Sydney's 'missing middle': what medium-density housing actually looks like — and why it's so hard to build

HouGarden Australia, 21 September — The development, called Little Waterloo, comprises four medium-rise buildings grouped around a central precinct and totals 216 apartments. It was originally approved and begun by Crown Group before being taken over by developer Barings. Studios are priced from A$850,000, with prices for one-, two- and three-bedroom apartments still to be set. The project is expected to reach completion mid-next year, when it will be offered to market.

'We see it as a good exemplar of doing mid-rise the right way,' said Warwick Dowler, head of residential at Barings. 'It shows what can be done in the right location, with smaller buildings close to so much neighbourhood amenity, like good public transport and lots of local facilities.'

The project sits within one of Sydney's most densely built-up precincts, yet its scale — well below the high-rise towers surrounding it — is precisely what its backers say makes it worth emulating. Amenities include ground-floor cafes and shops, communal rooftop podiums with seating and barbecues, and proximity to the Green Square aquatic centre, playgrounds, library and a Metro station.

The New South Wales government introduced its low and mid-rise (LMR) housing reforms last year, easing planning controls to allow a wider range of housing types within walking distance of shops, services and public transport. The government expects those reforms to deliver 112,000 new low and mid-rise homes across the state over five years — a target, not a count of homes already built.

Dowler said the LMR controls would create further opportunities for projects like Little Waterloo. Barings is also developing a separate 25-storey build-to-rent tower nearby, illustrating how mid-rise and high-rise development can coexist in the same precinct.

Jo McClellan, senior executive for policy and advocacy at the Planning Institute of Australia, argued that no single housing type can resolve the country's housing crisis on its own. 'It's a genuinely different offering that adds to the diversity of housing choice we need,' she said. 'At around six storeys, buildings can still deliver meaningful density and help chip away at the housing shortfall, while offering a scale of living that many people find comfortable and liveable.'

McClellan also highlighted practical design benefits at that scale. 'Well-designed mid-rise can provide easy access to street life, opportunity for natural light and ventilation, less reliance on lifts which can lead to a healthier lifestyle and provide for a strong sense of connection to the neighbourhood,' she said. She added that inserting mid-rise buildings among high-rise towers breaks up the streetscape and gives residents a genuine choice rather than 'everyone being funnelled into the same style of building.'

At the federal level, the Australian Productivity Commission has become one of the strongest advocates for medium-density housing as a tool to ease the national shortage. It recommends that state governments allow a baseline of three-storey medium-density development on most residential land.

'We're talking about making it easier to build,' said Productivity Commissioner Alison Roberts. 'We want to have a 'build mindset' instead of the one we have now, which is 'No, unless', with increasingly onerous requirements which don't necessarily deliver the value and make homes affordable.' Roberts noted that 75 per cent of residential land in Sydney, Brisbane, Perth and Adelaide currently permits only one or two storeys. 'We need to allow that zoning to lift,' she said. 'In a lot of cases, people knock down single homes or multiples of homes but don't have the ability to put up five to seven storeys, so we need a more proactive approach from government that says yes.'

Despite that political momentum, the Urban Development Institute of Australia's NSW branch (UDIA NSW) says the state is already falling behind the 112,000-home target set under the LMR reforms. Land prices are a core obstacle: medium-density projects require a larger footprint than a single high-rise tower but generate lower returns per square metre, and assembling fragmented land parcels from multiple owners adds cost and complexity.

'It's good that the government has a strong agenda to deliver low and mid-rise homes, as well as high-rise,' said Stuart Ayres, chief executive of UDIA NSW. 'But the sites are still hugely influenced by the feasibility of the product, and then whether the market can afford the prices. LMR may be affordable in the eastern suburbs and lower north shore, but further west, the feasibility of that type of development is more challenged.'

UDIA NSW is calling for a package of further measures to spur construction, including more flexible design guidelines, changes to affordable housing contribution rules, temporary land tax exemptions, and a freeze on increases to state development contribution rates.

A structural gap in the development industry compounds the problem. Established firms tend to specialise either in high-rise towers or in low-rise detached and semi-detached housing; few have the expertise or appetite for the middle ground.

'That middle ground of medium density is the hardest to achieve, the way our market delivery works,' said Dr Tom Alves, managing director of the Australian Housing and Urban Research Institute (AHURI). 'Often, it doesn't stack up to be viable for developers, so few specialise in it. They need, as a result, to be in higher value places or where there's a heritage determination like the lower north shore in Sydney or Fitzroy or Collingwood in Melbourne. A lot of the market is keen on it, but it's more expensive product so has to be bought by higher income groups.'

The affordability ceiling that Alves describes is visible in Little Waterloo's pricing: studios start at A$850,000, with larger apartments yet to be priced. The expected buyer profile — downsizers, young professionals and young families — reflects a segment of the market with relatively strong purchasing power, reinforcing the view that genuinely affordable mid-rise supply remains elusive even where planning settings allow it.

New Zealand faces a similar structural gap in its housing market. Planners and researchers there have long identified a shortage of mid-rise, medium-density housing between stand-alone homes and high-rise apartments. The Australian experience suggests that rezoning alone is unlikely to close that gap without complementary measures to make the economics work for developers.