Proposed development at Cremorne, Melbourne (source: Caydon)
Proposed development at Cremorne, Melbourne (source: Caydon)

The City of Yarra’s decision to knock back a proposal to build 260 apartments in the inner city Melbourne suburb of Cremorne was confirmed by the planning court last week ($1 billion Nylex redevelopment has too many one-bed apartments: VCAT).

The Victorian Civil and Administrative Tribunal (VCAT) rejected the developer’s appeal on a number of grounds, including excessive height, excessive car parking and insufficient housing diversity.

The issue I want to look at is VCAT’s finding that constructing 207 one bedroom, 37 two bedroom and 11 three bedroom apartments on the former Nylex site 2.5 km from the CBD would conflict with the provisions in the City of Yarra’s planning scheme promoting housing diversity.

In a large development (of) in excess of 260 apartments, a concentration of 80% of single bedroom apartments is not consistent with policy outcomes encouraging housing diversity. The applicant’s evidence in support of the high proportion of single bedroom apartments is that it reflects the applicant’s assessment of market demand. Increasing the proportion of 2 and 3 bedroom apartments also impacts on affordability issues.

VCAT concedes that “market preference and affordability issues are relevant and important issues”, but so too it argues “is planning policy that encourages diversity of housing options in developments of this type and scale”.

What is housing diversity? The VCAT decision references Objective 5.1 of the Guidelines for Higher Density Residential Development which call for:

A mix of dwelling types particularly in larger residential developments (e.g. to suit single people, family groups of varying sizes, students, the elderly, people of limited mobility and people of low to moderate incomes).

I take the planning scheme and VCAT’s interpretation to mean one bedroom units won’t attract families with children whereas two and three bedroom apartments will. The underlying rationale is that there’s some social benefit in having more children living in the City of Yarra. (1)

I’m not sure what that social benefit could be but I note that, according to VCAT, the cost of intervention might mean reduced affordability. In part that’s because two and three bedroom apartments are more expensive, so providing more of them at the expense of smaller apartments raises the entry price to the development.

It might also have an effect on supply. While developers are mostly price-takers – whether or not they can pass on a cost increase to buyers depends on market conditions – any reduction in expected profit affects the viability of planned projects and hence the supply of apartments and ultimately price.

Another issue is whether it’s even necessary to promote more multi room dwellings via the plannning system.

There’s no shortage of multi-bedroom housing options in the area. In the suburb of Cremorne, 84% of the dwelling stock has two or more bedrooms and 34% has three or more; only 14% has one bedroom. Moreover, 73% of dwellings are at ground level i.e. detached, terrace, town house.

Yet almost two thirds (64%) of Cremorne households are comprised of single persons or couples. Building one bedroom dwellings seems a far better match to the demographics of the suburb than adding to the existing preponderance of two and three bedroom dwellings.

Building more one bedroom apartments also matches better the much faster rate of projected future growth in small households (i.e. singles and couples) compared to families with children. At present, one bedroom dwellings comprise just 5% of all housing in the Melbourne urbanised area whereas dwellings with three or more bedrooms comprise 72% i.e. the deficiency is in the smallest dwellings not largest ones.

One bedroom apartments are in any event good for diversity. In fact the Design Guidelines referenced by VCAT emphasise their importance:

Higher density residential development is expected to cater for a diverse range of household types in the future, particularly smaller households.

They won’t suit families with children but one bedroom apartments will suit some of the “single people… students, the elderly, people of limited mobility and people of…moderate incomes” cited in the Design Guidelines.

On the other hand, any families with children that did choose to live in bigger apartments in this development wouldn’t add much socio-economic diversity because they’d necessarily be reasonably well-heeled.

But it’s by no means certain that providing more two and three bedroom apartments would by itself result in an increase in families with children. There are lots of empty-nesters, couples and singles who want two or more bedrooms for grandchildren, a study, guests, or privacy. Then there are group households – they already account for 17% of households in Cremorne.

Providing a diversity of dwelling types is a blunt instrument; it won’t necessarily or even probably lead to the sought-after outcome of a diversity of households and people.

Another interesting issue raised by this decision is whether using planning rules to promote social diversity at the micro level is consistent with what cities are about. I’ll discuss that next time.

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  1. I think the VCAT members interpretation of how Clause 16 SPPF and Clause 21.04-1 MSS of the Yarra Planning Scheme bear on the matter of diversity is arguable but that’s for the developer to take up.