While the Victorian government has committed to various housing projects, these often come with significant costs, delays, and inefficiencies. An innovative and cost-effective alternative would be to incentivise private mum and dad investors with older properties on suitable land to redevelop their lots into multiple dwellings through targeted land tax concessions on the proviso that these new dwelling are held as rental investments for a minimum of say 5 years. This approach could rapidly boost housing supply without the budgetary strain of state-led construction projects.

The Problem with Government-Built Housing

State government housing projects often suffer from bureaucratic red tape, budget blowouts, and lengthy timelines. For example, large-scale developments can take years to complete, while escalating material and labour costs further erode their cost-effectiveness. Although government intervention is critical in ensuring affordable housing, relying solely on public projects has proven insufficient to meet growing demand.

Adding to this complexity, the government is often constrained by land availability, zoning regulations, and community opposition, which slow down project approvals and execution. These challenges necessitate creative solutions that leverage private-sector capacity to deliver housing more efficiently.

A Market-Driven Solution: Tax Incentives for Redevelopment

Providing land tax concessions to mum and dad investors who own older homes on large, well-located lots is a strategic way to encourage urban infill and densification. This policy would:

1. Unlock Underutilised Land: Many older properties sit on expansive lots, particularly in Melbourne's middle and outer suburbs, where zoning allows for medium-density development. Bulldozing a single dwelling to construct two or more homes on the same site maximizes the utility of the land without requiring new infrastructure investment.
2. Accelerate Housing Supply: Private investors are more agile than government agencies in navigating planning processes and managing construction. By incentivising them, new homes could be built and rented out far quicker than government-led initiatives.
3. Support the Rental Market: More dwellings on the same lot mean more properties available for lease, helping ease the rental crisis. Additionally, newer homes are often more energy-efficient and better suited to modern living standards, appealing to a broader range of tenants.

Why This Approach Is Cost-Effective

The financial advantages of this strategy are significant:

• Minimal Public Spending: Offering a land tax concession costs the government far less than building housing from scratch. It shifts the financial burden of construction to private mum and dad investors while still achieving the desired outcome—more homes.
• Reduced Infrastructure Costs: Since the redevelopment occurs on already-serviced land, there’s no need for the government to invest in new roads, utilities, or public transport extensions.
• Scalable Solution: This policy can be applied city-wide, allowing for organic growth in housing supply without requiring the government to micromanage every development.

Potential Challenges and Mitigation Strategies

While this plan is promising, there are obstacles that policymakers must address:

1. Community Pushback: Increased density can lead to concerns about traffic, noise, and neighbourhood character. Clear guidelines on design and quality standards, coupled with community engagement, can mitigate these concerns.
2. Planning System Bottlenecks: Fast-tracking permits for investors who qualify for the land tax concession can help prevent delays in approvals.
3. Equity Concerns: Ensure the program is accessible to a wide range of property owners, not just those with the financial resources to redevelop independently. Partnering with builders or developers could provide solutions for owners without upfront capital.

Long-Term Benefits for Melbourne

This market-driven approach aligns with Melbourne’s long-term urban planning goals, such as reducing urban sprawl, increasing housing density near jobs and transport hubs, and improving rental market accessibility. By incentivising redevelopment, the government fosters private-sector innovation and participation in solving the housing crisis.