Land Banking by Developers: The Profitable Art of Doing Nothing

What Is Land Banking?

Imagine buying a block of land, getting council approval to build 50 homes on it, and then just... waiting. No construction. No homes. Just land, sitting idle, quietly appreciating in value while people sleep in their cars outside.

That's land banking - and it's one of the most quietly destructive practices in Australian housing policy.

Developers, both large and small, routinely acquire parcels of land in growth corridors, obtain development approvals, and then hold the land without building. Why? Because in a rising property market, the land itself becomes more valuable every year. Building houses is risky - it requires capital, labour, materials, and management. Sitting on approved land while prices climb requires nothing except patience and political protection.

The Scale of the Problem

The numbers are staggering. According to a 2023 report by the Australian Housing and Urban Research Institute (AHURI), there are over 300,000 approved but unbuilt lots sitting dormant across Australian cities at any given time. In Melbourne's growth corridors alone, research by the Victorian government's own infrastructure body found that developers had approvals in hand for enough lots to house approximately 150,000 people - land that had been approved for years without a single sod being turned.

In Sydney, the Greater Cities Commission identified that a significant proportion of rezoned land in Western Sydney remained undeveloped despite approvals being granted more than five years earlier. Infrastructure - roads, schools, sewage - was funded by taxpayers and built to service these lots. The developers collected the uplift in land value. The homes never came.

Meanwhile:

• Australian rents rose 9.8% nationally in 2023, the fastest pace on record
• Rental vacancy rates in major cities sat below 1% through much of 2023-2024
• The median house price in Sydney exceeds $1.1 million
• First home buyer participation in the market is at generational lows

These aren't unrelated facts. When approved supply is withheld from the market, prices stay high. That's not a bug in the land banking model - it's the entire point.

Who Benefits, and Who Pays?

The winners are straightforward: large listed developers like Stockland, Mirvac, and Peet Limited explicitly describe their land banks in investor presentations as strategic assets. Peet Limited, for instance, controls land holdings across multiple states measured in years of future supply. These are not small operators making cautious decisions - this is a deliberate, board-approved strategy to manage the rate at which supply enters the market in order to protect margins.

The losers are everyone else:

Why Don't Governments Fix It?

Here's where it gets politically uncomfortable.

Both the Coalition and Labor governments - at state and federal levels - have had decades and multiple opportunities to address land banking. The tools exist. A vacant land tax or development inactivity levy on approved-but-unbuilt lots would change the calculus overnight: suddenly, holding land idle costs money rather than making it. Several economists, including those at the Grattan Institute and the Reserve Bank, have pointed to this kind of mechanism as effective and implementable.

So why hasn't it happened?

The property development industry is one of the largest donors to both major parties. According to the Australian Electoral Commission's donation disclosures, property and construction interests donated tens of millions of dollars to the Liberal, National, and Labor parties over the past decade. Developer lobby groups like the Property Council of Australia maintain permanent, well-resourced presences in every state capital. Their access to ministers and their ability to fund election campaigns is unmatched by any tenant advocacy group or first home buyer association.

When the Victorian government floated a modest annual fee on undeveloped land in 2023, the Property Council's response was immediate and furious - and the proposal was quietly shelved in its most meaningful form. In New South Wales, successive governments of both stripes have introduced housing 'taskforces' and 'accelerated approval pathways' that largely serve to generate press releases rather than homes.

The result is a policy environment that identifies the problem clearly, announces action loudly, and delivers almost nothing to the people who need housing.

What Would Voters Actually Choose?

Polling consistently shows that Australians - renters, owners, and prospective buyers alike - support stronger government action on housing affordability. A 2023 YouGov survey found that 72% of Australians supported taxes or penalties on developers who hold approved land without building. Support cuts across age groups and political affiliations.

So we have a policy failure that: - Is well understood by economists - Has clear and available solutions - Enjoys majority public support - Persists anyway - because the people funding political parties prefer it that way

This is precisely the kind of issue that exposes the broken incentive at the heart of representative democracy. Politicians are not primarily accountable to voters - they are accountable to donors, party machines, and the factional interests that preselect them. A voter can punish a politician once every three or four years. A developer can fund or defund a campaign in real time.

Direct democracy changes that equation entirely. When members vote directly on policy - not politicians, not donors - the 72% of Australians who want action on land banking get to actually express that preference in a way that shapes real decisions.

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If you're tired of watching politicians announce housing plans that never deliver homes, it's time to be part of a party where your vote on policy means something. Take our policy quiz at directdemocracy.com.au to see where you stand on housing and other key issues - and find out how direct democracy would change the way Australia makes decisions.