The cost of planning new suburbs in Melbourne’s booming growth corridors has skyrocketed by about 750 per cent while the number of approvals has collapsed, analysis shows, threatening the state’s ability to deliver promised housing supply.
Master blueprints that map out everything from homes and roads to schools and parks, known as precinct structure plans (PSPs), now cost an average of $6 million each due to the dramatic slowdown in their delivery.
Developers say the approval process is tied up in a massive amount of red tape, Credit: Pat Scala
Developers blame the backlog on a massive amount of red tape, which some believe is a deliberate consequence of a state government policy to curb urban sprawl, and a collapse in government productivity, leaving them with multimillion-dollar holding costs.
Andrew Perkins, property research director at investment manager Wingate, said the number of PSPs delivered had fallen from up to 10 a year in the mid-2010s to an average of one to two a year in the past five years.
This collapse means the average cost to the state for each plan has soared from about $700,000 to nearly $6 million– a rise of about 750 per cent.
Perkins said he was increasingly concerned about the slowdown in PSP delivery and its impact on supply and housing affordability.
“We need to pull every lever at the moment to support housing in a housing crisis,” he said. “That doesn’t just include density. It also includes greenfield planning.”
His analysis shows while annual funding for the Victorian Planning Authority to deliver greenfield sites has remained relatively stable at between $12 million and $14 million a year over the past decade, government productivity had declined significantly.
Some greenfield developers claim the delays have left them paying millions in land tax and interest on sites while they wait for government approvals.
Villawood Properties executive director Rory Costelloe said his development company was facing an $11.5 million holding cost on one project because of a PSP approval pushed from mid-2025 into 2026.
“That’s $11.5 million we could have spent on infrastructure,” Costelloe said. “It’s a very frustrating process, painfully slow. The planners have got to come back and take responsibility for timelines. They are largely responsible for our affordability crisis because they’ve constricted supply so much.”
He said the slowdown had become particularly noticeable over the past 10 to 15 years, with significant red tape holding up delivery. “Very sadly, the TV show Utopia is true. The more people you have in a meeting, the fewer decisions are made.”
The Property Council of Australia’s Victorian executive director, Cath Evans, warned that the slowdown in PSP delivery threatened the state’s housing goals. Ultimately, she said, home buyers were the ones who paid the price for protracted timelines, noting that “delay ultimately does impact affordability”.
Costelloe believes the bottleneck recently is a deliberate consequence of the government’s goal to build 70 per cent of new homes in established suburbs and 30 per cent on the urban fringe or other greenfield sites. He argues the policy is out of step with the aspirations of many Victorians, particularly new migrants.
“People don’t come to Australia to live in an apartment, particularly from the Subcontinent,” he said. “Their aspiration is for two children and a detached house. I think people are realising [the 70/30 goal] is not achievable, because there’s no market for 70 per cent infill. In Melbourne it should be more like 60/40.”
Rory Costelloe, executive director of Villawood Properties. Credit: Eddie Jim
For years, a central goal of Melbourne’s planning strategy has been to rein in urban sprawl to protect farmland and make better use of existing infrastructure. Despite this, the city’s fringe has continued to expand, creating one of the most sprawling, car-dependent metropolises in the world.
Infrastructure Victoria has warned that the high cost of providing new infrastructure to greenfield sites makes unchecked outward growth economically and environmentally inefficient and has consistently advocated a more compact city.
Late last year, the Allan government released a 10-year plan for greenfield development, identifying 27 planned new precincts to deliver 180,000 new homes.
“We understand the need to improve speed and certainty – that’s why as part of this plan we’re working to reduce delivery timeframes for PSPs by a third,” a spokesperson for Planning Minister Sonya Kilkenny said.
“The use of new planning tools and delivery pathways will be explored as appropriate to reduce timeframes further.”
In May, the government announced funding for PSPs at new suburbs Clyde South in Melbourne’s south-east and Derrimut Fields in the west.
The government has also established a dedicated “concierge service” to work with councils and industry to fix issues holding up zoned land from being developed.
While acknowledging the need for careful planning, Evans said the process could be “overly prescriptive,” creating a conflict where “what is in a plan versus what is economically achievable from a design and cost perspective may not align”.
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