Planning delay is the costliest input in a rental home

Australia's governments agreed in 2023 to aim for 1.2 million new homes over the five years from mid-2024, and most of the public argument about reaching that number has been about how tall and how dense new housing should be. That argument matters, but it misses the input that does the most damage to the economics of rental housing in particular. My position is that the time and uncertainty of discretionary planning decisions cost more homes than height controls do, and that developers like Corvalla should be prepared to accept firmer, lower limits in exchange for decisions that are quicker and predictable. I hold this view having sat on both sides of the planning counter, and I know it will not please everyone in my industry.

Twenty-six months for a drainage agreement

My first post was as a strategic planner at a growth-area council on Melbourne's western fringe. In 1996 I worked on the plan for an estate of about 2,400 lots. The developer had finance, builders and buyers. What it did not have was an agreement between the council, the water authority and itself about who would pay for the trunk drainage. Settling that took twenty-six months. Nobody behaved badly. Each agency was protecting a legitimate interest on its own timetable, and nobody was answerable for the total elapsed time. I did not understand then that the delay itself was the largest cost in the project. I learnt it after I crossed to the developer's side in 1999 and watched holding costs, interest and lost sales accumulate while letters went back and forth.

Thirty years later, planning systems are more sophisticated, and many councils and state agencies have worked hard to shorten them. The structure of the problem has not changed. Discretionary approval invites everyone with an interest to argue for something better, and a decision that can be appealed rewards the applicant who asks for more than it expects to receive. Both sides then build the argument into their behaviour, and the cost of the argument into their prices.

Why rental housing feels delay more than other housing

Delay hurts all housing, but it hurts build-to-rent more than apartments built for sale, for a reason that is easy to overlook. A developer selling apartments can pre-sell to buyers, use those contracts to support construction finance and pass some of the cost of delay into the sale price. A build-to-rent owner sells nothing. It funds the whole building with equity and debt, earns nothing until residents move in and recovers its capital over decades from rents the local market sets. A year of delay therefore adds a year of carrying cost on land and design spending with no offsetting revenue, and exposes the project to construction prices that may have moved against it meanwhile.

We have measured this on our own projects. At Footscray, our application for 19 storeys and 402 homes was refused in 2023. An appeal to the tribunal would have taken fourteen to twenty months on our advisers' estimate, with about a 60% chance of success. Instead we redesigned the building at 13 storeys and 284 homes, after meetings with council officers and neighbours, and received a permit five months after lodging. At the midpoint of the appeal estimate, construction would have started about a year later, into a market where building costs were still climbing. The lower building with the earlier start was worth more to us than the taller building with the later one, even though it holds 118 fewer homes.

I do not want to make too much of one project. Footscray was a site where the refusal grounds were specific and the redesign was obvious to someone who had once written refusals for a living. Other sites and other refusals differ. But the result matches what I have seen across thirty years: a clear rule with a lower limit usually produces homes sooner than an uncertain process with a higher one.

The bargain I would accept as a developer

If that is right, the policy question is less about raising height limits than about turning discretion into rules, and my industry has to accept its side of the bargain. Here is what I would accept. In well-located areas near stations and jobs, planning schemes should set a building envelope for rental housing that is approved as of right when the design meets published standards for height, setbacks, overshadowing and amenity, with a short period for a decision and no third-party appeal against a compliant scheme. In return, developers like us would give up lodging above the envelope in the hope of negotiating down to it, and would accept that the envelope may be lower than we would choose.

None of this is new; versions of it exist in several states for particular kinds of housing. What has been missing is a willingness on the industry's side to say openly that we would trade height for certainty. Many developers would rather keep the option of arguing for more, because on a good site the option has value. I think that option, summed across a city, costs the rental market more homes than it adds on individual sites.

There are honest objections. Neighbours would lose a right to be heard on compliant schemes, which is a real loss to people who must live beside the result. Envelopes can be badly drawn, and a wrong rule is harder to correct than a discretion used well. Councils need the staff to write good standards in the first place, and the growth-area council I worked for in the 1990s certainly lacked them. I accept every one of these. My answer is that the present system already takes away people's ability to plan their lives, through delay and uncertainty, and does it less visibly.

I would ask two things. Of governments: firm envelopes near transport, with short and binding decision periods for compliant rental schemes. Of developers, my own company included: design to the envelope rather than above it, meet council officers and neighbours before lodging, and publish how long our approvals took and why. The homes that matter most are the ones that start this year rather than next, and a lower building under construction is worth more to a renter than a taller one still under argument.