While Western Australia grapples with a housing shortage requiring just over 25,000 new homes a year, upfront government charges on small‑ and medium‑scale residential developments are blocking much‑needed supply in inner Perth, a local buyer’s agent says.
Perth completed a little over 20,000 homes in 2024, according to the Australian Bureau of Statistics, again missing its National Housing Accord target. The shortfall is most visible in central areas where demand for townhouses and villas is rising, but the economics of delivering these projects are becoming increasingly strained.
Nationally, policy experts are promoting “gentle density” — townhouses, terraces, low‑rise apartments and dual‑occupancy homes in existing suburbs — as a key way to add housing without drastically changing neighbourhoods. A recent CEDA report suggests such changes could lift Perth’s housing stock by more than 17%, helping close the gap with national supply targets.
“We know there’s a huge appetite for quality medium-density housing in Perth’s inner suburbs, but the numbers simply don’t stack up for many mum-and-dad developers,” said Peter Gavalas (pictured) of Resolve Property Solutions.
“Developers undertaking two- to five-lot developments in established suburbs face a daunting array of state government and local council charges that must be paid before construction can begin."
The upfront cost burden is particularly severe for smaller infill projects.
The numbers are sobering. For instance, Water Corporation charges around $7,600 per additional lot, and Western Power fees add another at least $2,300 per lot.
“But the real sting is council infrastructure contributions, which can reach up to $15,000 per extra lot created, depending on the local government area," Gavalas said. "For a modest three-lot subdivision in an inner suburb, developers can face tens of thousands of dollars in upfront charges before any construction work begins.”
While the WA government has introduced an Infrastructure Development Fund offering rebates of up to $10,000 per multiple dwelling for apartment developments in priority locations, Gavalas argues this doesn't adequately address the challenges facing smaller‑scale developers.
"The current incentives are primarily targeted at larger apartment projects near transport hubs. What we're seeing is strong demand for two- to five-lot townhouse and villa developments in established inner suburbs, but the upfront cost burden makes many of these projects financially unviable," he said.
With Perth's rental vacancy rate remaining critically low at just 0.7% in October, according to SQM Research, and median rents reaching $760 per week, Gavalas believes reforming the infrastructure charges system could unlock significant housing supply in areas where people want to live.
"Inner-city medium-density development is crucial because it places housing near jobs, services, and transport. But when developers face huge bills before they can start building, many viable projects simply don't proceed," he said.
While the state's Medium Density Housing Code came into effect in April 2024 to streamline planning approvals for townhouses and grouped dwellings, the cost structure hasn't kept pace with the policy intent.
WA has also recently announced plans to increase housing density around Perth train stations, aiming to channel more homes into well‑serviced, transit‑rich areas — but smaller infill developers say upfront charges still make many inner‑suburb projects unworkable.
"We've made it easier to get approval for medium-density housing, which is positive. But if the economics don't stack up due to upfront charges, developers won't build," Gavalas said. "Government needs to consider deferring or reducing infrastructure charges until titles are issued, or expanding rebate schemes to include smaller-scale developments."
Such measures would directly reduce the financial risk for smaller‑scale builders and landowners, and help accelerate the delivery of housing in sought‑after, established areas with existing infrastructure and services.
“The urgency remains high: without a mechanism to quickly unlock this mid-tier housing supply, Perth’s housing crisis will only deepen,” Gavalas said.
Get the hottest and freshest mortgage news delivered right into your inbox. Subscribe now to our FREE daily newsletter.
