Australia plans to sell off defence land to developers – but could it deliver homes instead?

The federal government plans to sell A$3 billion of Department of Defence properties on prime land across Australia, including Paddington in Sydney, St Kilda in Melbourne and Victoria Barracks in Brisbane.

The sales may help the budget in the short term, but at the time of a housing crisis, is this using public land in the best way?

Instead of selling these sites outright, the federal government could take a lead in redeveloping the land to deliver more affordable homes and long-term value for our cities.

It wouldn’t be the first time government has played this role. There are lessons to be learned from a 1990s urban redevelopment programme called Building Better Cities, which redeveloped Ultimo and Pyrmont in Sydney among other sites.

A quick fix, or a lost opportunity?

Australia’s housing crisis is one of the most urgent challenges facing federal and state governments. At the same time, the federal government plans to sell more than 60 publicly owned defence sites across the country.

Selling land can bring a quick boost to revenue. But public land is a limited resource, so we need to make sure we are getting public value from it. Once it is sold, governments lose control of how it is used in the future.

Many of the sites listed for private sale are located in capital cities, often close to jobs, public transport and services.

They range from the small, such as two office buildings on Grattan Street, Carlton, to the large, such as the 127-hectare Defence site in Maribyrnong, in Melbourne’s inner west. Locations like this are where homes are most needed. But redevelopment is not always easy, as the sites may have contaminated land or heritage buildings.

Selling these sites to private developers with limited conditions may maximise short-term revenue for defence purposes. Housing will likely be delivered.

But rather than selling land unrestricted to the private market, the government has other options to deliver better outcomes for current and future generations.

Government as master developer

One option is the federal government could transfer ownership of the sites to state governments, as long as they follow an agreed process. Government development agencies, such as Renewal SA or Hunter and Central Coast Development Corporation, would act as master developer.

These agencies work with the community to establish a vision for the future of each site. This could include social and affordable housing, employment and community uses and open space.

Then the federal and state governments would fund upfront any land remediation, public transport, streets and open spaces. This sets up what is required to make a liveable neighbourhood, and de-risks the process for private developers. Then smaller sites are sold to private developers or community housing providers at a higher value, with the government retaining that profit.

With government as custodians of the redevelopment process, high quality neighbourhoods are delivered, with more affordable housing. A project such as Bowden in Adelaide, led by Renewal SA, is a great example.

Back to the 1990s

If this level of government vision and coordination seems a stretch, it’s worth considering we have done it before. The Building Better Cities program of the 1990s invested federal and state money into 26 places around Australia, including Ultimo-Pyrmont in Sydney, Subiaco in Perth and Kensington Banks in Melbourne.

The program focused on improving the urban development process and the quality of urban life. It included the redevelopment of land no longer required by state and federal governments.

Not only did the program create high-quality places to live, it also improved Australia’s economic growth over the following decades. The $268 million investment in the transformation of industrial wasteland at Honeysuckle in Newcastle encouraged $768 million in private investment and led to over $2 billion in direct and indirect economic benefit by 2012.

Long-term leases

There are other ways for government to guide the transformation of these smaller sites in the defence portfolio. One option is to set up a long-term ground lease, to enable the delivery of homes but retain the land for future generations.

The Victorian government has shown the potential of this approach with its ground lease model, with the first neighbourhoods completed in 2024 on public housing land in Brighton, Flemington and Prahran.

Through a development agreement, private developers build affordable, social and private housing on public land. The land and buildings return to government after a 40-year period.

Alternatively, the federal government could set minimum affordable housing or sustainability requirements with the sale of sites, to support better outcomes.

Finance Minister Katy Gallagher has mentioned that sales will consider remediation, heritage and community impacts. But the focus is on achieving “market value” for the land, rather than any broader ambition.

What happens next?

Now that the defence land has been declared surplus to needs, it will go to the Department of Finance’s Property Clearing House.

This process allows other government departments to buy a site before it is sold on the open market.

Let’s hope the government sees the bigger social and economic benefits in leading the strategic transformation of these sites, rather than a short-term cash fix.