Strip away the political theatre around Melbourne's housing debate and a quieter, more profitable solution is already taking shape on suburban streets. Townhouses and terraces, long a fixture of Melbourne's inner ring, are gaining fresh momentum as experts and developers argue they offer more density, at lower cost, in the locations people actually want to live.
Analysis of official figures by the Sydney Morning Herald shows that Victorian approvals for semi-detached, row and terrace homes have trended strongly upward over the past 35 years, eclipsing both Queensland and New South Wales. That trajectory is being reinforced by recent state government reforms to the Townhouse and Low-Rise Code, which introduced simplified "deemed to comply" rules covering setbacks, room dimensions and overlooking. The practical effect is faster, more predictable approvals for smaller-scale residential development.
Brendan Coates, economic policy programme director at the Grattan Institute, argues this form of development will do more to boost housing supply than the Allan government's high-profile activity centre plan for high-rise apartments. "These are homes that are genuine alternatives for families," he said. "They're also cheap to build and don't require any specialised equipment."
The simplicity of the construction model also lowers the barrier for smaller operators. Unlike apartment towers, which demand specialist builders, lift cores, basement carparking and complex fire engineering, townhouses can be developed viably by what Coates calls "mum and dad" developers. "The value of this kind of gentle density is you can have a street of 50 homes, and if five of them get turned into five townhouses, you've boosted density on the street by 50 per cent," he said. "And the streetscape's fairly unchanged."
Recent Grattan modelling suggests the commercial case for townhouses is stronger than for apartments in many of the activity centres earmarked under current planning policy, where unit prices have actually fallen over the past five years. Australian Bureau of Statistics data confirms the average cost of building semi-detached, row and townhouses is substantially lower than apartments.
Dan Honey, chief creative officer at property developer Molonglo, puts the inflection point at three storeys. "Anything taller requires lift cores, basements, complex fire engineering and compliance, heavy structures, cranes, and a different type of builder, all adding to cost and risk," he said. Molonglo originally planned to develop a former Brunswick shopping arcade into apartments before pivoting to townhouses when it became clear apartments would compromise both design quality and buyer affordability. "New apartment end prices have increased dramatically for the buyer in recent years, while developer margins have decreased," Honey said.
For buyers, the lived experience is catching up with the economics. Elicia Wallace, a 49-year-old construction project manager, moved into a three-storey, two-bedroom townhouse in Moonee Ponds after downsizing from a single-storey Edwardian home she no longer had the appetite to renovate. The move halved her utility bills through better insulation and modern appliances, cut her commute by 20 minutes, and gave her daughter a degree of independence that a single-level home couldn't provide. "In my previous house, we were all on top of each other. Living in a townhouse, I can sit downstairs and watch TV, she can go upstairs and have her own space," Wallace said.
The political backdrop is worth examining clearly. The opposition leader, Jess Wilson, announced a housing proposal this week that centres on expanding apartment development in a "capital city zone" around the Melbourne CBD, covering suburbs including Southbank, North Melbourne, Fishermans Bend, Parkville, Fitzroy and Collingwood. The policy targets an area that already has a glut of roughly 8,000 new and unsold units across metropolitan Melbourne, which raises reasonable questions about whether adding more apartment supply in the same precincts addresses the underlying problem.
There is a fair counter-case for apartment-led density, of course. Well-designed higher-density housing near public transport nodes can reduce car dependence, lower per-capita land consumption, and support the commercial viability of local retail and services. Inner-city apartment living suits a significant portion of the population, particularly singles and couples without children. Dismissing the apartment model entirely would be premature, particularly if planning and construction reforms succeed in bringing costs down over time.
Chamberlain Architecture and Interiors director Glenn Chamberlain, who has worked extensively in the Victorian market, sees the two forms as complementary rather than competing. "Either apartments are going to improve, a little bit of extra storage, a little more space, or townhouses are going to become more and more viable as an alternative to detached homes," he said. The design challenges of townhouses, including managing light access from a single aspect, clever storage solutions and efficient use of vertical space, can actually produce more interesting architecture than formulaic apartment blocks, he argues.
The honest assessment is that Melbourne's housing shortage is too large and too varied to be solved by any single typology. The genuine tension is between the speed and scale that apartment towers theoretically offer and the commercial reliability and community acceptance that townhouses demonstrably deliver. Grattan's analysis suggests the latter is currently winning on both counts. For a city that needs to house more people in places they actually want to be, that is a signal worth taking seriously, regardless of where you sit on the broader density debate.