The Victorian planning framework for residential development needs reform.
That is not to accept the much more dubious proposition that the planning system is a significant cause of our current housing affordability problem. However day-to-day the planning system doubtless causes frustration and costs for individual applicants, and enormous difficulties for the council planners (mostly) charged with administering it. Reforming such provisions is an intrinsic good that is worth pursuing.
I also do not believe that means sacrificing other planning outcomes (amenity protection, character outcomes, urban greening, etc) in the name of either process efficiency or overall housing supply. Hard choices between system efficiency and policy outcomes might need to be made if the system is already optimised to achieve its intended outcomes. But where the system has obvious deficiencies, we can focus on remedying those before evaluating the need for more radical changes.
Regulation of Residential Development – What’s the Problem?
So what was the state of the planning system, and its management of housing provisions in particular, leading into the Victorian Housing Statement?
In short, the residential development provisions were – and remain – in complete disarray.
The design of residential zones, for example, has chopped and changed. Some councils applied the General Residential Zone broadly, based on early guidance that saw it is a largely status quo incremental growth zone, while others applied it sparingly given later guidance that framed it as accommodating much more change. This has undermined the clarity about outcomes the reformed zones were supposed to provide.
Policy could help cover this gap, but it has been increasingly sidelined in the suite of regulatory tools. Councils have been pushed towards describing outcomes in countless zone schedules, but this is a resource-intensive process, and the end results are unhelpful in terms of clearly describing desired typologies and outcomes.
ResCode is, at its heart, a 1990s code for the design of villa units and 2-storey townhouses. It is unsuited to the design of the 3- and 4-storey buildings that are increasingly important to housing supply. In addition to those design problems, basic regulatory maintenance has been neglected. The Department ignored problems in its drafting – which allowed confusion to arise about basics of how Standards and Objectives were to be applied – for more than fifteen years. There were also no tiers added to the ResCode Standards when the new zones were introduced, to provide a baseline of default outcomes expected in each zone category.
This neglect has occurred against a background of broader system dysfunction, as multiple system reviews (including two highly critical reports by the Victorian Auditor-General) came and went without adequate response, and reform efforts were focussed on narrow and ill-conceived process-based reforms such as VicSmart. Underlying problems – the problematic VPP paradigm for policy expression, the lack of clear state-wide guidance on fundamental policy issues, the dysfunctional relationship between state government and local councils – have been all but ignored.
The Housing Statement’s Regulatory Mad Libs
This was the background against which the Victorian government’s September housing statement landed. While it is not hard to envisage a package of reforms that fixes the above problems, many of these changes will require time to implement. The current disorderly application of residential zones has taken a decade to roll out, for example; a fix will take time. Similarly, a code for 3- and 4-storey buildings will need some proper community engagement and regulatory design work.
Given this, the state government’s lackadaisical response to known issues has been infuriating. Consultation for the 2016 Advisory Committee reviewing the residential zones had highlighted the need for better scheme guidance for higher growth typologies, for example; while the confusion about the operation of ResCode Objectives and Standards has been apparent, and repeatedly raised with the Department, since the Li Chak Lai v Whitehorse decision in 2005.
Against this background of inaction the measures in the housing statement have the air of panicked over-correction. Rather than the careful and methodical reform that was needed, the reforms announced are a half-baked package that smash together good ideas and bad ideas in what seems like a game of regulatory Mad Libs.
An example of this incoherence is the new provision at cl 53.23 for “Significant Residential Development with Affordable Housing.” This promises a facilitated stream to incentivise such housing, which is a good idea in principle. Yet qualifying applications are exempt from third party notice and review rights. Not explained is why the merits of these luckless would-be objectors’ concerns are changed by the presence of affordable housing in the development.
They aren’t, of course; that’s logically indefensible. But the notice and review exemption hasn’t been examined through a lens of whether third party rights are warranted or appropriate. Instead, these community rights are used simply as a bargaining chip, something that the government can trade to developers in exchange for a policy outcome. They offer this swap as an alternative to including meaningful affordable housing requirements in schemes, or enacting the viable alternative of the social housing levy they announced but abandoned in 2022. This is a deplorable way to conceive of community involvement in the planning system.
This clause is one of several new provisions creating further new application streams (including at cl 55.22 – Significant Economic Development and cl 53.24 – Future Homes). This is a further continuation of the proliferation of special-purpose streams, including the VicSmart system but also the dizzying array of provisions increasingly dotted through cls 52 and 53. It is surely time to admit the failure of this strategy, which has vastly increased procedural complexity while eroding the integrity of the core system. At some point, a system that that is all carve-outs and workarounds is no system at all.
The reliance on Ministerial decision-making in the new streams is also troubling. When the Independent Broad-Based Anti-Corruption Commission released their Operation Sandon report in June, former Premier Daniel Andrews flagged that he saw a reduced role for local councils in planning decision-making. But the Sandon report specifically noted that transferring powers to the Minister did not address integrity concerns, and the Victorian Auditor-General has previously been critical of the governance structures around Ministerial decisions. It is odd indeed that the first major planning reforms after Sandon concentrate power in a single decision-maker and dramatically curtail third-party involvement in the system. This is difficult to defend from an integrity perspective, especially given that there has still been no detailed response to the Sandon findings.
There are also real questions about this centralisation of power at a pragmatic level. The days of the Minister handling a small number of hand-picked applications in the name of development facilitation are gone. The Minister and Department will now be processing a wide array of applications that happen to meet (for example) cost thresholds in the new cl 53.22 – Significant Economic Development. The merits of those applications will vary considerably. Will the enthusiasm for Ministerial involvement in these matters survive the inevitable need to refuse a bunch of poorly conceived applications under this clause? And can the idea of the Minister’s office being an elite facilitation pathway survive the scaling-up that will be needed? The statement suggests 90 new planners will be hired to help make these decisions. At that scale, the Ministerial / Departmental team will be operating just as another council, subject to all the same resourcing challenges councils currently face.
The package does not only include process reforms, however. There are also changes to the ResCode provisions, notably converting a range of ResCode Standards to deemed-to-comply (with fourteen changed immediately, and the rest to follow at a future date). This approach essentially reduces ResCode to a box – fit within it, and your proposal will be deemed acceptable.
Deemed-to-comply ResCode has been looming on the horizon for years as a bad idea whose time would eventually come. Yet despite that long gestation there is no sign that the implications of the change have been thought through. Until now, the qualitative elements of ResCode – alongside the hard work and expertise of council statutory planners who administer the controls – have done much to moderate outcomes under the quantitative provisions and to achieve contextual responses. The qualitative provisions are also the main avenue to tailor outcomes for the different expectations of the various residential zones, as the standards do not change from zone to zone. (Modification of the compliant envelope will only be through maximum overall heights and garden areas).
With those qualitative aspects of the Code stripped away, it should be easy to sketch out what the compliant buildings look like on typical lot sizes. Importantly, those forms will be very similar across the spectrum of zones. If the state government is truly comfortable with these outcomes, it should be willing to publish diagrams of what it thinks these minimally compliant ResCode typologies will look like. That kind of analysis has not, however, been made available. (See here for my attempt at doing this exercise).
The ResCode reforms also sit oddly alongside one of the more defensible ideas in the package, the expansion of the Future Homes program to apply on land with good access to transport networks or activity centres. That program, with its focus on designing and defining appropriate typologies, is an example of the kind of outcome-oriented form-based regulatory design we should be encouraging. Yet the Future Homes are a boutique product, limited in their application by the large consolidated lots they require. It is difficult to imagine that these designs will be attractive to developers compared to the yields offered by the new wave of minimum-compliance ResCode development.
This emphasis on development facilitation without discussion of likely built form outcomes reinforces the “whatever it takes” approach to facilitating development. This is the regulatory equivalent of trying to speed up your car by cutting the brake lines.
Yet for all the emphasis on housing supply, this package has not been accompanied by a proper inclusionary zoning measure, or an equivalent of the government’s abandoned social housing levy. When that levy was abandoned in February 2022 after a concerted property industry campaign, the government announced that a not-yet-specified package of reforms that was “set to deliver massive gains to the property and development sector” was now “off the table for good.”
That package was never publicly released, so it is hard to know how it aligned with this set of reforms. However it is difficult to escape the sense that the 2023 package delivers the development industry its “massive gains” without the social housing benefit that was to be achieved in 2022.
There is a Better Way
If parts of the preceding discussion seem intemperate, that’s an accurate reflection of my state of mind. Two months on from the housing statement, the sense of affront has not abated. This is an upsetting package. That partly derives from what seems like needlessly haphazard hacking at the system, and partly from the antagonistic stance the state government has taken towards local government.
Councils have worked diligently for years to try to implement a flawed regulatory framework they did not design. They continue to be scapegoated for planning delays, but sidelined in the process of system reform. Misguided reform programs have exacerbated procedural complexity, making the system ever-harder to administer. Rather than better target the system, the state government has used the VicSmart program to increase the proportion of planning work that is resource-intensive low-value busywork done under punishing timeframes. It is harder than ever to retain good planners in local government, especially in statutory planning teams. It is against this background that this flawed set of reforms has been dropped on the sector with little warning, guidance, or strategic justification.
A path back from this low ebb is possible, but this will require a change of approach by the state government. In the new edition of my book about the Victorian system, I argue it is time for a recognition of fundamental flaws in the Victorian planning paradigm. Recent planning reform advocacy by PIA and the Municipal Association of Victoria has come to similar conclusions. Aspects of more recent system reform papers (particularly the 2017 Auditor-General report, the 2022 Environment and Planning Committee enquiry, and even – within its tighter scope – the Sandon Special Report) also largely align with this view.
There is little sign in the Housing Statement or elsewhere that state government recognises the problems or is working to remedy them. The Housing Statement does promise a “modern, fit-for-purpose planning system” built on a review of the Planning and Environment Act. However the Act was already subject to review in 2009, and there is little detail as to what the new review will involve. The need for a coherent paradigmatic change to the VPP planning system that sits under the legislation is not addressed.
The new planning paradigm does not need to scrap the VPPs or drastically rewrite the Planning and Environment Act. However it will need us to turn away from certain dead-end “solutions” like the reliance on process streams, timeframe demands in the VicSmart mode, and endless special purpose work arounds in the mode of the Housing Statement. Instead, it will need to revisit the prevailing VPP approach to regulatory design and policy expression. And it will need to place the relationship between state government and councils at its centre, using structural mechanisms to empower councils as genuine and valued partners in the system.
This article first appeared in the December 2023 issue of Planning News. The still at the top is from the 1920 Buster Keaton short One Week, which you can (and should!) watch here.