How Melbourne beats Sydney on housing crisis solutions

Sydney Morning Herald

by Matt Wade

February 24, 2026

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How Melbourne beats Sydney on housing crisis solutions

Melbourne’s approach to addressing its housing crisis offers valuable lessons for Sydney, according to a recent analysis by the Grattan Institute. The report highlights that Victoria’s embrace of “gentle density” developments, such as three-storey townhouses, has created more feasible opportunities for increasing housing supply compared to NSW’s policies in Sydney. Brendan Coates, an economist at the Grattan Institute, argues that NSW’s restrictions on such housing types limit its ability to tackle the city’s severe housing shortage effectively. While NSW has introduced ambitious reforms, including the Transport Oriented Development (TOD) program and low- and mid-rise housing policies, these measures fall short of Victoria’s more permissive approach. For instance, while Sydney allows dual occupancies in low-density zones, it largely prohibits “gentle density” developments like townhouses in many areas. In contrast, Melbourne permits three-storey townhouses across most residentially zoned land, enabling greater housing capacity. Grattan estimates that 400,000 sites in Greater Sydney could support gentle density developments, significantly easing the city’s housing demand. The analysis also points to a “feasibility gap” for mid-rise apartments (four to eight storeys) in Sydney due to high construction costs and stringent regulations. This contrasts with Victoria, where similar projects are more commercially viable. Premier Chris Minns’ reforms have increased housing approvals but have not fully addressed the limitations on gentle density

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Originally published on Sydney Morning Herald on 2/24/2026