Melbourne is experiencing an affordable housing crisis

The City of Melbourne is Victoria’s fastest growing municipality. During the next 10 years, our residential population is expected to grow by approximately 100,000 – that is more than 42,000 additional households. Greater Melbourne’s population is forecast to grow from 5 million people today to 8.5 million in 2051.

By 2036, demand for social and affordable housing will almost triple, to approximately 27,100 affordable dwellings – leaving a shortfall in supply of around 18,000 affordable homes.

A growing population, rising housing costs, low wage growth and insufficient investment in social and affordable housing is compounding the issue of housing affordability. Our draft Affordable Housing Strategy is part of a suite of responses by the City of Melbourne to address the spectrum of housing challenges.

Why do we need affordable housing?

Melbourne is one of the world's most liveable cities. People who live in our municipality enjoy excellent access to public transport, jobs, education and services. However, housing is becoming less affordable and is out of reach for many people. This makes our community less inclusive, diverse and prosperous.

Housing is essential infrastructure and is vital to the functioning of our society and economy. A wide spectrum of professionals including nurses, administration officers, child care workers, artists, hospitality and service industry staff contribute directly to our local community and economy, but many cannot afford to live here.

Ensuring all people have a place to live that is safe, secure and appropriate for their needs is a basic human need and allows people to participate fully in their community. Numerous studies have proven that a safe home improves physical and mental health, personal relationships and quality of family life, education and employment outcomes.

Our research shows that for every $1 invested in affordable housing, the community benefits by $3. This is due to:

  • reduced crime costs
  • reduced family violence
  • health cost savings
  • enhanced human capital
  • educational benefits
  • key worker retention.

Who can afford to live in the City of Melbourne?

Lenny, nurse and single parent

Low income family

Income after tax: $1000 per week
Rent for two bedroom apartment in Kensington: $450 per week
Leftover for living expenses: $550 per week

Hui, musician (supplements income with bar work)

Moderate income single

Income after tax: $850 per week
Rent for one bedroom apartment in North Melbourne: $410 per week
Leftover for living expenses: $440 per week

Louise, barista

Moderate income single

Income after tax: $750 per week
Rent for one room in a Carlton sharehouse: $265 per week
Leftover for living expenses: $485 per week

Luke, office cleaner

Moderate income single

Income after tax: $811 per week
Rent for one bedroom apartment in Southbank: $470 per week
Leftover for living expenses: $341 per week

Ana, pensioner

Very low income single

Income (pension): $420 per week
Rent for one bedroom apartment in Kensington: $375 per week
Leftover for living expenses: $55 per week

Mae, PhD student

Income: $540 per week
Rent for a bedroom in shared apartment in the Central City: $280 per week
Leftover for living expenses: $260 per week

Strategic approach

Our goal is to increase the supply of appropriate and accessible affordable rental housing in the City of Melbourne.

The draft strategy also outlines how we will best focus our advocacy efforts to enable change more broadly across the social housing and private rental market.

We have identified four priorities to address the crisis, with eleven corresponding actions and two policies.

Four strategic priorities:

What are we proposing?

We support the introduction of state wide mandatory inclusionary zoning (IZ) for affordable housing.

Mandatory IZ is a planning control which requires a percentage of affordable dwellings to be provided within new development. This approach embeds the cost of providing affordable housing in the cost of the land and provides policy certainty to developers.

Mandatory IZ is not currently available within the Victorian Planning Provisions. Its adoption can only be enabled by the Victorian Government. The City of Melbourne can advocate for this change but is not able to implement mandatory IZ independent of the Victorian Government.


1.1 Advocate to the Victorian Government for state-wide mandatory inclusionary zoning.

What are we proposing?

We will commit to delivering up to 25 per cent affordable rental housing on appropriate City of Melbourne land. The leasing of land will be prioritised over sale to retain public ownership. We will also identify a site to be leased for a demonstration affordable rental housing project, which will seek to deliver the majority of its housing as affordable housing. The feasibility of the percentage of affordable housing will need to be tested for viability.


2.1 Commit a City of Melbourne owned site to deliver an affordable housing project in the next five years.

2.2 Continue to work with other local Councils to establish opportunities for affordable housing development, and consider ways to share resources to enable affordable housing projects.


I. On all future residential development on City of Melbourne owned land, we aim to deliver up to 25 per cent of residential development as affordable housing. Consideration will be given to accommodating greater than 25 per cent affordable housing in urban renewal areas.

II. Consideration will be given to delivering affordable housing on commercial developments and community facilities on City of Melbourne land.

What are we proposing?

We will review our existing processes, mechanisms and resources to improve affordable housing outcomes and ensure housing stock is efficiently delivered and managed.


3.1 Develop an Affordable Housing planning policy for inclusion in the Melbourne Planning Scheme. This planning tool should clearly outline when an affordable housing contribution should be made, how the rate of affordable housing should be calculated and what should be included in an affordable housing agreement.

3.2 Establish a special purpose entity to manage affordable housing contributions, with potential to operate across local government boundaries.

3.3 Commit staff and budgetary resourcing to the ongoing delivery of affordable housing outcomes.

3.4 Develop a centralised internal process for recording and assessing affordable housing outcomes.

What are we proposing?

We will lead and influence change across government, the community housing sector and development sector. Beyond using our public forums to advocate we will lead by doing and demonstrate best practice in our own operations.


4.1 Advocate across all levels of government, the private sector and the broader community to improve affordable housing outcomes.

4.2 Advocate to the Victorian and Australian Governments for the increased investment and provision of social housing, with an emphasis on public housing.

4.3 Partner with the State and Federal Governments to identify surplus land for the delivery of affordable housing in the City of Melbourne. This may include land that is owned by government departments and entities such as Melbourne Water and Victrack.

4.4 Use City of Melbourne events, public forums and media platforms to promote greater awareness and understanding of affordable housing issues and alternative housing models.

What benefit could this deliver?

If implemented effectively and at scale, the proposed priorities outlined in this strategy could deliver up to 5,530 new affordable homes by 2036. This would leave a remaining shortfall of approximately 17,670 homes.

We recognise a shortfall of 17,670 affordable homes may seem overwhelming. However, the problem is not insurmountable. We will advocate and partner across the sector and with other tiers of government to find solutions that address this remaining shortfall.

Read the draft strategy

Affordable Housing Strategy