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Victoria’s local councils say they would relinquish some of their planning powers if the state did the same, as they called for a new metropolitan planning body to guide the development of Melbourne.

In a break with its traditional strident defence of council planning authority, the Municipal Association of Victoria says both levels of government need to concede ground and work together to address the challenges of population, housing and environmental crises, and minimise corruption risks.

“Currently, we have a Wild West at the bottom of the system where councils are interpreting things their way, and another at the top where there is a lot of power sitting with the minister, a situation which is not appropriate,” said association president David Clark.

Apartments in Melbourne’s DocklandsCredit: Simon Schluter

“There’s a middle ground we should aim for where both levels of government work together for the better planning outcomes for Melbourne.”

Clark said that as a good first step towards a new planning partnership would be for Planning Minister Sonya Kilkenny to hold a forum with all metropolitan mayors.

On Friday, the Municipal Association of Victoria released a report exclusively to The Age commissioned from prominent planning and economic consultants SGS, recommending improvements to planning to help cope with Melbourne growing to a city of 8 million by 2051 – without sacrificing liveability and the environment.

It will be used to urge the government to rethink aspects of its controversial September housing statement released under former premier Daniel Andrews, which promised a dramatic increase in housing supply in established suburbs in response to declining housing availability and affordability.

Victorian Premier Jacinta Allan and her predecessor, Daniel Andrews.Credit: Gus McCubbing

As part of the housing strategy, the government also regulated to allow developers seeking approval for larger housing and commercial projects to bypass local councils and apply directly to the planning minister.

Senior integrity and planning experts – including the government’s anti-corruption watchdog IBAC – have warned against such a move, and the SGS report says the concentration of power in an individual decision-maker “increases the integrity risks in the planning system”.

The report and the Municipal Association of Victoria’s response come as the government undertakes the first major review of the Planning and Environment Act in decades and as it develops a new state planning strategy, Plan Victoria, which will replace Plan Melbourne.

The paper stresses the importance of democratically elected councils while also calling on local and state government to work together through a new metropolitan body.

It floats models ranging from a “modest” option of a standing committee of state and council representatives, to a more “significant” elected metropolitan authority with wide powers, including over strategic and transport planning and decisions for major sites and projects.

Such a body would be reminiscent of the Melbourne and Metropolitan Board of Works, which oversaw Melbourne’s planning from the mid-1950s to the mid-1980s.

Report author and SGS principal Pat Fensham said: “So what we’re saying is, let’s have an evolution to an entity that involves councils, but is in the service of a plan for the betterment of the whole metropolitan area.”

The report notes that the “great cities and metropolises of the world” have citywide agencies that involve local councils, pointing to the Greater London Authority, the Tokyo Metropolitan Government and the City of New York.

In September, the government announced that it would replace Plan Melbourne with Plan Victoria, but the Municipal Association of Victoria insists Melbourne needs its own plan, noting that the government’s projections show the capital’s proportion of the state’s population will continue to grow. In 2021, Victoria’s population split was 72.5 per cent in Melbourne and 27.5 per cent in regional areas.

The state’s forecasts are that Melbourne will accommodate 83 per cent of population growth between 2021 and 2051.

Kilkenny did not respond directly to questions from The Age. Instead, a Victorian government spokesperson said: “We’re getting on with delivering the 800,000 new homes Victoria needs over the next decade, but we can improve how and where that housing is developed both across the state and around Melbourne too. We need to do both, and that is exactly what the new plan for Victoria will do.”

Fensham said there was wide support in the community and councils for the idea of more housing in activity centres near jobs and transport. “But much more focus needs to be on the implementation side of such plans – on making it work,” he said.

Developers and planners often highlight that a key obstacle to more housing in older established suburbs is finding sites big enough or assembling enough smaller sites, to make higher-density housing viable.

The SGS report argues for a “rebooted” state development arm, Development Victoria, to play a bigger role in buying, assembling and overseeing development of sites, including on “demonstration projects” to show how to create well-planned and designed communities.

It says that rather than being limited by the requirement that its projects make commercial returns, a revamped Development Victoria should be given a mandate “to generate net community benefits (social, environmental and economic outcomes)”.

The report also notes that more funds are needed to ensure that a more dense city is serviced by public services including transport, open spaces and social housing.

It calls for the replacement of the current system of developer levies for services with a “development licence fee” based on the uplift of land value from land rezoning, and for a “revisit” of the Social and Affordable Housing Contribution scheme announced by the government in early 2022 but abandoned days later.

The report says traditional owners should be “integrally involved in decision-making about their Country”.

“The self-determination and treaty process in Victoria provides the platform for establishing the arrangements for true partnerships in relation to the development and implementation of a metropolitan plan for Melbourne and regional plans,” says the report.

Clark said it was crucial that Melbourne had a plan, and the will and resources to make it work. “This notion that cities aren’t important is ridiculous,” he said. “We have to be a little city-centric and be able to plan for a good city, and that has to be beyond municipal boundaries.”

The Municipal Association of Victoria will release a separate SGS report on planning or regional Victoria next week.

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