After years of glut, the rental market in Sydney and Melbourne has tightened extraordinarily in the past 12 months. Property managers have reported upwards of 100 people queuing for inspections of rental properties in hot Melbourne rental areas like St Kilda and South Melbourne. The not-unexpected result has been a sharp increase in rentals.

And while demand factors have played a role, of greater significance is the shortage of supply. In Melbourne especially, it is well known that the large developers pulled up stumps a few years ago as the bottom fell out of the inner-city apartment market. This has resulted in a lack of new developments being constructed around the development-friendly inner-city and Southbank regions.

However, a further, less publicised reason for the supply shortfall has been the trend for local suburban councils in the past decade to clamp down on virtually any significant development. Most councils are now dominated by anti-development Green councillors who have adopted a restrictive approach to building approvals.

Several developers have told Crikey that it is near impossible to obtain approval for a block of apartments in Melbourne residential suburbs like Elwood, St Kilda, Camberwell or Windsor. Councils have also clamped down on the number of units or townhouses that can be built on a standard block. A decade ago, a developer would have been able to construct four well-sized townhouses on a traditional quarter-acre block; now, they would be lucky to get approval for three.

The anti-development attitude of suburban councils and their voters, while ostensibly aimed at inhibiting profiteering developers, has led to a dramatic reduction in supply of rental apartments and has been a key, yet publicly unstated cause of the current rental crisis.

While their intentions may have been pure, in trying to curtail the rich the Green councils have ended up hurting their own and those who can least afford it – struggling young renters and the aged. At the same time, the restrictions on development are protecting the sky-high property values of established baby boomers whose only contact with rent is when they are going to see the musical.

Peter Fray

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Peter Fray
Editor-in-chief of Crikey