Australia’s housing crisis has become a defining challenge for governments, builders and communities. But amid debates about megaprojects, build-to-rent towers, and new masterplanned suburbs on the urban fringe, one piece of the puzzle has been hiding in plain sight.

A new report from the Committee for Economic Development of Australia (CEDA), produced with urban consultancy Urbis, argues that “gentle density” small, incremental increases in housing across middle-ring suburbs could add roughly one million new homes to the national supply.

It is one of the clearest roadmaps yet for how Australia can make real progress without waiting decades for new rail lines or greenfield land release programs. And it places builders right in the centre of the solution.

What the Report Says

CEDA and Urbis modelled the impact of turning just one in four standalone homes in the major capital cities into dual occupancies. If that shift happened gradually, and in combination with allowing more terrace housing, townhouses and low-rise apartments in suitable areas, housing stock could rise by around 9 per cent nationally.

The gains vary by city:

• Sydney: up to 12 per cent more homes
• Melbourne: around 15 per cent
• Brisbane and Adelaide: roughly 16 per cent
• Perth: more than 17 per cent

CEDA’s senior economist Danika Adams said the opportunity has been hiding in full view.

“Gentle density can deliver more housing in middle-ring neighbourhoods where people want to live, while making better use of existing infrastructure and transport networks,” Ms Adams said.

Australia’s missing middle the space between single-family homes and high-rise towers has been largely overlooked in national housing policy. The report argues that this is where some of the fastest, least disruptive supply gains can come from.

Why Middle-Ring Density Matters Now

Australia needs to build about 240,000 “well-located” homes every year until 2029 to meet the National Housing Accord target of 1.2 million. But the report highlights a sobering reality: Australia has missed that benchmark every year since 2016.

Meanwhile, population projections show an additional 14 million people over the next 40 years, with most growth centred in the major cities. Urban expansion alone cannot keep pace.

As CEDA chief economist Cassandra Winzar explains, pushing residential growth further towards the city edges is no longer sustainable.

“When we see what is happening with our population growth and continued economic development, we cannot keep building further and further out,” she said. “Middle-ring suburbs offer the best of both worlds.”

Australia’s largest cities remain some of the least dense in the developed world. Melbourne sits 100th globally by population, yet 858th in density. Sydney ranks 104th for population and 803rd in density. The gap between how many people live in our cities and how much land they occupy is unusually large by international standards, which creates inefficiencies across infrastructure, transport, service delivery and cost of living.

Lessons From Auckland: What Happens When You Upzone an Entire City

The report draws a striking comparison from just across the Tasman.

Auckland introduced sweeping planning reform in 2016, abolishing single-family zoning and enabling medium-density housing across roughly 75 per cent of the city. The results were immediate:

• 22,000 new homes built between 2016 and 2021
• These homes represented about one-third of all building consents
• A 50 per cent jump in approvals
• An 80,000-home increase in total stock by 2024 roughly 15 per cent growth
• House prices estimated to be 15–27 per cent lower than they otherwise would have been
• Rents reduced by up to 28 per cent

This level of housing supply finally outpaced population growth, something Australian cities have not achieved in decades.

CEDA’s Danika Adams says Auckland shows that scale and simplicity are critical.

“It worked because it removed complex processes, allowed feasible development and was applied broadly,” she said.

State Reforms Are Emerging But Patchy

Several state governments have begun inching towards more density.

• NSW and Victoria have introduced reforms to streamline approvals and unlock development around well-located transport corridors and activity centres.
• Western Australia has announced plans to increase density around 10 Perth train stations.

However, the report notes that change is uneven and often slowed by local resistance. Planning systems are inconsistent across councils, frequently restrictive, and difficult for developers and builders to navigate.

Winzar argues that councils need stronger incentives or clearer consequences.

“If local governments are not meeting their targets, state governments may need to take over planning regulations,” she said. “But financial incentives for good performance should also be part of the approach.”

The report recommends the introduction of “by-right” rules, clear, prescriptive planning settings that state precisely what can be built on certain blocks without triggering lengthy objection processes.

Why This Matters to Builders

Builders know better than most that middle-ring suburbs are full of underutilised land: oversized blocks, ageing dwellings at the end of physical life, and areas well-served by transport, schools and services.

Turning a quarter of existing blocks into dual occupancies would:

• Create faster, more predictable work pipelines
• Reduce reliance on delayed and costly greenfield approvals
• Provide more diverse products for buyers at different life stages
• Slow the sprawl that pushes trades further from job sites
• Support the shift towards compact, efficient, lower-carbon homes

Australia’s market has already shifted. Many builders report rising enquiry for townhouses, terrace-style homes and small-footprint designs particularly in suburbs where land prices keep rising faster than wages.

This aligns with affordability research from Cotality, which recently found Australian home buyers now need more than a decade to save a 20 per cent deposit in most capitals. With national dwelling values lifting 7.5 per cent over the past year alone, demand is growing for smaller, more attainable options.

The Political Reality: More Density Is No Longer Optional

The idea of gentle density is often framed as a controversial shift, especially where established suburbs fear character loss or overshadowing. But the numbers tell a clear story: without medium-density options, Australia cannot close the supply gap.

The report warns that without change:

• Housing competition will intensify
• Prices and rents will keep rising
• Infrastructure networks will come under greater strain
• Outer suburbs will extend even further, increasing commute times
• Labour shortages will worsen as trades are pushed out of city centres

For builders, this environment creates both challenge and opportunity. Demand will remain strong, but delivery will get harder unless planning systems adapt.

A Path Forward: Small Steps, Big Impact

CEDA’s modelling shows that gentle density is not about radical overhaul. It is about modest, incremental change across thousands of blocks that, collectively, has a significant national impact.

The report encourages governments to:

• Create consistent planning rules across councils
• Introduce by-right development pathways
• Incentivise councils that meet housing targets
• Support dual occupancy as a mainstream option
• Increase supply in areas already well-serviced by transport and infrastructure

It is a practical, politically achievable way to add supply quickly without relying solely on large-scale new precincts or waiting for long-term infrastructure.

Author: TGB Editorial