This Productivity Commission case study found that Victoria’s commercial zoning arrangements illustrate the benefits of a more flexible approach to land use, with benefits for the broader community.

The Victorian experience shows that is it possible to bring more flexibility and simplicity to commercial land use without significant negative consequences.

More flexible zoning helps realise the productive potential of urban land, making it easier for new firms to enter local markets and for existing firms to expand with reduced administrative and compliance costs.

The report emphasises that land use regulation is important. Australia needs a certain amount of regulation to separate incompatible uses from one another (such as industrial uses from residential areas).

Key points:

• Land use zoning can be an effective tool for pursuing urban planning objectives, such as separating industrial activities from residential areas or reserving open or green space.
• While important, zoning is just one of many factors shaping land use in a jurisdiction like Victoria, including population growth and a shift from manufacturing to knowledge‑ and service‑based industries.
• The move to broader commercial zones aimed to increase business investment and encourage more productive land use by making the zoning rules simpler and less prescriptive, but generated concerns about unintended adverse consequences.
• The significant negative impacts predicted to result from the 2013 reforms do not appear to have come about, although some maintain that the more market‑driven approach has detracted from urban amenity or unfairly affected some businesses. Some of these arguments are questionable on empirical and/or conceptual grounds.