Abstract: Continued population growth in Melbourne over the past decade has led to the development of a range of strategies and policies by State and Local levels of government to set an agenda for a more sustainable form of urban development. As the Victorian State government moves towards the development of ‘Plan Melbourne’, a new metropolitan planning strategy currently being prepared to take Melbourne forward to 2050, the following paper addresses the issue of how new residential built form will impact on and be accommodated in existing Inner Melbourne activity centres. Working with the prospect of establishing a more compact city in order to meet an inner city target of 90,000 new dwellings (Inner Metropolitan Action Plan - IMAP Strategy 5), the paper presents a ‘Housing Variance Model’ based on household structure and dwelling type. As capacity is progressively altered through a range of built form permutations, the research attempts to assess the impact on the urban morphology of a case study of four Major Activity Centres in the municipality of Port Phillip.