Private agreements between home owners that have been used for decades in many Melbourne neighbourhoods to veto backyard subdivisions will be swept aside in the Allan government’s housing push.

Thousands of restrictive covenants are in place in Melbourne, either introduced by developers seeking to create exclusivity or struck between home owners on large lots who want to preserve low-density neighbourhood character.

Based on a law that originated in 1918, they give home owners the power to oppose subdivisions and second dwellings in their neighbourhood on almost any grounds that will cause “material detriment”, effectively ringfencing swaths of suburban Melbourne from higher density housing.

But a change in planning policy, being debated in state parliament, will give councils and courts the authority to overrule a covenant if a housing proposal is judged to align with the state government’s housing agenda.

Barrister Matthew Townsend, one of Melbourne’s leading experts on restrictive covenants, said the change has the potential to open up hundreds of thousands of single-dwelling properties to new housing.

“If the scheme that the government has proposed is successful, you would expect to see a large number of applications for medium-density housing in areas where there are presently few, if any, medium-density housing developments,” Townsend said.

The state government has set a target of building 2.24 million new homes by 2051, 70 per cent of them in established suburbs.

Under its proposed planning change, a covenant could be lawfully breached if a housing proposal fit “the objectives of planning in Victoria”.

A bill before parliament’s upper house defines those objectives as “increasing housing supply, diversity and affordability and facilitating the provision of social and affordable housing in Victoria”.

Townsend said councils and the Victorian Civil and Administrative Tribunal would be far more likely to grant permits for more intensive housing in areas where it would currently be disallowed.

“Many areas such as Reservoir, Balwyn, Camberwell and Croydon could be expected to experience a large number of applications for medium-density housing, and that might be dual occupancy, three lots, four lots, or even five or six dwellings on the lot,” he said.

The Coalition’s spokesman for planning, housing and building, David Southwick, accused the government of rushing through the change with no regard for the voices of local communities.

“Covenants are there to protect liveability and neighbourhood character, the very thing many Victorians consider when making what is often the biggest purchase of their lives: their home,” he said.

Dr Stephen Glackin, a senior research fellow in urban planning at Swinburne University, said restrictive covenants operated outside of town planning schemes that guide development across Melbourne. He said it was absurd to have planning laws hamstrung by private covenants that were set decades ago.

“Covenants set 50 years ago, or 100 years ago, just absolutely do not speak to the current context,” he said.

Glackin said covenants gave individual landowners too much power and made it harder to plan for Melbourne’s population growth.

“When you look at the mounting housing pressures that we’re going through, and the speed at which we’re having to change planning to accommodate the housing crisis, people really should start copping on to the fact that the city, the planning schemes and individual land parcels just need to be opened up.”

A government spokesperson said the planning overhaul was “bringing Victoria’s old-fashioned NIMBY planning laws into the modern era”.

“Right now, families who want to make a simple change to their home can get dragged to the Supreme Court to challenge a restrictive covenant,” the spokesperson said.

“We’re making it so covenants won’t automatically block planning permits any more. Councils will be able to remove restrictive covenants when they no longer make sense.”

The Municipal Association of Victoria has welcomed the change, arguing that councils have no control over the implementation of covenants but are lumped with the responsibility of administering them.

“These changes should drive significant time and cost savings for applicants and councils, and they are welcome,” the association said.

“The changes bring Victoria into line with other states, will reduce the excessive reliance on legal advice by applicants and councils, and will allow councils to focus on the planning merits of applications.”

Premier Jacinta Allan has said she wants Victoria to be Australia’s “townhouse capital”. Recent analysis of medium-density housing approvals revealed most townhouses are springing up in outer growth suburbs, not in Melbourne’s inner and middle ring.

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