How building thousands of homes in Melbourne will tilt the seats of power

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This city’s political map was once so well established that a Melburnian’s politics might be read by their address and, even, which side of the Yarra River they lived on.

The leafy streets of the inner-east and south-east were strictly conservative; the industrial suburbs of the north and west, diehard Labor territory.

A view of the city from Southgate Tower, Sturt Street, South Melbourne, in 1993.Credit: Joe Sabljak

Then, after the excoriation of the 1990s, as a great structural shift saw manufacturing giving way to services, that map underwent a rework. Melbourne densified around its centre, while continuing to sprawl at its fringes as population boomed.

One upshot was the rise of the Greens, a development underpinned by young people flocking to work, live, and mostly rent, in central Melbourne. The two big political parties were caught off guard.

Now, as the pandemic fades in the rearview mirror, our population is booming again. This time the Labor state government seems determined not to let forces of demography get the better of it.

With housing and rental affordability at a historically low ebb, the government has signalled a more active role in shaping Melbourne’s future, promising 800,000 new homes over a decade, made possible by new ministerial powers designed to direct high and medium-density housing into established suburbs.

If it follows through, Labor’s plan will almost certainly impact the politics of the suburbs – and electorates – targeted as part of the densification push.

“Housing densification is the friend of the left side of politics, no doubt,” says prominent former Labor strategist and Redbridge pollster Kos Samaras. Ominous words indeed for the Coalition, which fears the government’s housing vision may be as much about politics as good planning.

It is a strategy both rich with opportunity and fraught with danger for the government.

Never waste a good crisis

Melbourne’s politics were shaped in part by this country’s tradition of homeownership, among the highest in the world, and long a policy bedrock for conservative parties. But as a political strategy, it is now long past its best-before date.

Homeownership in Melbourne peaked in the 1980s. Since the late 1990s, the decline has accelerated, with soaring prices pushing the great Australian dream further out of reach for each successive generation.

As Victoria’s recent housing statement acknowledges, affordability is now at its lowest level for at least three decades, thanks to soaring interest rates, runaway property prices, population growth and falling real wages.

A family earning a median income of $105,000 can now afford just 13 per cent of homes on the market – the lowest proportion since records started in the early 1990s. It now takes a typical Victorian household more than six years to save up for a deposit on a house, compared with about 3.6 years in the early 2000s. For low-income households, the situation is even grimmer.

The decline in homeownership in Victoria has been accompanied by a similar drop in the level of public housing as a proportion of all housing. Victoria currently has the lowest percentage of social housing in Australia.

Demand for private rentals, therefore, is soaring – along with rents. Over the year to September, Melbourne rents increased by an average of 5.8 per cent, the biggest annual rise for more than 24 years.

As a result, a growing proportion of Melburnians are private renters paying big money for the roof over their heads, more inclined to vote Labor or Green than Liberal. So, as older voters either die or stop voting, and a similar portion of the population turn 18 and start to vote, the result is a compounding negative for the conservatives.

A new political map

More than 96 per cent of occupied dwellings in the state seat of Melbourne are now either flats or townhouses and more than 70 per cent are rentals. Once a Labor stronghold, the seat is now rock-solid Green.

In the seat of Richmond, which swung from Labor to Green in 2022, 87 per cent of inhabited dwellings are now flats and townhouses, while 55 per cent of all households are rentals.

Liberal territory has also been affected. The seat of Prahran – traditionally fought over by the Liberals and Labor and where 60 per cent of properties are rentals and almost 90 per cent are flats or townhouses – swung Green in 2014.

And at the 2018 “Danslide” election, the Liberals lost the blue ribbon seat of Hawthorn – formerly held by stalwarts like Ted Baillieu – to Labor.

Current Liberal leader John Pesutto won Hawthorn back last year, an outcome suggesting something of a comeback for the Liberals in their heartland after the devastation of the “teal” independents across blue-ribbon conservative territory at the federal election.

But a closer look at the figures reveals that Pesutto’s vote was actually down in 2022 from 2018 and that the left vote had been split by Labor, the Greens and a teal-like independent.

The Liberal leader has plenty of cause for concern, and not just for his own seat. At the last election, Labor notionally won the newly created seat of Glen Waverley off the Liberal Party, with a 4.3 per cent swing. Tellingly, over the decade to 2021 the seat has experienced a 5.1 percentage point drop in the proportion of households owned outright, mostly offset by a rise in the proportion of rental households.

The housing statement and big squeeze

Despite decades of government rhetoric about reining in sprawl, the bulk of Melbourne’s growth has continued to be on the fringe where property prices are lower and young families could afford to buy.

Earlier this year the Andrews government acknowledged it had failed to meet its own target of directing 70 per cent of housing growth to established areas, and that just 56 per cent of new dwellings since 2014 were in existing suburbs.

Planning minister Sonya Kilkenny with now premier Jacinta Allan.Credit: Joe Armao

In September, through his much-spruiked housing statement, then premier Daniel Andrews insisted it was time to get serious about both housing affordability, and consolidating the city. Supply in established suburbs, he insisted, was the answer to both challenges.

He promised 80,000 homes a year for the next decade, with 70 per cent in established suburbs and approvals for larger housing projects decided by Planning Minister Sonya Kilkenny, sidestepping local councils.

Few in the housing industry believe the 80,000 homes per year average is realistic, but if the government realises even part of its plan, the location of the housing has real implications for Melbourne’s politics.

Planning or politics?

Pesutto’s seat of Hawthorn is a case in point.

As part of the housing statement the government identified 10 so-called “activity centres” where it wants to see 60,000 homes built in the next decade: Broadmeadows, Chadstone, Epping, Frankston, Moorabbin, Niddrie (Keilor Road), North Essendon, Preston (High Street) and Ringwood, and Camberwell Junction.

Camberwell, whose well-heeled residents are renowned for their success in resisting development, is in the heart of Pesutto’s seat. The government has made a point of its plan to approve more medium and high density there.

Samaras says Hawthorn is a seat Labor will seek to win back at the next poll. “Three or four more apartment blocks and he’s gone in 2026.” It’s an unnerving observation for the Liberals, who now hold just 11 seats in Melbourne.

Could the government be Machiavellian enough to use planning approvals and housing density for political ends?

Pesutto says he has “no doubt” that Labor’s push to densify middle-ring suburbs is at least in part politically motivated.

While he acknowledges there is room for new homes across established suburbs – including his own electorate – he warns retrofitting the infrastructure such as schools, hospitals and roads would come at an enormous cost, limiting scope for much-needed infrastructure on the fringes.

“We don’t doubt that there is a political calculation by the government that this will suit them politically,” he told The Age. “I’m not worried about more housing coming in, what I’m concerned about in Hawthorn is that it’s very difficult to conceive where a school or a new hospital is going to go. The cost of retrofitting infrastructure that comes with a significant increase in population is prohibitive.”

Opposition Leader John Pesutto says he has no doubt Labor’s housing push involves a political calculation.Credit: Eamon Gallagher

John Utting is a trusted electoral strategist who has helped Victorian Labor to victory on multiple occasions including in 2022. He says through its housing statement, “Labor is both dealing to and creating a constituency,” conscious strategy or not.

Samaras says that given Labor is probably at a high watermark in the number of state parliamentary seats it holds, it is unlikely to be seeking to push further into Liberal territory. “Labor will be looking to strengthen its position in the seats it has taken off the Libs in the eastern suburbs.”

Nonetheless, Samaras says the government’s housing plan – if realised – will accelerate a long erosion of the Liberal voter base in electorates such as Box Hill, Ringwood, Ashwood, and even further east, in Bayswater.

His company’s research indicates that Victorian Labor secures around 60 per cent of the two party preferred vote of young renters and homeowners.

“Stimulating the movement of these groups of voters into established suburbs will have a significant impact on the political landscape,” he says, “further accelerating the trends witnessed at the 2022 state election, with Labor enjoying moderate swings towards it in eastern electorates.”

Labor plans to eventually extend the list of activity centres to 120 across greater Melbourne. No explanation has been provided for the locations, leaving some planning experts scratching their heads about how they were chosen.

Monash University political scientist and emeritus professor Paul Strangio is in little doubt that politics would have played a part in the decision-making.“Labor hardheads would be alive to any electoral consequences of their policymaking and would not be gifting advantages to rival parties,” he says.

But political party strategists and experts agree that Melbourne’s housing crisis and the government’s response may indeed prove an advantage to at least one of its rivals.

On Labor’s left and west flank

Senior Labor sources and strategists note that at both the state and federal level the Greens now talk as much, or even more, about housing than about climate and the environment. The Greens have, for example, been campaigning for the introduction of the two-year rental freeze, followed by rental caps of 2 per cent every two years.

In Victoria, the Greens have worked hard for years to make housing a top order issue; the lack of public housing in particular, has been a focus. It was a major campaign priority in both 2018 and in 2022, whereas Labor in 2022 campaigned more on energy prices.

The party’s Victorian leader Sam Ratnam says the impact of the housing crisis is having a “visceral” impact on MPs because of constituents in housing stress and “literally homeless” presenting at MPs’ offices as a last resort for help.

She says Labor has been “caught sleeping at the wheel” on the housing crisis, failing especially in the provision of social housing. She has dismissed the housing statement as a continuation of a failed policy of relying on the private housing market.

Victorian Greens leader Samantha Ratnam.Credit: Joe Armao

The Greens are now eyeing the once deep red seats of Pascoe Vale, Footscray, Preston, Northcote, Albert Park for 2026. Ratnam notes increasing Green support in Hawthorn, Ivanhoe, Williamstown and Monbulk.

In the seat of Pascoe Vale, for example, the proportion of rental properties has increased from 31 to 35 per cent over a decade. Apartments and townhouses now account for more than 40 per cent of the housing stock. After a recent distribution, the seat is held by Labor on a margin of just 2 per cent against the Greens.

In Footscray, where 44 per cent of properties are now rentals, and almost half are apartments or townhouses, Labor is clinging on to a 4.2 per cent margin against the Greens.

Big problem, big risk

Labor would be wise not to bank on its housing and planning shake up as a recipe for electoral success.

The housing statement is built on the assumption that a loosening of planning controls will see private developers build lots more homes quickly.

But, as The Age has reported, securing planning approvals is no guarantee of getting homes built, especially when the building industry is in turmoil, and construction costs are at an all-time high.

In the social housing sector, the reality is that the combined commitments of the federal and state governments will result in the ongoing decline in social housing as a proportion of the overall housing market.

So if, come 2026, the Allan government is judged to have done little more than talk about housing while constituents continue to suffer, it could pay a big price. The Greens will be the beneficiaries in the inner-north and west in particular.

While Labor has made political inroads into the Liberal vote in the east, it is losing support to right-leaning independents in the outer-northern and western suburbs. That trend looks likely to continue or accelerate if there is no real relief offered from housing stress.

In the seats of Thomastown and Broadmeadows, homeownership is declining, and private renters are growing as a proportion of voters. However, these renters are not part of the uni-educated cohort of the inner suburbs.

“The renters tend to be lower-income, casual gig workers and Uber drivers,” says Samaras,“the kind of people the Left once courted but has now forgotten.

“These people know they’ve been forgotten and boy, they are swinging the baseball bat.

“These renters tend to vote for anyone other than the major parties.”

Utting also points to the experience of former New Zealand prime minister Jacinda Arden and the damage done to her government by its spectacular failure to deliver on its 2018 “KiwiBuild” promise of constructing 100,000 homes in 10 years.

Frustration with New Zealand Labour’s housing record is widely viewed as a key factor in the slump in Ardern and NZ Labor’s standing, and her decision to quit politics.

He stresses that time may work against Labor in Victoria because policies like the September housing statement take many years to have any effect.

Utting cautions that voter disillusionment over housing is now a deep structural problem for both major parties.

“A big political challenge is presented by renters facing the likelihood that they will never get back into the kind of house they were brought up in. There is a huge risk because there is no way of politically satisfying this issue.”

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