply where people want to live.

“These are homes that are genuine alternatives for families,” he said. “They’re also cheap to build and don’t require any specialised equipment.”

This simplicity means developing residential sites is viable for “mum and dad” developers, he said, without the investment risks or planning conflicts apartments bring.

“The value of this kind of gentle density is you can have a street of 50 homes, and if five of them get turned into five townhouses, you’ve boosted density on the street by 50 per cent,” he said. “And the streetscape’s fairly unchanged.”

Recent Grattan modelling shows that townhouse approvals are more commercially viable than apartments in the activity centre plan, many of which are planned for areas where unit prices have gone down over the past five years.

Opposition leader Jess Wilson’s housing proposal, announced on Wednesday, focuses on increasing apartment developments. It targets a “capital city zone” around the CBD – including Southbank, North Melbourne, Fishermans Bend, Parkville, Fitzroy and Collingwood – despite a glut of 8000 new and unsold units in metropolitan Melbourne.

ABS data shows the average cost of building semi-detached, row and townhouses is significantly less than apartments.

“Three storeys is a sweet spot,” Dan Honey, chief creative officer at property developer Molonglo, said. “Anything taller [requires] lift cores, basements, complex fire engineering and compliance, heavy structures, cranes, and a different type of builder … all adding to cost and risk.”

Molonglo is selling townhouses off-the-plan at a Brunswick former shopping arcade the firm planned to develop into apartments, until it became clear that would compromise design and buyer affordability.

“New apartment end prices have increased dramatically for the buyer in recent years, while developer margins have decreased,” she said. “[Townhouses] allowed us to pursue the spatial and material qualities we value… without pushing costs beyond reach.”

Elicia Wallace lives in a three-storey, two-bedroom, two-bathroom townhouse in Moonee Ponds.

The 49-year-old and her 11-year-old daughter downsized from a single-storey, fixer-upper Edwardian house.

“I just didn’t have the appetite to renovate another house, to be honest. I just wanted something new,” the construction project manager said.

“I have quite a busy hectic life, like everyone. Having a 20-minute shorter commute into the city, and being home with my family is way more important than having a big backyard that I might use once, twice, three times a year.”

As well as halving her utility bills thanks to insulation and modern appliances, Wallace said the ability to create “kid zones” was an unexpected benefit.

“In my previous house, we were all on top of each other. Living in a townhouse... I can sit downstairs and watch TV, she can go upstairs and have her own space,” she said.

Wallace is now selling, looking for a larger home as she and her partner move in together. But she’d happily stay in the complex if a larger home became available.

Her agent, Nelson Alexander’s Ryan Currie, said townhouses provide a long-term alternative to apartments, and have benefits over a detached home.

“A good little single- or double-front period family home is definitely everyone’s dream, but people also need to consider: old period homes need maintenance,” he said. “A townhouse... you’ll probably have a lot less to worry about.”

Chamberlain Architecture & Interiors director Glenn Chamberlain said townhouses were well-established in Victoria, which allowed for innovation.

“You’ve got to think about how you tessellate the different spaces into a form that is quite rigid,” he said.

Solving problems like how to bring light into a space that may only get sun from one direction, navigating storage and maintaining generous dimensions, are challenges that can lead to more interesting designs, he said.

“Either apartments are going to improve – a little bit of extra storage, a little more space – or townhouses are going to become more and more viable as an alternative to detached homes,” he said.

Honey agreed, adding labour costs, insurance and compliance demands were “nudging the market back toward a form Melbourne has always known”.