In January 2024, Heritage Victoria released an important update to its interpretation of Section 101(2)(b) of the Heritage Act 2017, which deals with the concept of “reasonable or economic use.” This change significantly impacts how developers approach proposals involving heritage-listed properties — especially where demolition, subdivision, or major alterations are proposed.
What’s Changed?
Heritage Victoria has now tightened the criteria for demonstrating that a heritage place cannot reasonably or economically be used under existing conditions. The bar for evidence has been raised, and claims of economic hardship or impracticality must now be supported by rigorous, independent assessments.
Key Shifts Developers & Home Owners Should Understand
A Higher Bar for Evidence
Claims that refusal of a permit would prevent economic use must now be supported by:
- Independent valuations
- Feasibility modelling
- Detailed financial assessments
Subjective or anecdotal statements will no longer suffice.
Adaptive Reuse Must Be Exhaustively Tested
Applicants must show that all feasible, sympathetic re-use options have been explored and ruled out — such as:
- Conversion to new uses
- Retention and upgrade
- Public or community use
Demolition or subdivision must be a last resort, not the starting point.
Subdivisions Face Tighter Scrutiny
Subdivision proposals must demonstrate that:
- Retaining the property in one title is no longer viable
- Subdivision contributes to a sustainable re-use strategy
- The proposal preserves key elements of significance, rather than simply unlocking land
4. “Reasonable Use” ≠ Maximum Profit
Heritage Victoria has made it clear: the expectation is not optimal commercial return, but a reasonable, sustainable use. The fact that a heritage constraint lowers land value is not, in itself, a justification for major change.
Strategic Implications for Developers
Aspect
Use Justification
Subdivision Logic
Adaptive Reuse Approach
Heritage Constraints
Old Approach (Pre-2024)
General business case or owner assertion
Maximise yield via layout and title changes
Often underdeveloped or overlooked
Treated as development barriers to overcome
New Expectation (2024 Onward)
Expert-led financial modelling and viability reporting
Subdivision only if necessary to facilitate viable use
Full exploration and documentation of reuse pathways
Treated as parameters for informed and creative design
How to Respond Effectively
To adapt to these new policy expectations:
- Engage early: Book a pre-application meeting with Heritage Victoria to test feasibility and receive feedback.
- Commission independent expert reports: This includes property valuations, conservation cost estimates, and economic use modelling.
- Treat your Heritage Impact Statement as strategic: It must go beyond compliance to clearly articulate the rationale and viability of the proposed works.
- Integrate adaptive reuse from the outset: Don’t treat it as a fallback — make it central to your design and feasibility process.
At HUECO Heritage & Urban Economics, we work with developers to ensure your proposals not only comply with the Heritage Act but are grounded in sound economic logic and defensible planning strategy.
Need help navigating these changes? Contact us for expert guidance on Heritage Impact Statements, feasibility reporting, and subdivision strategy in heritage-sensitive contexts.