Victoria grapples with slow and costly planning approvals, says HIA report

Victoria has emerged as the most sluggish and expensive state for planning approvals in Australia, according to a recent industry survey conducted by the Housing Industry Association (HIA). The survey, which included responses from new home builders, renovators, manufacturers, suppliers, trade contractors, developers, and other industry participants, highlights significant challenges in the state’s planning approval process.

HIA’s Senior Economist, Tom Devitt, revealed the findings, stating, “Obtaining a planning approval for a new home build in Victoria takes over seven months and costs almost $20,000.” This figure starkly contrasts with the national average of $14,100 and 5.4 months, making Victoria’s process notably more burdensome.

The survey delved deep into the time and cost implications of obtaining planning approvals across the country, and Victoria’s performance was found to be the most taxing among the large states. “Victoria’s planning approvals process was the most expensive and time-consuming of all the large states, far worse than the national average,” Mr Devitt added.

The lengthy and costly process has resulted in significant repercussions for the building industry in Victoria. Devitt highlighted, “There are many cases where planning approval for one dwelling on residentially zoned land takes a minimum of 6-12 months. There are even horror stories across the state of planning processes taking years and costing builders hundreds of thousands of dollars in delays, costs, and rework.”

These delays and costs are not just a financial burden but also impact the volume of homes being built. “The result is that many builders are simply no longer attempting to build certain dwellings or develop particular parcels of land,” explained Devitt. “For some types of multi-units and land development, both builders and customers are concluding that the subdivision process is too hard, delays are too long, and holding costs are too high.”

The impact extends beyond the builders, affecting the broader housing market. “This means, beyond the explicit costs of the planning process, there are homes that never get started, further constraining overall home building volumes and making all other housing more expensive,” Devitt noted.

The Australian government has recognised these challenges and organised a national Economic Reform Roundtable aimed at boosting productivity in housing and increasing the number of homes built. Devitt emphasised the importance of addressing planning system inefficiencies in these discussions: “Improvements to the planning system must be part of the discussion.”

The current Victorian planning process is mired in complexities and inefficiencies. Devitt described the situation: “The Victorian process is bogged down in costs, delays, and uncertainties, including required drawings, consultants and experts, reports and permits, heritage and flood overlays, environmental regulations and restrictions, third-party notification and appeal rights, and council fees, modifications and delays. It can often take weeks to get a simple response from council.”

Additionally, new building regulations, such as those related to energy efficiency and accessibility from recent changes to the National Construction Code, add further time and cost burdens. “There are also new building regulations, including around energy efficiency and accessibility associated with recent changes to the National Construction Code, requiring specific expertise that costs time and money,” Devitt said.

The survey respondents proposed several improvements to streamline the planning process, with private certification emerging as a key suggestion. “Rules-based private certification would overcome the subjective interpretations, including around neighbourhood character, relative to what should be objective town plans,” Devitt explained. “It should also reduce the occurrence of numerous unnecessary and often duplicated requests for information and reversed decisions from different Town Planners.”

The introduction of private certification for building approvals previously accelerated the process significantly, reducing it from months to weeks without sacrificing quality. Devitt argued that extending this approach to planning approvals could have similar benefits. “Extending private certification to planning approvals will speed up this process, contributing positively to recent policymaker efforts to improve productivity in the home building industry,” he stated.

Moreover, private certification could alleviate conflicts of interest at the local level, where councils often face disincentives to approve more housing supply. “Councils have disincentives towards approving more housing supply. Councils are beholden to their existing residents, not potential future residents,” said Devitt. “Private certification would bypass these conflicts. It would also ease the burden on councils, addressing skills shortages and allowing Town Planners to do what they do best – and better than anyone else – write town plans, design cities, not be distracted by the administrative task of assessing compliance with them.”

The HIA’s findings and proposed solutions, including further insights into planning costs and delays, are detailed in their Housing Policy Scoreboard, Planning Blueprint, and Omnibus Survey Findings.