A year on from the introduction of Victoria’s Townhouse and Low-Rise Code, application volumes have surged nearly 50 per cent. The numbers tell a clear story about where work is heading and what builders need to understand before the pipeline converts.
The numbers that matter
Applications for townhouses and low-rise homes in Victoria have increased from around 4,800 to 7,000 in the year since the Townhouse Code came into effect in March 2025, a jump of almost 50 per cent.
That is not a rounding error. That is a structural shift in where residential work is concentrating.
In Melbourne’s middle suburbs, planning permits for this housing type rose from 2,000 to more than 3,100 over the same period. The councils recording the highest volumes were Monash with 515 homes, Merri-bek with 452, Banyule with 402, and Darebin with 345.
Regional Victoria moved just as strongly. Greater Geelong recorded 664 homes, representing an 83 per cent increase, while Greater Bendigo recorded 166 homes, up 207 per cent.
For builders operating in or considering these markets, the pipeline signal is significant. Applications are the leading indicator. They tell you where demand is forming before construction starts.
What the Code actually changed
Understanding what drove these numbers requires understanding what the Code actually did.
The Townhouse and Low-Rise Code introduced a ‘deemed to comply’ assessment pathway for townhouses and apartment buildings up to three storeys under Clause 55 of all planning schemes. In practice, this means that if a development meets all the applicable standards upfront, the planning process moves faster and with greater certainty.
The standards cover setbacks, height, daylight access, overshadowing and overlooking, among other requirements. If a townhouse design meets those specific standards, it is ‘deemed to comply’ and neighbours cannot appeal to VCAT on those matters. Councils also cannot assess those proposals against neighbourhood character objectives.
Before this change, the average planning permit in Victoria was anything but fast. The average assessment time for a planning permit was 145 days, well over the statutory deadline, with the process subject to constant requests for additional information plus notice periods.
The government’s own modelling suggested the Code could reduce planning permit assessment times by at least 60 per cent, in addition to time saved avoiding VCAT.
Fewer VCAT appeals and faster council decisions mean one thing above all: reduced holding costs.
For builders, a development that previously sat in a planning queue for five months can now move through far more quickly if the design is fully compliant from the outset.
The catch: compliance upfront or pay the price
The tradeoff is worth understanding clearly.
With far less room for interpretation, even small design errors can quickly lead to non-compliance. There is almost no margin for error. Projects that don’t fully meet the deemed-to-comply standards fall back into the standard planning process, losing the speed advantage entirely.
If even one standard is not met, the application will be subject to the traditional town planning process.
This is a practical shift for builders accustomed to working through planning processes iteratively. The new model rewards builders who invest in thorough design and documentation at the front end. It penalises those who rely on negotiating their way through assessments.
For anyone pricing work or advising clients on feasibility in Victoria right now, this is the operational reality that needs to be built into early planning.
Where the work is and where it is going
The volume surge in applications is real. Whether it converts to an equivalent surge in construction starts is a different question.
Applications indicate intent. Construction starts require finance approval, viable margins, available trades and confirmed timelines. In the current Victorian market, not all of those conditions are straightforwardly in place.
The multi-unit sector in Victoria remains subdued, with an ‘anywhere but Victoria’ mentality discouraging investment decisions, driven in part by increased property taxes and business costs. Trading conditions for home builders have remained challenging in the face of rising construction costs, over-reaching new regulations, and lack of business confidence.
HIA received early positive feedback on the Townhouse and Low-Rise Code changes for providing upfront certainty and streamlining approvals, but noted that amendments are required to further improve implementation.
In other words: the approval mechanism is working. The broader investment environment around it is still creating friction.
That distinction matters for builders reading application volume as a direct demand signal. The pipeline is building. The question is how much of it converts to committed construction and on what timeline.
Regional Victoria deserves attention
The regional numbers are worth pausing on.
Greater Bendigo’s 207 per cent increase in applications is not a marginal movement. Greater Geelong’s 83 per cent jump indicates sustained demand pressure, not a one-off spike.
For builders positioned in or adjacent to regional Victorian markets, this scale of pipeline growth in townhouse and low-rise product is a direct opportunity signal. Regional markets have historically lagged in multi-unit development partly because the planning pathway was too uncertain to make the economics work. A faster, rules-based approval process changes that calculation.
The demand is there. Population growth and housing affordability pressures in regional centres are well documented. What the Townhouse Code has done is make the planning pathway for medium-density product more viable in those markets.
What builders should be doing with this information
The application surge does not automatically translate into work at your door. But it does tell you where to position.
Builders who understand the deemed-to-comply pathway inside out will be better placed to advise developers and clients on feasibility from day one. That means knowing which standards apply in which zones, understanding where overlay triggers might push a project back to the standard pathway, and being able to assess site compliance before a client gets attached to a design that won’t hold up.
The councils recording the highest application volumes are Melbourne’s established middle ring: Monash, Merri-bek, Banyule, Darebin. These are not greenfield markets. They require builders who understand infill construction, tight sites, party wall issues, and complex staging.
For trades and suppliers, the pipeline question is timing. Applications filed now represent work that will move into construction over the next twelve to twenty-four months, depending on how projects navigate the pathway and whether finance conditions allow them to proceed.
The bottom line
Victoria’s Townhouse Code is producing measurable results at the application stage. The volume data confirms that when you reduce planning uncertainty and provide a clearer pathway, demand that was already sitting in the market moves forward.
Whether the construction sector can absorb that pipeline efficiently depends on factors the planning system cannot solve on its own: trades availability, construction costs, finance conditions, and the overall investment environment.
What the Code has done is remove one of the most persistent bottlenecks in Victorian medium-density development. For builders operating in that space, understanding the new rules is now basic preparation. Not optional. Not a nice-to-have.
If the applications filing through Melbourne’s middle suburbs and regional centres convert to starts at anything close to their current rate, the next two years in this product category will be busy.
Victoria’s Townhouse Code is producing measurable results at the application stage. The volume data confirms that when you reduce planning uncertainty, demand moves.
General information disclaimer: This article contains general information only and does not constitute planning, legal or financial advice. Builders should seek independent professional advice relevant to their specific circumstances.
Author: TGB Editorial
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