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In an effort to alleviate the country’s housing crisis, some state governments are implementing sweeping housing reforms, actively encouraging dual-occupancy redevelopment, especially in middle-ring suburbs.
The ‘missing middle’ suburbs in major cities and regions – home to ageing building stock, built on oversized blocks which are ripe for duplex or townhouse redevelopment – are on the radar because of their proximity to transport, schools and services.
Public policy think tank CEDA, the Committee for Economic Development of Australia, recently released the report A middle path: How gentle density can help solve Australia’s housing crisis.
The report shows that if just one in four standalone homes in major cities were developed into dual occupancies, Australia could increase its current housing stock by nine per cent, roughly equating to one million new homes.
And with major cities likely to bear the brunt of Australia’s population growth – estimated at an extra 14 million people over the next four decades – the report predicts cities and major centres will grow at twice the pace of regional areas.
Currently our major cities are low-density in comparison with other world cities. Sydney ranks 104th for population and 803rd for density and Melbourne ranks 100th for population and 858th for density.
“When we see what’s happening with our population growth, with our continued economic development, we can’t keep building further and further out,” said CEDA chief economist Cassandra Winzar.
“Middle-ring suburbs and this ‘gentle density’ is kind of the best of both worlds.”
According to the Australian Bureau of Statistics, in the five years to June 2025, two-for-one knock-down rebuild (KDR) projects – which add one dwelling to net dwelling stock – currently symbolise 26.7 per cent of all knock-down rebuilds, representing 25,480 new builds nationwide.
Knocking down the family home and rebuilding two homes on the block can offer many benefits including the chance to cater for generational living, update living quarters, help owners to stay in a neighbourhood they know, have a steady rental income from the second home or to live in one home and sell the other to be mortgage free. However, some builders and developers are questioning whether the sums which traditionally seemed so lucrative to mum and dad developers as little as five years ago still add up today.
Escalating expenses are significantly narrowing margins and, according to ABS figures, building costs have gone up 30 per cent over the past five years.
Nationwide in 2025, duplex build costs ranged from $2000 to $3800 per square metre, with Sydney and Melbourne at the higher end of the scale.
Total turnkey projects for a standard three-bedroom duplex – excluding land – can range from $650,000 to $1.45 million, with high prices driven by material shortages, labour demands and council fees.
“If you choose a reputable builder for a dual-occupancy build in Sydney, these days you would be lucky to see a profit, the margins are just too close,” a spokesperson for Sydney building company Phase Projects told AC.
Veteran dual-occupancy developer Susan Davis* is also sceptical about the motives of family members when generational dual occupancy is being considered by a family unit.
“A really big issue is people doing a dual-occupancy build with extended family,” Davis said.
“I know someone in this predicament at the moment where they’ve got a big block they have had for years. They’re older and the next generation is saying ‘we could do a deal here’.
“I feel that anything like this has to be done very, very carefully for the older person, especially, to not be ripped off on what they already have and the value of it as it is.
“Because they are not necessarily going to get the value they would’ve had if they just sold the whole big block in the first place and let someone else develop it.”