TRP26-02 Growing up or growing out: How supporting infill development in established areas could reshape Sydney over the next 40 years

Sydney’s population is projected to increase substantially in coming decades. To accommodate this growth and ensure housing is affordable, additional homes will need to be built in the places where people want to live.

This paper uses an Alonso–Muth–Mills (AMM) model to examine how planning reform could shape Sydney over the next 40 years. It compares two scenarios: growing out, where historical density constraints are maintained, and growing up, where density constraints are relaxed to allow more infill development in established areas.

The modelling suggests the benefits of relaxing density constraints are substantial, including lower housing costs, shorter commutes and less urban sprawl. The resulting welfare gains are equivalent to an additional $8,400 in annual income for the average Sydney household, measured in today’s dollars.