Victoria to legislate against shoebox apartments?

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ScreenHunter_3480 Jul. 25 10.20

By Leith van Onselen

It looks as if Melbourne will soon implement new rules that will mandate minimum sizes on new apartments, as well other design rules, in order to prevent high rise from becoming “future slums”. From The Age:

Among the mandated rules for developers proposed under the Office of the Victorian Government Architect’s draft Better Apartment Design guidelines would be minimum ceiling heights of 2.7 metres…

The draft guidelines… would also see minimum apartment sizes set at 37 square metres for a studio apartment. A one-bed unit would be a minimum of 50 square metres; two bedrooms, 65 square metres; and three bedrooms, 90 square metres.

And there would be minimum storage space in all studio or one-bed apartments of four square metres, up to eight square metres for a three-bed apartment.

The guidelines also recommend that all apartments above ground level should have a balcony with a minimum depth of two metres…

”Many of the apartments are not much better than a motel room. We can’t live in a motel room for the rest of our lives.”

The proposed new design rules follow a recent report from the Melbourne City Council, which argued that 40% of Melbourne’s newest apartments are smaller than 40 square metres. It’s findings are backed-up by a recent report in The AFR, which claimed that the average size of a new apartment has shrunk from 60 square metres five years ago to between 42 and 45 square metres today (and falling).

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There are a number of factors that are likely driving the shift to smaller apartments.

First, shrinking apartment sizes (as well as shrinking lot sizes) are partly a symptom of land price inflation. That is, as land prices rise, size and quality must be compromised in order maintain some semblance of affordability.

Second, apartment building is becoming a new “export” industry for Australia, with many high-rise developments now targeted at foreign investors rather than local buyers. Hence, the apartment market is increasingly built around satisfying the needs of overseas investors rather than residents.

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Personally, I have no issue with sales of new apartments to foreigners. Although, policy makers should not delude themselves that such developments are an answer to Australia’s housing affordability woes or perceived housing shortages.

Overall, the new design standards for Melbourne seem reasonable; although they should perhaps exempt student accommodation, where tenancy is usually temporary and cost is the primary concern.

That said, sensible housing policy is about lowering the systemic cost of housing and providing buyers with maximum choice and a myriad of housing options. But due to the raft of supply-side constraints on both infill and fringe development, new housing is overly expensive and choice has essentially been limited to an expensive inner-city shoe box or an inflated postage stamp-sized lot on the fringe.

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About the author
Leith van Onselen is Chief Economist at the MB Fund and MB Super. He is also a co-founder of MacroBusiness. Leith has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs.