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Local councils say the state government’s vision to increase housing supply and population density in established Melbourne suburbs will fail if it freezes them out of decision-making in its upcoming planning overhaul.

Then-premier Daniel Andrews released a long-awaited housing statement last month outlining ambitions to build 80,000 homes every year over the next decade, while flagging housing growth targets for local government areas and a rewrite of the state’s planing laws.

The state government has a target of building 80,000 new homes every year. Credit: Darrian Traynor

But councils fear they will lose decision-making power in the overhaul, with the government already amending planning rules to enable developers to bypass councils and apply directly to Planning Minister Sonya Kilkenny to approve larger projects.

Municipal Association of Victoria chief executive Kelly Grigsby said councils had an important role to play in planning for housing growth with necessary infrastructure and services, and ensuring it was handled in a way Victorians would accept.

“They need us to help get this done. We are critical partners and, without us, they can’t deliver the aspirations that are outlined in the housing statement – plain and simple,” she said.

Grigsby said the Municipal Association, which represents the state’s 79 councils, did not oppose a push for greater population density in existing Melbourne suburbs, but those communities needed a say in how it was done.

It wants the state government to commit to working with councils on its planning changes, including housing-growth targets.

“There are many brilliant examples around the world where you’ve got intensification … but the amenities are still really high and the liveability is fantastic,” Grigsby said.

“So it comes down to involving people in the planning process to be able to influence that design.”

As part of its housing statement, the government said it would update its 30-year growth strategy, Plan Melbourne, and expand it to a statewide strategy called Plan Victoria.

Plan Melbourne set a goal of reining in urban sprawl and concentrating 70 per cent of growth in existing Melbourne suburbs.

But The Age revealed on Thursday that the Department of Transport and Planning predicts 54 per cent of growth will be in outer suburbs over the next 15 years. A total of 840,000 new residents are expected to move to the cities of Wyndham, Melton, Hume, Whittlesea, Casey, Mitchell and Cardinia.

At a Municipal Association event in Melbourne on Thursday, SGS Economics and Planning partner Patrick Fensham said Melbourne was on track to be a megacity of about 8 million people by the middle of this century and that runaway growth on the fringes was a “social timebomb”.

Fensham, who is advising the association on its response to the planning overhaul, said setting targets in established areas could help ensure there would be sufficient infrastructure to support future growth.

“Councils need some comfort that their communities can be brought along in the processes … [otherwise] the system becomes delegitimised, and that’s when you do get communities who are resistant to change,” he said.

“But if there’s confidence around the process, around the potential that there’s a dividend from the growth, that there’s some infrastructure that’s going to follow, then you build the possibility of a social licence to change.”

Grattan Institute economic policy program director Brendan Coates said that to build 800,000 new homes over the next 10 years the Allan government would need to impose growth targets higher than levels councils supported.

“If you set targets based on what councils are willing to do, then all you do is keep the problem we’ve got already, which is that councils won’t support the amount of housing that needs to be built because existing residents don’t want it,” he said.

However, the Municipal Association has rejected claims that “NIMBY” councils are holding back housing supply, pointing to almost 120,000 houses, townhouses and units that councils have approved but haven’t been built.

Grigsby said developers were facing increasing construction costs and were delaying building approved plans until there was a reset in the housing market.

The state government was contacted for comment.

Infrastructure Victoria, the government’s independent adviser, issued a warning last week on the social, environmental and economic costs if Melbourne continued to sprawl.

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