Abstract: Compact city policies such as Melbourne 2030 have been established in Australia for a range of reasons including climate change. It is now clear that the Melbourne 2030 policy has not been effective – with new development mostly on the urban fringe. This policy failure has often been sheeted home to resident and local government resistance to densification. This paper suggests this narrative is insufficient to explain this failure at a metropolitan-wide scale and is clearly mistaken in one suburb where compact city policy appears to thwart its own aims by encouraging speculation and producing vacant sites. Brunswick is an inner-city suburb with good opportunities for intensification on transit lines and former industrial sites. Applications for new housing between 2002-7 would have increased housing stock by 16%. Resident resistance was high but about 80% of the potential increase in dwellings was approved. However, by 2009 just under half of all approved dwellings had commenced construction. The taller and denser projects remained stalled, sites on-sold and permits extended. We suggest developers speculate that the Planning Tribunal will approve significant increases in height and density, using Melbourne 2030 to over-ride local policy. Such permits produce significant capital gains that can be cashed without construction. The current planning system encourages ambit claims, contestation, cynicism and speculation as it thwarts resident negotiations towards a more compact city. The idea that resident resistance is the problem obscures the role the planning system itself plays in thwarting the goals of Melbourne 2030.