Reimagining Cities Through Smarter, Fairer Housing Density

Australia’s housing story has been shaped by two decades of rising prices, shrinking affordability and growing pressure on households to move further from the opportunities they rely on. Now, a new Grattan Institute report is challenging the nation to rethink what our cities could look like if we embraced a more balanced and future-focused approach to density.

The headline recommendation is simple but bold: allow three-storey homes on all residential land across Australia’s capital cities, and up to six storeys around major transport hubs and commercial centres. According to Grattan, these changes, supported by 11 key actions, could help unlock up to 67,000 extra homes each year, reduce rents by more than 12 percent over the next decade and cut more than 100,000 dollars from the cost of a median home. For households, employers and industry alike, this is the kind of systemic shift many have been waiting for.

Behind the proposal is a clear diagnosis. Australia has underbuilt for 25 years. While our population continued to grow, dwelling construction failed to keep pace. In the early 2000s, the average home cost four times a typical household income. Today, it costs more than eight. For the lowest-income Australians, housing has gone from consuming 20 percent of income to nearly 30 percent. Affordability has become one of the defining challenges of our time.

A major contributor, the report argues, is restrictive planning. Across Sydney, 80 percent of residential land within 30 kilometres of the CBD allows only three storeys or fewer. In Melbourne, that figure reaches 87 percent. Most of Brisbane, Perth and Adelaide remain capped at one or two storeys. While other global cities have evolved, including Auckland with its 2 to 7 storey approach and Los Angeles with significant medium-density growth, much of Australia’s urban land remains locked into very low-rise limits.

The consequences are significant. Infrastructure networks are stretched, commutes are longer, productivity is reduced, and the gap widens between those who can live near opportunity and those who are pushed to the fringes. If Sydney matched Toronto’s density within 15 kilometres of its CBD, the city would already have 250,000 more homes. If Melbourne were as dense as Los Angeles across the same radius, it would have 431,000 more homes.

Grattan’s recommendations aim to change this trajectory. Standardised low-rise and mid-rise codes, clear and consistent approval pathways, higher housing targets, incentives for states and transparent planning governance are all part of the proposed blueprint. The goal is not just more homes. It is better cities. The benefits include more vibrant neighbourhoods, improved construction productivity, lower emissions from reduced car dependency, and greater social equity.

However, not everyone agrees with the proposed approach. The Planning Institute of Australia warns that blanket upzoning could outpace infrastructure, creating congestion and delays in essential services such as water, transport and schools. The Institute stresses the importance of thoughtful sequencing to ensure that new density supports, rather than strains, communities. With construction capacity already under pressure, planners argue that rezoning alone cannot deliver homes without matching investment in infrastructure and industry capability.

What is clear is that Australia is approaching a turning point. The nation needs more homes in the places where people want to live, along with smarter planning systems that balance ambition with practical delivery. As the Grattan report states, “the equation is simple: if we build more homes where people most want to live, housing will be cheaper and our cities will be wealthier, healthier and more vibrant.”

For the construction and property sectors, this moment creates opportunities for innovation, collaboration and meaningful city shaping over the decade ahead.