The Missing Middle: Why Melbourne Needs Mid-Sized, Well-Designed Homes
A recent ABC article shared a startling statistic: over 60% of Australian households are made up of just one or two people. And yet, our housing stock continues to be built for large families.
It’s a mismatch that’s easy to spot — but much harder to solve.
On the surface, this looks like a numbers issue. But in reality, it’s the result of cultural habits, policy lag, and market distortions. The real challenge isn’t building more homes. It’s building the right ones.
Bigger Homes, Smaller Households
Over the past few decades, housing in Australia has become more than shelter — it’s become a financial product. Real estate is marketed as an investment vehicle first, and a home second. That shift changed the way we design and value the spaces we live in.
In a country where community infrastructure has become patchy and private amenity is prized, many families now rely on the home to meet all their lifestyle needs.
Parents work from home to avoid long commutes. Kids stream shows with friends from the second living room rather than visiting the local cinema. Spare bedrooms double as guest rooms, storage, hobby spaces, or hybrid offices.
It’s not indulgence. It’s adaptation — often a rational response to public infrastructure that feels stretched or unsafe.
Meanwhile, many older couples remain in family homes that exceed their daily needs, but continue to serve a purpose. Downsizing is expensive, and often not worth the disruption. Spare rooms accommodate visiting relatives, growing families, or adult children who’ve returned home — sometimes with their own families in tow, saving for a place of their own.
Bigger Homes, Smaller Households
Over the past few decades, housing in Australia has become more than shelter — it’s become a financial product. Real estate is marketed as an investment vehicle first, and a home second. That shift changed the way we design and value the spaces we live in.
In a country where community infrastructure has become patchy and private amenity is prized, many families now rely on the home to meet all their lifestyle needs.
Parents work from home to avoid long commutes. Kids stream shows with friends from the second living room rather than visiting the local cinema. Spare bedrooms double as guest rooms, storage, hobby spaces, or hybrid offices.
It’s not indulgence. It’s adaptation — often a rational response to public infrastructure that feels stretched or unsafe.
Meanwhile, many older couples remain in family homes that exceed their daily needs, but continue to serve a purpose. Downsizing is expensive, and often not worth the disruption. Spare rooms accommodate visiting relatives, growing families, or adult children who’ve returned home — sometimes with their own families in tow, saving for a place of their own.
Why Alternatives Keep Falling Short
As governments announce plans to build 1.2 million new homes, many Australians find themselves caught between poor options:
Apartments and strata housing: Often small, inflexible, and expensive to maintain. Capital growth usually lies in the land, and apartments offer little stake in it. Add to that body corporate fees and special levies for repairs, and many buyers see them as risky investments.
Small townhouses: While marketed as a compromise, they often suffer from poor design - narrow stairs that make moving furniture impossible, inaccessible layouts for prams or ageing residents, and little usable outdoor space. They can feel more like vertical compromises than functional homes.
Outer suburban houses: Promoted as the “affordable” solution, but often a false economy. Mortgage costs may be comparable to smaller, more central dwellings, but the long-term trade-offs are significant — reliance on two cars, longer commutes, higher energy bills, and more maintenance. Many are poorly designed, with oversized entry foyers and underutilised space compensating for a lack of design thinking.
It’s no wonder people are sceptical. The options don’t reflect how they actually live.
This map shows just how much of greater Melbourne is covered by heritage overlays. While heritage has an important role, blanket overlays can limit opportunities for medium-density housing in well-connected inner suburbs – exactly where we need more mid-sized, well-designed homes. (Source: VicPlan)
The Case for the Missing Middle
What we truly need are mid-sized, well-designed homes in connected neighbourhoods. Not tiny shoebox apartments. Not oversized four-bedroom homes on the fringe. Something in between.
Mid-sized homes are:
Efficient: Easier to maintain, heat, and cool.
Flexible: Designed to evolve with households across different life stages.
Connected: Located near schools, transport, parks, and shops — making life less car-dependent and more community-focused.
And yet, these homes are in short supply.
Part of the reason is policy. Much of Melbourne’s inner and middle-ring suburbs are restricted by blanket heritage overlays and zoning that prevents gentle infill or medium-density development. As the map below shows, huge portions of the city are effectively frozen in time - even in areas well-serviced by infrastructure.
Retrofitting and reconfiguring existing homes is particularly powerful in inner and middle-ring suburbs already well-serviced by public transport and infrastructure. These areas offer the strongest opportunity for sustainable density — without waiting for new estates to catch up on roads, schools, and services.
The Role of Small-Scale Infill Development
Governments have poured enormous effort into partnering with large volume builders — those who specialise in sprawling estates on the urban fringe. But these projects take years to approve, longer to deliver, and often stretch infrastructure beyond its limits.
If we’re serious about meeting housing targets, we need to expand our focus. That means not just working with the big players, but actively empowering small builders, boutique developers, and mum-and-dad investors to deliver infill housing in established suburbs.
Well-located family homes with large backyards can often accommodate a second dwelling — a battle axe build, a duplex, or a small subdivision. These opportunities are faster to deliver, better connected to existing infrastructure, and better aligned with the way people actually want to live. But at present, the planning system makes these projects too hard, too risky, and too slow.
With the right planning incentives (like reduced infrastructure levies for infill, streamlined planning pathways, or grants for sustainable retrofits) governments could help offset rising construction costs and make adaptive reuse a more viable option for everyday families and small-scale developers alike.
It’s time we recognised that small builders and nimble developers might just be the solution.
The Way Forward
Solving the housing crisis isn’t just about increasing supply — it’s about the type of homes we build, where we build them, and the policies that shape those decisions.
We don’t need more sprawl.
We need mid-sized homes with smarter design — and planning and investment policies that allow them to be built in the places people actually want to live.
Some commentators have suggested we return to the model of 30 or 40 years ago: start small, and add rooms, verandahs, or garages over time. In theory, it sounds practical. But in reality, it's no longer viable for most families.
Construction costs have soared. Cost of living pressures are high. Trust in the building industry has plummeted after years of bad headlines and builder collapses. Even if families wanted to build in stages, the process is now riskier, slower, and harder to finance. Most lenders won’t touch owner-builder loans, and few households have the skills (or the appetite) to navigate it alone.
Today’s families aren’t avoiding incremental building because they’re unwilling. They’re avoiding it because the system no longer supports them to do it well.
That’s why the “missing middle” matters more than ever. Medium-density, well-located homes that don’t rely on future extensions to be functional. Right-sized homes that are designed with care from the beginning — not with the hope of catching up later.
Designing for Real Life
At Whisker Architecture, we often ask our clients one key question: “When are you planning on selling?”
If the answer is 0–8 years, you're building a product.
If the answer is 8–15 years, you're building a home.
If the answer is 15+ years, you're building a legacy.
Too often, people design for resale — not for themselves. But the real value comes from creating a home that reflects how you live, not how a future buyer might. And when done well, good design holds value anyway.
We believe it’s time to shift the narrative — away from outdated housing models and one-size-fits-all thinking, and toward homes that fit how Australians live now.
Smarter design. More thoughtful policy. Less compromise.
Are we building for our own lifestyle – or for the next buyer? Too often, resale value dictates design decisions, when the real opportunity is to create a home that reflects who we are and how we live.
Thinking of designing your forever home?
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