Why the 'missing middle' is Australia’s greatest housing supply opportunity

When architects and cafe owners Kim Lai and Tom Orton were ready to buy a family home, they found themselves searching for the perfect in-between size.

They are among a growing number of buyers seeking the “missing middle” – low to medium-density apartments, townhouses and duplexes in established inner-city suburbs, near employment, transport, shopping and parks, that are an alternative to standalone houses, urban sprawl and residential skyscrapers.

The couple, who are parents to a three-year-old son and founders of the We Are Humble studio, bought a loft-style apartment in Brunswick’s medium-density Jewell Station Village in 2024. They moved their practice to the building, behind Drip Coffee, the ground-floor cafe they opened.

Lai says their home offers a combination that was hard to pin down. “The type of apartment product and the location landed where we wanted it to,” she says. “We would have been waiting a long time to find something else that suited us.”

Although residents of such developments say this type of housing meets their needs, supply is not keeping up. The federal government has a benchmark of 1.2 million homes by 2029, but experts say policy intent and the reality of what’s being built are streets apart. 

Outdated planning controls largely favour detached housing, experts argue. Meanwhile, the so-called missing middle is becoming a missed opportunity.

Danika Adams, senior economist at the Committee for Economic Development of Australia, says the data reveals that missing-middle housing has yet to reach a meaningful volume.

“We know that semi-detached housing and townhouses still account for less than a fifth of dwelling approvals in major Australian cities, and those medium to high-density completions are declining slightly,” she says. “So while those detached single homes have kept reasonably steady, we know we’re missing the housing accord targets.”

Adams’ research shows that even modest density changes can make significant inroads into the housing shortage. Converting one in four standalone houses into two homes in Australia’s five largest cities could create almost a million dwellings, increasing supply by 9 per cent.

Adams says even when zoning allows for greater density, layers of regulation, such as minimum lot sizes, prevent projects from proceeding.

“Once you stack on those controls – setbacks, open space, space ratios, minimum car parking, design requirements, heritage overlays – they can effectively make that zoning ineffective,” she says.

Adams is an advocate of “by-right” development, in which certain projects can proceed without case-by-case discretionary approvals. “There’s no objection rights, which is an important one, and if the project meets the code, then its approval is default rather than the other way around, where approval is the exception,” she says.

Neometro is the developer of the mixed-use Jewell Station Village, which comprises four buildings and public space. Director Lochlan Sinclair says the missing middle works best when scale aligns with how people want to live.

“They’re big enough that you can get critical mass, but they’re not so big that you’re diluting the community,” he says. 

Feasibility remains a key constraint. “We’re still in a climate where construction costs are kind of running away, and there’s a lot of regulatory costs,” Sinclair says. “The risks and the challenges around delivering housing are higher than they’ve ever been.

“You need a developer who understands how we actually get from a permit to people living in it, but living in a way that makes great places, not just getting things up as quickly as possible.”

The price gap between new builds and existing houses is closing, with an emphasis on high-quality design and livability.

“There’s a cost to delivering good apartments, and we’re not happy to cut corners,” Sinclair says. “The differential between that and existing housing stock is starting to shrink. How do we get more people to look at apartments as a genuine alternative?”

Elevate your living experience with our digital magazines

Browse Domain’s property and lifestyle magazines.

Read now

Sam Heckel, executive director of planning and development at the Housing Industry Association, says the missing middle accounts for about 13 per cent of the total housing stock, according to the most recent census. These smaller infill projects are sensitive to rigid planning controls; just one, such as lot size, setback, private open space or parking, can undermine an entire project. 

“There is a wide range of housing typologies that fit in that missing middle piece, and unfortunately, we’re not seeing enough of them,” Heckel says. “A big apartment project or a greenfield development has more scale to absorb barriers that come up.

“When we’re talking about a 600 or 800-square-metre site, with three or four townhouses, that can be something difficult to deal with.”

Minimum lot sizes are a frontline restriction that rules out some sites for subdivision, Heckel explains.

“There are so many potential benefits to creating smaller allotments,” he says. “It really does bring down the cost of land. When our members talk about a housing crisis, they’re actually talking about a land crisis.”