Did you know the cost of adding a second dwelling on your standard residential block (RZ1) in the ACT could run to around $250,000 before you have turned a sod or laid a brick?

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A recent Canberra Times article highlighted that uptake of the government's RZ2 rezoning reforms has been "really, really low", with only a tiny proportion of blocks transitioning to higher-density housing.

These two issues are not separate - they are symptoms of the same underlying problem.

In 2023, the ACT government amended its RZ1 dual occupancy policy. A second, separately titled dwelling (up to 120 square metres) is now allowed on blocks over 800 square metres. On paper, this is exactly the kind of "missing middle" reform policymakers point to as the solution to Canberra's housing shortage.

In practice, it is not working.

A local builder recently walked me through the real costs involved in delivering one of these dwellings. The figures are approximate, but directionally accurate:

Lease variation charge - $84,000

Architectural fees - $20,000

Town planner - $10,000

Building approvals - $12,000

Utilities and connections - $20,000+

Tree removal contributions - ~$48,700 for just three large mature trees

Arborist and reporting - ~$6,000

Professional reports, engineering and compliance - $30,000+

Titling and certification - ~$20,000

The tree component alone is telling. On a typical Canberra block, removing three established trees can trigger almost $50,000 in government charges i.e. $50,000 before you pay an arborist or buy replacement tress. On many sites, achieving a compliant building envelope without tree impacts is practically impossible - meaning this is not an edge case, it is a standard cost.

Before construction even begins, you are already potentially approaching a quarter of a million dollars.

When the dual occupancy rules were introduced, planning firms were inundated with enquiries. But once these costs became clear, almost nobody proceeded.

That should sound familiar.

The same Canberra Times reporting on RZ2 highlights that simply changing zoning does not lead to new housing. Developers still face a stack of charges, regulatory friction, and uncertainty that make projects unviable. As Property Council representatives noted, taxes, lease variation charges and planning complexity continue to suppress development.

RZ1 tells the same story at a smaller scale - and the tree regime is a perfect example of how policy intent collides with on-the-ground reality.

Instead of large developers, it is everyday homeowners who could add supply - a granny flat, a downsizer unit, a rental dwelling for a family member. But they face the same layered costs and compliance burden, just without the scale to absorb it.

So while the policy intent is sound - increase density, unlock "missing middle" housing, and boost supply - the execution is failing.

The lesson from both RZ2 and RZ1 is straightforward: You cannot tax, charge and constrain your way to more housing supply

If the government is serious about increasing housing in Canberra, it needs to focus less on what is allowed to be built, and more on whether it is economically viable to build it.

Until that changes, the missing middle will remain exactly that - missing.

Dan Carton is co-founder of Diogenes Funds Management, former chair of Havelock Housing, and former chief economist of Defence Housing Australia.

Jason Tulio is a producer for The Canberra Times.

Jason Tulio is a producer for The Canberra Times.

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