RttR: More Zoning for Projects No One Can Build: Grattan’s ‘Independent’ Housing Theory

Responding to the Rhetoric (RttR) is our rapid-response strand within Melbourne for Sale. It sits alongside our formal published volumes, but operates differently: timely, evidence-based rebuttals to policy claims, media narratives and “expert” analysis that shape the housing debate in real time. When arguments don’t stack up, economically, logically or factually, RttR steps in to test them against the numbers and the lived reality on the ground.

The Grattan Developer Lobbyist Institute, sorry, the Grattan Institute, has delivered a striking fresh new intervention in Melbourne’s housing debate, as reported in The Age on 22 February 2026 (“The 20-storey divide: Melbourne’s high-density push stalled by numbers that don’t stack up”).

So fresh, in fact, it appears entirely untethered from economic reality.

Under the Allan Government’s existing activity centre reforms, Grattan says up to 600,000 homes could theoretically be “unlocked” through deregulated planning settings.

That’s the big number. Here’s the small one. Only 18% of projects in those zones are commercially viable. Which means 82% of this newly “unlocked” capacity cannot currently be built viably.

Pause there, because this is where the argument quietly collapses under its own weight.

Grattan itself acknowledges the constraint is not planning capacity. Brendan Coates, the Institute’s housing program director and a YIMBY Melbourne board member (independent, of course), notes that post-pandemic construction cost surges have rendered many mid-rise projects unviable. Finance is tight. Taxes and charges bite. Margins don’t stack up.

In plain English: the economics don’t work.

So, what do you prescribe when construction costs, financing conditions, taxes and viability are the binding constraints? If you’re Grattan, the answer is… more planning deregulation.

Expand the activity centre footprint. Push six-storey envelopes further into the outer catchment. Loosen amalgamation rules. Broaden “yes by default”.

In other words: widen the map.

Which is a bit like walking into an empty restaurant, where the meals are overpriced, the meals are awful and the customers have stopped coming and concluding that the real problem is regulation around the width of the front door.

Not the prices. Not the costs. Not the product. Not demand. The door.

And if 82% of potential housing supply is unviable because it costs too much to build relative to what buyers will pay, expanding zoning envelopes doesn’t fix the arithmetic. It simply expands the list of sites sitting on the shelf, waiting for the moment the margins return.

YIMBY Melbourne all but says this out loud in the same article: “The most important thing to remember is that changing lines on maps enables housing to be built as soon as it becomes economically viable,” lead organiser Jonathan O’Brien says.

Exactly. As soon as it becomes "economically viable".

Not "let's find a solution to have these built affordably today".

Not "let's mandate affordable housing to limit hosing costs and allow for affordability to be passed onto consumers".

Not "government needs to step in and build the public and social housing needed to drop prices at the bottom of the market".

As with all things YIMBY, actually creating affordable housing is an afterthought for their dogmatic pursuit of supply, supply, supply - but only the type that will deliver developer bit profits when they are good and ready to make them.

In other words: redraw the map now, so the private market can move fast later when it suits the spreadsheet. The goal is maximum optionality for developers and landholders, with the public asked to sign a blank cheque in advance by loosening planning rules today.

The Market Is Already Talking

Grattan says we need to “build more of the homes that people want where they want them”, while also conceding that demand for new apartments is weak in some outer activity centres. On its own that’s already awkward for an organisation advocating for towers of apartments across the city, but it’s not the single killer fact. The killer is what happens when you put that admission next to the rest of the market evidence because it all points in the same direction.

Start with the demand signal: in parts of the outer ring, we know buyers aren’t exactly lining up for new apartments. Now add the inventory signal: Melbourne has thousands of unsold apartments sitting there right now. Then add the resale signal: in many activity-centre suburbs, the very places we’re told are the obvious answer, established apartments are selling at a loss compared to original purchase prices.

Put it together and the message is obvious: people don’t want this product at these prices, no matter how many lines you redraw on a map.

If this were the irresistible answer to affordability, it wouldn’t be selling at a discount. It wouldn’t be sitting unsold. It wouldn’t be struggling for buyer confidence. The market has already delivered its verdict and it isn’t blaming planning maps.

And this is where even the expert voices in the same story start quietly puncturing the fantasy. David Hayward, emeritus professor of public policy at RMIT, makes the obvious point: if the government genuinely wants more higher-density homes near public transport, it shouldn’t pretend the private market will deliver that outcome on its own terms. He also notes Victoria’s land tax settings have helped moderate prices and warns that “chasing these dreams” has led to planning reforms that are diminishing the quality of housing stock (along with the liveability of the suburbs it impacts).

The market isn’t whispering here. It’s speaking clearly, through weak demand in some outer centres, unsold inventory, and resale losses in the very locations being held up as the model. Yet the response we’re being sold is still to treat planning maps as the central barrier and push for even more deregulation anyway.

The Permits Are Already In — The Cranes Aren’t

Here’s the part that should embarrass anyone still pretending this is mainly a planning problem.

Melbourne already has a massive pipeline of council-approved housing that simply isn’t being built. A pipeline over 100,000 projects long according to the Municipal Association of Victoria, the peak body for councils.

These aren’t projects stuck in VCAT purgatory. They’re not being “blocked by NIMBYs”. They’re not strangled by overlays or neighbourhood character restrictions.

They’re approved.

And they’re sitting there because the numbers don’t work because construction costs, finance and risk have moved faster than the sale prices and rents that would make these projects viable.

That matters because the approvals are already done. The market still won’t build. Blaming planning now is like blaming the starting gun when no one shows up to race.

So when Grattan responds to a viability crisis by calling for even looser planning controls, it’s not offering a solution to the housing crisis today. It’s handing developers an early Christmas present: rewrite the rules now, so the moment the margins return they can move faster, build bigger, and extract more, while communities wear the permanent change.

That’s the tell. There’s nothing in this agenda about affordability, housing standards, infrastructure, or building the homes people actually need. It’s about clearing the runway so the private market can maximise yield when the spreadsheet says “go”.

A housing strategy turns approvals into homes.

This strategy turns suburbs into a pre-approved profit option.

Context Matters

It’s also worth taking a quick look at who is making this argument, because Grattan is routinely treated as a neutral umpire floating above the fray, when in reality it sits squarely inside Australia’s political and funding ecosystem.

The Grattan Institute was established in 2008 with backing from the Commonwealth Government under Prime Minister Kevin Rudd and the Victorian Government under Premier John Brumby, both Labor governments. It describes itself as “independent”, but its institutional DNA is plainly drawn from the Labor policy universe, and that matters when its recommendations line up so neatly with what Labor governments already want to do.

Then there’s the funding landscape. Grattan operates with major corporate supporters, including National Australia Bank, and NAB isn’t just a passive bystander here. It publishes plenty of “thought leadership” on housing and supply that, conveniently, tends to land on the same policy destination: faster approvals, fewer planning constraints, more flexibility for development pipelines. NAB has also publicly talked up massive ambitions for housing-related finance, including substantial funding for residential-adjacent development (build-to-rent, student accommodation and similar). When a major bank is positioning itself to expand development lending, “thought leadership” has a funny way of arriving at “deregulate more.”

Grattan also lists the Scanlon Foundation among its endowment supporters, the philanthropic vehicle associated with Peter Scanlon, widely described as a successful property developer and investor. Again, nothing mysterious: just another thread tying the “independent” policy conversation back into the property and finance ecosystem that benefits from a bigger, faster, looser development pipeline.

And finally there’s governance overlap. Grattan’s housing program director is a board member of YIMBY Melbourne. So when the Grattan solution to a viability crisis is, yet again, “more deregulation”, it doesn’t land as a reluctant conclusion forced by the data. It lands as a worldview doing what worldviews do: finding its favourite lever, no matter what the numbers say.

Put it all together: Labor origins, corporate funding incentives, property-linked philanthropic support, and YIMBY governance overlap and the pattern becomes hard to miss. It’s not a conspiracy. It’s alignment. And readers deserve to see it laid out bare in front of them.

The Convenient Narrative for the Government

Blaming planning maps is politically neat. It’s clean. It’s simple. It produces tidy graphics and big, impressive capacity numbers. Most importantly, it shifts attention away from the harder questions about government budget priorities, public housing ambition, procurement settings, infrastructure sequencing and whether the state itself is prepared to build at scale rather than outsourcing the entire crisis to private margins.

If you frame the housing crisis as a failure of “red tape”, you can announce bold reforms without committing to the expensive, complicated business of delivering large-scale public, social and affordable housing. You redraw the lines, talk about “unlocking supply”, and reassure everyone that if we just deregulate enough, the market will solve this.

And when the market does not solve it, when Grattan’s own analysis shows that 82% of that theoretical capacity remains commercially unviable, the answer isn’t to question the premise. It’s to reach for the same lever again.

Deregulate more.
Expand further.
Loosen again.

And all of this sits against the backdrop of ongoing public controversy about alleged cost inflation and misconduct within Victoria’s construction ecosystem, including claims that corruption linked to CFMEU influence may have cost taxpayers up to $15 billion on major projects. Imagine how much affordable housing that could have helped deliver?

As for the structural relationship between a government out of money, a ‘big build’ agenda running out of projects, height limits, crane-intensive mega-sites and the well-documented influence of construction unions on large-scale building programs, that’s a conversation for another day.

For now, the pattern is clear. It is far easier to blame planning maps than to confront delivery failure, budget trade-offs or the limits of a market-led model. Far easier to sell deregulation as reform than to ask whether the strategy itself is flawed.

The Core Absurdity

Here’s the problem in one sentence: Grattan admits the binding constraints are construction costs, finance conditions and commercial viability and then, without blinking, it prescribes planning deregulation as the cure.

That is the contradiction at the heart of the argument. If 82% of “unlocked” capacity can’t be delivered under current economic conditions, the issue is not that Melbourne lacks zoning. The issue is that the economics don’t stack up and redrawing planning maps doesn’t change that arithmetic.

All it does is expand the inventory of sites sitting there on standby, waiting for margins to improve. Which may be very useful to developers and land speculators when conditions turn, but it doesn’t solve the delivery problem today, it doesn’t guarantee affordability tomorrow, and it certainly doesn’t justify selling communities a permanent rewrite of their suburbs on the promise that it might be “useful” later.

Melbourne does need more homes. But treating planning deregulation as a universal solvent, even when your own numbers show viability is the bottleneck, isn’t serious economics. It’s ideology dressed up as analysis: the same lever pulled again and again, regardless of what the evidence is actually saying.

And at some point, the absurdity becomes impossible to unsee.