Australia could potentially unlock around one million new homes by transforming one in four standalone dwellings in major cities into dual occupancies, according to a recent report. The study, conducted by the Committee for Economic Development of Australia (CEDA) in collaboration with urban consultancy firm Urbis, suggests that increasing “gentle density” in the middle rings of the five largest cities could boost the nation’s housing stock by 9%.
The concept of gentle or modest density involves the development of terraces, townhouses, low-rise apartments, and dual occupancy in strategically located and well-serviced areas. The report argues that current debates have predominantly focused on the extremes of the housing spectrum—high-density inner-city developments and sprawling outer suburban or regional areas—while neglecting the potential of medium-density housing solutions.
The Case for Gentle Density
“Australia’s housing crisis has been decades in the making and requires action on many fronts,” said Danika Adams, CEDA senior economist and report co-author. “But ‘gentle density’ can deliver more housing in middle-ring neighborhoods where people want to live, while making better use of existing infrastructure and transport networks.”
The report estimates that adopting a moderate-density approach could result in significant increases in housing stock across major cities: approximately 12% more homes in Sydney, 15% in Melbourne, 16% in Brisbane and Adelaide, and over 17% in Perth. Some states have already initiated steps towards increasing density, with New South Wales and Victoria introducing reforms to streamline approvals and unlock development in well-located areas, despite facing criticism from some existing residents.
Western Australia, for instance, has announced plans to enhance density around 10 train stations in Perth.
Population Growth and Housing Demand
Australia needs to construct 240,000 homes annually to meet the National Housing Accord target of 1.2 million well-located homes by 2029, a goal set by the Commonwealth and state and territory governments. However, the CEDA report highlights that the nation has consistently fallen short of this pace since 2016.
With Australia’s population projected to grow by over 14 million people in the next 40 years, primarily in major cities, the report warns of escalating housing pressure. Population growth in cities and major centers is expected to proceed at twice the rate of regional areas. Despite this, Australia’s largest cities remain low-density by global standards. For instance, Melbourne ranks 100th for population but 858th for density, while Sydney ranks 104th for population and 803rd for density, according to the report.
“When we see what’s happening with our population growth, with our continued economic development, we can’t keep building further and further out,” CEDA chief economist Cassandra Winzar told The Business. “Middle-ring suburbs and this ‘gentle density’ is kind of the best of both worlds.”
Lessons from Auckland
The report also examines the impact of comprehensive planning reform in Auckland, which introduced extensive “upzoning” changes starting in 2016. These reforms eliminated single-family zoning and permitted medium-density housing across roughly three-quarters of the city. Between 2016 and 2021, these changes resulted in approximately 22,000 new homes, accounting for one-third of all residential building consents and driving a 50% increase in approvals.
By 2024, Auckland’s housing stock had expanded by about 80,000 dwellings—around 15%—outpacing population growth for the first time in decades. The report found that house prices in Auckland were 15 to 27% lower than they otherwise would have been, while rental prices were reduced by up to 28%.
“Auckland’s experience shows what’s possible when you implement planning reform at scale,” Ms. Adams said. “It worked because it removed complex processes, allowed feasible development, and was applied broadly.”
A recent report from another think tank, the Grattan Institute, suggested that Australian rents and house prices could be 12% lower within a decade if all capital cities were rezoned to allow three-storey buildings.
The Role of Local Councils
Ms. Winzar pointed out that zoning and planning regulations at the local council level pose significant barriers to development. “Rules differ from council to council, we have a huge number of councils in Australia as well,” she told The Business. “So it’s really hard for developers to get in, to understand what the requirements are, and they are often very restrictive.”
She suggested that local councils lack sufficient incentives to increase zoning and that state governments should adopt a carrot-and-stick approach. “If local governments aren’t meeting their targets … that could mean that state governments actually take over some of the planning regulations,” Ms. Winzar said. “[If they do], we think there should be some financial incentives.”
The report also recommended that local councils introduce “by-right” planning rules that specify what can be built without objection, based on land size. “If it’s not impacting you individually, it’s almost certainly impacting someone in your family. And most people also want their family members to be able to live near them.”
As Australia grapples with its housing crisis, the insights from this report could guide policymakers towards more effective strategies that balance growth with livability, ultimately helping to alleviate the pressure on the housing market.
