How the missing middle can help solve the Australian housing crisis
Back to Blog 28 November 2023 3 minute read
The “missing middle” of low-rise, medium-density homes could play a key role in overcoming Australia’s housing affordability crisis by increasing the volume of dwellings in established areas.
While small-scale developers are ideally suited to missing middle housing, they still encounter challenges accessing traditional lender services.
These challenges could create major opportunities for both retail and wholesale investors, by helping solve the financing pain points of smaller developers.
Australia’s housing crisis continues to worsen
Public attention has focused heavily on the woes of the Australian housing market – in particular a worsening affordability crisis created by a shortage of well-situated homes in major cities.
The crisis is set to worsen in the future. New housing starts plunged by a staggering 23 per cent in 2022 on the back of soaring costs and construction delays, according to data from the Housing Institute of Australia (HIA)
These problems have continued in 2023, with the housing starts of Australia’s 100 biggest builders dropping to 57,830 in the year to June, for their lowest level since 2013.
The severity of the problem has since prompted a strong response from government. In August, national cabinet unveiled an ambitious plan to build 1.2 million new “well-located” homes over the five-year period starting from 1 July 2024.
Given that national cabinet made specific reference to “well-located” housing, the plan is expected to drive the creation of in-fill housing situated in established urban areas.
The Victorian government’s new housing plan, for example, highlights a focus on in-fill housing, which can create new homes situated near existing amenities and infrastructure, and thus reduce the need for urban sprawl.
The plan states that ‘By unlocking new spaces to build homes across established suburbs, we’ll stop urban sprawl and boost housing supply in the places Victorians want to be – close to where they work, or send their kids to school’.
Missing middle could be the key to in-fill housing supply
The “missing middle” refers to those homes that lie between detached suburban houses and high-rise apartments. These homes primarily consist of low-rise, medium-density dwellings, such as duplexes, terrace houses, town homes, and Fonzie flats.
As a category of housing, the missing middle is extremely well-suited to in-fill development in Australia’s established suburbs. It’s comparatively easy for a developer to take an existing home or empty lot, and convert it into a low-rise dwelling that fits in with the suburb.
The low-rise, medium-density character of missing middle homes also makes them less likely to disrupt the surrounding built environment. They can increase the supply of dwellings in an area, without compromising its character.