There is always something happening at ratio: stay up to date with our project and team news here.

10 October 2018

Inclusionary Zoning: the 'Stick' Solution for Affordable Housing

Victoria’s housing affordability crisis is being felt by all. Successive political parties have struggled to provide a consistent mechanism for affordability that is effective in providing housing to those in need. In this piece, we explore a realistic avenue for achieving affordable housing through planning controls in ‘Inclusionary Zoning’. 

Where Are We Now?

It’s apparent to those who have worked in the planning sector in recent years that there have been little in the way of effectual policy directives concerning affordable housing. Whilst there have been attempts to encapsulate housing affordability in broad State Planning Policies, such as the following, these have not translated into action to date:

“Encouraging a significant proportion of new development, including development at activity centres and strategic redevelopment sites, to be affordable for households on low to moderate incomes.” [Clause 16.05-2 – Strategies under ‘Affordable Housing’].[1]

“Planning for housing should include providing land for affordable housing.”[2] [Clause 16 – Housing].

The lack of success in delivering affordable housing across Melbourne’s property market is obvious. We can therefore conclude that broad statements have no real impact in implementing the measures necessary to shift the property market paradigm, which is undoubtedly required.

“In Australia, social and affordable housing has generally been funded by Commonwealth and State Governments tax systems, rather than the planning or development assessment system.”[3]

Where then do we turn? It would make sense to planners that policy directives are still the obvious answer, but policy with more teeth is required and perhaps greater incentive - an answer less obvious.

Both a timely and recent change, which is of little surprise considering the explosion of news commentary on affordable housing, has seen the State Government introduce amendments to the Planning and Environment Act 1987.

These amendments change the status-quo by adjusting the statutory weight attributed to the issue of housing affordability. The amendments include (inter alia):

Addition of an objective “to facilitate the provision of affordable housing in Victoria” to Part 1 of the Act.

In a previous article we provided an overview of these amendments.

Along this tangent, the arsenal for statutory decision makers is now made more tangible.

Inclusionary Zoning

One of the more practical solutions to the complex issue of housing affordability is through the planning policy framework we have all come to know and love. The concept is ‘Inclusionary Zoning’. But what is Inclusionary Zoning?

There are varying interpretations of Inclusionary Zoning, however the general principle is: ‘designated parcels of land, through policy control (mandates), require that a percentage (usually between 5 and 20%) within the end-product development is reserved as affordable housing.’ With affordable housing now defined within the Planning and Environment Act 1987, under Section 3AA, the next step is to encourage the private sector to provide such housing.

Existing examples of Inclusionary Zoning currently being trialled across Australia are demonstrated in Figure 1: Inclusionary Zoning examples in Australia (top right) [4]:

As evidenced, the concept of providing affordable housing as part of larger development approvals is nothing new. Unbeknownst to some, ‘inclusionary provisions’, albeit in a different form, are already within the planning scheme, which have been a long-standing measure to return benefits to local government areas (for the wider community).

Public Open Space Contributions, which require a developer to make a contribution to the Council for public open space (usually 5%) as a percentage of the site value of the land can be argued to be a form of inclusionary provision.

The State Government is trialling inclusionary policies on Government land through the ‘Inclusionary housing pilot’[5] and the ‘Public housing renewal program’[6]. Both include an inclusionary element (i.e. which both mandate the inclusion of social and/or affordable housing within the development).  

Moving forward, we would like to see inclusionary zoning (in the form of mandatory affordable housing requirements) seriously considered in rezonings across the state and in cases where significant infrastructure investment increases land values.

Recent examples, such as Fishermans Bend and the Level Crossing Removal Project), highlight the opportunities presented in these areas. The uplift in land values when rezonings or infrastructure investment is made by government is an appropriate point to share the benefits with the broader community.

There appears to be an opportunity for Local Government Authorities to embrace the model, particularly as there is now increased statutory weight by the inclusion of the affordable housing definitions. Leadership from the State Government to support such an initiative would provide greater certainty to public and private sectors in this space.

In New South Wales, the Greater Sydney Commission (an independent organisation established by an Act of Parliament with specific responsibilities for planning for Greater Sydney), is proposing affordable housing targets in order of 5-10%[7] to those on ‘very-low and low incomes’ through inclusionary zoning:

“The draft Greater Sydney Region Plan and revised draft District Plans (October 2017) propose an Affordable Rental Housing Target in the range of 5-10% across Greater Sydney, subject to viability.” (The Greater Sydney Commission Information Note 4 – footnote 8)

As stated within Note 4, the Commission is proposing affordable housing targets apply under certain conditions (inter alia):

  • apply to land that is the subject of upzoning — a change of land use to residential or an increase in permissible residential development density.
  • vary by precinct according to the local development viability.
  • apply only to new areas nominated by the relevant planning authority; conversely not apply retrospectively to rezoned land.
  • be announced prior to rezoning to give the market certainty about the amount of affordable housing to be provided, and so that it can be factored into underlying land prices.
  • apply to land within new urban renewal or land release areas (both government and private) identified via a local or district housing strategy, or another form of appropriate research that illustrates a current or future need for affordable rental housing.

The Victorian Government doesn’t have to look abroad for solutions. The adoption of 5-10% of affordable housing is no small feat and demonstrates that it can be achieved by a State Government on a wide-scale and affect real change.  

Devil's in the Detail

Victoria’s planning system is unique insofar as it offers a ‘discretionary’ or ‘merit’s based’ approach to policy. Whilst our system is partially modelled on both UK and USA planning frameworks, the recent frustration in Victoria’s slow planning approval’s process is undoubtedly high.

On this note, an article written as part of the American Planning Association journal[8] raises a relevant question:

“Is a mandate needed to produce affordable housing or are incentives sufficient to spur developers to create affordable homes and apartments? (p. 2)

Certainty of planning policy and planning controls will potentially provide for the greater assurance to both developers and the wider community.  In-turn, this certainty will increase the supply of affordable housing. Such certainty, of course, needs to be clear at the start of the development process, to enable all parties to factor such changes in planning controls into business models.

Final Words

While Inclusionary Zoning might not be a panacea for the state’s housing affordability crisis, it can alleviate local pressures in a municipality-based approach and make a positive contribution to an issue that requires continual innovation and adaptation.

Inclusionary zoning provides an opportunity to form part of an array of solutions necessary to increase the supply and provision of affordable housing in Victoria. Importantly, the concept enables the uplift in land values to be shared by the private and public sectors to stimulate additional housing supply, including homes for those in the lower tiers of income.

Authors: Mitch Seach, Senior Planner and Mia Zar, Senior Planner


[1] [31/10/2014 VC43]

[2] [30/05/2014 VC106]

[3] Spiller, M, Mackevicius, L, and Spencer, A – Development contributions for affordable housing: theory and implementation (2018).

[4] (online, August 2018)

[5] (online, August 2018)

[6] (online, August 2018)

[7] (online, September 2018)

[8] Brunick, N – The Inclusionary Housing Debate: The Effectiveness of Mandatory Programs Over Voluntary Programs. American Planning Association (2004).



There are a number of terms used throughout our Housing Affordability series that have multiple interpretations. For the purposes of clarification, we've put together a glossary of terms as we've used them.


Follow ratio: on Linkedin or Twitter to join the conversation.

ha inclusionary zoning
ha inclusionary zoning fig1