June 2022
“Look again at that dot. That’s here. That’s home. That’s us. On it everyone you love, everyone you know, everyone you ever heard of, every human being who ever was, lived out their lives.”
– Carl Sagan
“It is not the function of the government to stop the citizen from falling into error; it is the function of the citizen to keep the government from falling into error.”
– Justice Robert Jackson
My wife and I are navigating through the town planning council experience to try and do a renovation to our home. But going through it you stumble upon a very big problem within the housing approval space that makes houses more expensive with a very simple fix. That will have a large impact on increasing the supply of new housing while also reducing the demand for new housing. It will improve housing affordability while costing zero dollars to implement.
I’m of Indian descent and want to create an intergenerational large family home here in Melbourne. With the goal being for there to be enough space for my wife and I, a couple kids and our parents all live under the 1 roof if we need to. Currently my house doesn’t have enough space for my parents to also live with us which is why I would like to build that space.
At the moment, we live in a 2 storey townhouse in a Neighbourhood Residential Zoning (NRZ) which is 4 bedrooms and 3 bathrooms. Larger 5 bedroom houses in this suburb are significantly more expensive so what we want to do instead is to add a 3rd storey extension to make it 5 bedrooms. Building additional levels is cheaper than trying to buy land to build on because it uses the existing site of the current home. No additional land is needed at all which is usually the most expensive part of any home.
Land is at a huge premium and is very expensive which is the leading cause of the housing supply shortage. Expensive land is the main reason the cost of buying a house is too high for middle class Australians. It’s too expensive to buy land in desirable areas to build homes because land is finite and people have already bought and developed all of it, so urban sprawl pushes houses further and further out of the cities.
The zoning is basically a set of rules that all developments and houses have to abide by. The rules are designed by councils and implemented by giving every block of land a zoning that they have to follow. They’re not allowed to deviate from the rules of the zoning without applying for a waiver to the council, which they generally don’t like granting.
The reason for different zonings is to create communal neighbourhood character. To create a facade and footprint of a house within which every house has to fit within. It can’t be bigger than the footprint allows which is very sensible. It’s so you don’t have a 10 storey building next to a 2 storey house which would look weird; and for the councils to adequately predict resources like parks and sewerage etc.
In our case though there is a silly problem. The NRZ zoning allows for a house to be built upto a height of 9m tall or 10m tall if the land is sloped. This is a lot of house height, within the footprint of which you can easily build a 3 storey home. But there is also a rule within this NRZ zoning that limits a house to only 2 storeys. This second rule is where the problem is.
There are a lot of houses that are able to be built to 9m tall over 3 storeys, increasing the footprint and allowing you to have more house and accommodate more occupants in the same amount of space. But then the zoning hamstrings you from the very beginning by strictly limiting the storeys to only 2.
But this doesn’t make a lot of sense. Why have a height limit at all at the same time as a storey limit? It’s like telling someone they can have a large garage that can fit 3 cars but then another rule saying they’re only allowed 2 cars regardless of how big the garage is. Why even allow for 3 cars if there is another rule that secretly overrules it?
If you have a rule that allows someone to build a 9m tall house, then why add a rule that artificially limits what they can build within that 9m? Because if you do a common sense check, 1 storey is usually only 3m. So most houses are only using 6m – 7m of the amount of height they are allowed. Or they end up using pitched angle roofs to use the rest of the height. But if they used a flat roof then there is enough space to build a whole extra storey, which they’re not allowed to make.
This is very silly. Instead the second part of the rule shouldn’t exist. If you tell people they can have upto 9m, then they should be able to put whatever they like so long as it fits within that height outline. If you’re looking to have a similar footprint and facade of houses to create neighbourhood character. It will still achieve that.
Why not instead specify a height limit only and then let people build whatever they want within that height limit? If they can fit 3 storeys with a flat roof and have a larger budget they should be allowed to do this. If they want to use only 2 storeys with an angled roof because they have a smaller budget, they should be allowed to do this. It seems the NRZ zoning is overly restrictive. But how does this affect housing affordability?
We are a perfect example, I only want to use 1 house for a big family but the zoning rules is looking like it’ll force us to use 3 or more houses for the same number of people. 1 house for us, 1 house for each of our parents and then 1 house for our kids. Even though we don’t want to. We just want to add a 3rd storey to our home to make to big enough to have us all live here.
We want to use 1 house but instead we’re going to have to use 3 or 4 houses because the NRZ zoning is too restrictive. So that is 3 or 4 houses that won’t be on the market for other people to use or we will compete prices up with those people. We’re going to be competing with other people who need those houses more than we do because the council won’t let us achieve what we want to achieve with our current house.
This Urban opinion piece was really eye opening for me as to one of the reasons why there is a housing affordability problem in Victoria and by extension Australia. Excessive use of the NRZ zone by councils stops people from building and doing what they want. The biggest problem with the NRZ zoning is that it was an unintended consequence of bad council decision making.
Here are a few excerpts from the Urban piece:
“The Advisory Note that accompanied the zones gave reasonable comfort that the zones would be applied in a sensible and logical manner. In particular, the NRZ, the most restrictive of all the zones, is to be applied in relatively limited circumstances
However, it is evident that a number of councils are seeking to broadly apply the Neighbourhood Residential Zone as the default zone, covering anywhere from 70% to 90% of the residential land in their municipalities. Councils such as Bayside, Boroondara, Port Phillip, Stonnington and Yarra are proposing that between 70-90% of their residential land will be in the NRZ.
There are significant implications in effectively locking away the majority of suburban Melbourne from residential development. New housing choices will be limited to high rise development or the outer fringe, with little choice in between. This will impact housing choice, sustainability as well as affordability.
It is ludicrous to nearly double the population of Melbourne over the next 35 years, whilst at the same time propose to prevent residential development in most of suburban Melbourne (in Glen Eira’s case that’s around 80%). With a limited supply of new housing choices in established areas, existing homes can only rise in value, becoming even more unaffordable.”
When it was researched and designed, it was intended to only be used sparingly. It was only designed to be rarely used but then local councils implemented it as the default. The NRZ zone was meant to be used for only 10% of Victoria’s land but instead councils implemented it for 80% of Victoria’s land.
That paragraph and those excerpts needs to be read twice to really process it.
A restrictive zoning that was designed to be appropriate for 10% of the state was instead used for 80% of the state by the local councils. No wonder there’s a housing shortage when something like that happens. One of the reasons people couldn’t afford homes is because 80% of the land has been locked away within a restrictive zoning that doesn’t allow anything to be built on it except a 2 storey home.
What should have happened is that most of Victoria should have used the much more flexible General Residential Zone (GRZ) zoning as was intended. Notice the use of the word General. The big difference is the GRZ allows you to build more flexibly, including upto 3 storeys. This is what was intended to happen when the new zones were introduced. But for some reason it was changed. How did this happen?
Whether or not it was an oversight or a form of corruption is difficult to determine. But definitely restricting the ability of people to increase the size of their houses reduces the amount of space that can be built which people can live in, which makes existing houses more valuable. Preventing more houses makes the houses that are there go up in price. If you own those houses, which the members of the councils do, you get rich. So people got rich by implementing a restrictive housing zoning in a much broader scope than it was designed to be used for.
This is so clearly a major cause of housing unaffordability in this state with the easiest fix. That I’m really surprised it has never been addressed before. The reason I think it has never been addressed is because it seems like it’s a niche problem. Or you need to have faced it first hand to really understand and appreciate the scale of the perniciousness.
It’s too late to casually rezone all the 80% of areas that are NRZ to GRZ as it was meant to be. But an easier fix that will achieve the same thing is just to keep the height restrictions as it is in this NRZ zoning, to keep neighbourhood character, but then remove the storey restrictions. The houses will still fit within the height restriction of the zone so will still comply. Since the NRZ zoning was implemented in 80% of the state even though it wasn’t meant to anyway, that change would fix all the problems that were created by it which affect a lot of houses.
It is a simple and straightforward change that will immediately dramatically boost the supply of housing while also reducing the demand for housing without costing the government anything. It will help generations of Australians and Victorians, people who already own property and people who are yet to purchase property.
Families like me will build our 3rd storey and add the bedrooms and space we need. We will then not go out and buy the 3 or 4 houses that we otherwise would have to do for our parents and children to live in. Which means that is 3 or 4 more houses that will be on the market for other people to buy. This dynamic will play out for many tens of thousands of families in the state and country.
This isn’t the only fix to help housing affordability. But it is such a no brainer easy to implement win win with a big impact without spending a cent. Many thousands of homes will then not be bought by people like me who don’t need them because our current house will satisfy our needs. They’ll be on the market for other people. Which will dramatically reduce the demand for houses and increase the supply of housing massively. Which will improve housing affordability.
It is so easy that I can’t see why a Government that understands the problem wouldn’t implement it. This essay hopefully outlines the scope of the problem and how easy it is to fix. Until it gets fixed, I’ll see you all at the auctions where I’ll compete with you and bid up the price to try to buy the 3 or 4 extra houses for my parents and kids that I don’t need and I don’t want. I just want to build the space for my parents and kids on my current house.