Granny Flat Rules Victoria: Small Second Dwelling Laws & Permits (2026)

TL;DR: Victoria’s granny flat rules have changed significantly since 2023. The old Dependent Person’s Unit (DPU) system is being phased out by March 2027, replaced by new “Small Second Dwelling” rules. You can now build a granny flat up to 60sqm on most residential blocks of 300sqm or more without needing a planning permit. You only need a building permit, which cuts approval time to 3-6 weeks and costs to $2,500-$4,000. You can rent the place to anyone — the old “dependent person” rule is gone.

Key takeaways

• Victoria has replaced its old DPU rules with a “Small Second Dwelling” system that started in late 2023 and has been fully in place since March 2025.
• You don’t need a planning permit for granny flats up to 60sqm on most residential blocks of 300sqm or more, provided there are no special overlays.
• You always need a building permit, which costs $2,500-$4,000 and takes 3-6 weeks.
• Anyone can live in or rent a small second dwelling.
• The dwelling must achieve a minimum 7-star NatHERS energy rating.
• DPU transitional rules end on 28 March 2027 (extended from 2025 by Amendments VC266 and VC304).
• You cannot subdivide the granny flat or sell it separately from the main house.

Victoria’s shift from DPU to small second dwelling

Victoria has made the biggest changes to granny flat rules of any Australian state. For years, the only way to build a second home was through the Dependent Person’s Unit (DPU) system — a restrictive setup that required the occupant to be dependent on someone living in the main house. You couldn’t rent to anyone off the street, which made DPUs largely useless as an investment tool.

That changed when the Victorian Housing Statement: The Decade Ahead 2024-2034 set off a round of planning reforms that created a new category: the Small Second Dwelling.

Timeline of key changes

Date	Amendment	What changed
December 2023	VC253	Introduced the Small Second Dwelling system. Removed the need for a planning permit for homes up to 60sqm in most residential zones.
March 2024	VC259	Allowed DPU applications to continue alongside the new rules for a transition year.
March 2025	VC266	Extended the DPU transition period. New small second dwelling rules fully in place.
September 2025	VC282	Updated Clause 54 standards for blocks under 300sqm.
2025-2026	VC304	Extended DPU transition rules to end on 28 March 2027.

What is a small second dwelling?

Under the new rules, a small second dwelling is a self-contained home that:

• Sits on the same block as an existing house
• Has a maximum floor area of 60sqm
• Has a kitchen, bathroom, and toilet
• Is the only small second dwelling on the block
• Cannot be subdivided or sold separately
• Cannot be connected to natural gas

It can be freestanding, attached to the main house, or created by converting part of the existing structure.

Do you need a planning permit?

Usually not. This is the biggest practical difference from the old DPU system.

When you don’t need a planning permit

• The block is 300sqm or more and in a residential zone
• The dwelling is 60sqm or less
• No special planning overlays apply (see below)
• The building is no more than 9m tall
• It’s the only small second dwelling on the block

When you do need a planning permit

• The block is under 300sqm (assessed through VicSmart)
• The property has a Heritage Overlay (though buildings under 5m painted in muted colours have an exception)
• The property has a flood overlay, environmental significance overlay, bushfire management overlay, or similar controls
• The design doesn’t meet standard siting rules

The VicSmart fast-track

For blocks smaller than 300sqm or cases where a planning permit is required, Victoria’s VicSmart system applies:

• Decisions made within 10 business days
• No public advertising or neighbour notification
• Council decides without consulting other agencies
• Much faster than the standard 60-day planning process

VicSmart applies to single homes on blocks under 300sqm where there are no overlays.

Building permit: always required

Even without a planning permit, you’ll still need a building permit from a registered building surveyor. The building permit covers:

• Structural safety
• Siting on the block (setbacks, building size)
• Energy efficiency (7-star NatHERS)
• Fire safety and smoke alarms
• Livable Housing Design Standards
• Access and amenity

Building permit costs and timeframes

Location	Typical cost	Typical timeframe
Inner Melbourne councils	$8,000-$18,000	10-14 weeks
Eastern suburbs councils	$4,000-$8,000	4-6 weeks
Outer suburbs councils	$3,000-$6,000	3-5 weeks

These costs are for the building permit only. You’ll also pay for design, plans, engineering, and an energy rating assessment. The average building permit cost when no planning permit is needed is $2,500-$4,000.

If your design doesn’t meet standard setback or siting rules, you may need consent from the council, CFA, or water authority before the building permit can be issued — adding cost and time.

Size limits and setbacks

Maximum floor area

The floor area cannot exceed 60sqm, with no exceptions like NSW has for internal conversions. All liveable space inside counts toward the limit.

Setbacks

Setback rules come from the zone schedule:

Boundary	Typical requirement
Primary street	As specified in the zone schedule (usually 4-9m)
Secondary street	As specified in the zone schedule
Rear boundary	Usually 4m
Side boundaries	1m to 8.6m depending on building height

Side setbacks increase with wall height. A single-storey granny flat with walls under 3.6m high typically needs just 1m on each side.

Building height

The maximum height is 9m. In practice, the combination of increasing setback requirements with height, the 60sqm floor area cap, and the cost of multi-storey construction means almost every granny flat in Victoria is single storey.

In Heritage Overlay areas, buildings 5m or less in height painted in muted tones don’t need a planning permit.

Energy efficiency: 7-star NatHERS

All new homes in Victoria, including small second dwellings, must meet a minimum 7-star NatHERS energy efficiency rating. This requirement has applied since October 2023.

In practice this means:

• Ceiling insulation: R4.0 or higher
• Wall insulation: R1.5 to R2.5
• Double glazing: usually needed to reach 7 stars
• Whole-of-Home energy requirements for appliances, lighting, and renewables
• NatHERS assessment cost: $400-$800

The 7-star requirement adds roughly $5,000-$15,000 to build costs compared to the old 6-star standard. You’ll recover some of that through lower energy bills over time. If your design fails the assessment, your building permit application comes back, adding 2-3 weeks to the timeline.

Livable Housing Design Standards

Since 2024, all new Class 1a homes in Victoria, including small second dwellings, must meet the Livable Housing Design Standard:

• Flush entry (no steps)
• Accessible toilet on the entry level
• Reinforced bathroom walls for grab rails
• Wider corridors and doorways
• Slip-resistant flooring in wet areas

These requirements make the home accessible for people of all ages and abilities. They don’t add dramatically to build costs when designed in from the start.

Rental rules: a complete change

This is where the new rules really differ from the old ones.

Under the DPU rules, only someone dependent on a resident of the main house could live there. “Dependent” meant relying on someone because of age, disability, or similar needs. Renting to anyone else was not allowed, and DPUs were classified as movable buildings.

Under the small second dwelling rules, anyone can live there, you can rent it out, it’s a permanent structure, and standard residential tenancy laws apply.

This change has turned granny flats into a genuine income-generating asset for Victorian homeowners. Many are now building specifically as rental properties.

DPU transitional provisions

If you already have a legal DPU, it remains legal. You don’t need to convert it to meet the new rules unless you want to rent it to someone who isn’t a dependant.

New DPU applications can still be lodged under transitional rules until 28 March 2027 (extended from 2025). After that, all new applications are assessed under the small second dwelling framework.

How Victoria compares to NSW

Feature	Victoria	NSW
Max floor area	60sqm	60sqm (70sqm for internal conversions)
Minimum lot size	300sqm (no planning permit)	450sqm (CDC pathway)
Planning permit	Not needed in most cases	CDC available (10-20 days)
Building permit	Always needed (3-6 weeks)	Always needed
Rental	Anyone	Anyone
Energy rating	7-star NatHERS	BCA/NCC compliant
Subdivision	Not allowed	Not allowed
Approval cost	$2,500-$4,000 (building only)	$3,000-$5,000 (CDC)

Victoria’s smaller minimum block size (300sqm vs 450sqm) and the absence of a planning permit requirement in most cases probably makes it easier to build here than in NSW.

Construction costs in Victoria

Typical costs for a granny flat in Victoria in 2026:

Cost component	Typical range
Building permit	$2,500-$6,000
Design and plans	$3,000-$8,000
NatHERS assessment	$400-$800
Engineering	$1,500-$3,000
Construction	$120,000-$160,000
Site works and services	$15,000-$35,000
Total estimate	$142,400-$212,800

Be wary of “from $150,000” quotes — the full project cost is typically $185,000-$228,000 once everything is counted.

Use our granny flat cost calculator to get an estimate for your area.

Common mistakes to avoid

1. Thinking no planning permit means no rules — you still need a building permit and must comply with all siting and construction standards.
2. Forgetting overlays — heritage, flood, bushfire, and environmental overlays can trigger a planning permit requirement even on large blocks.
3. Underestimating the 7-star NatHERS cost — budget an extra $5,000-$15,000 for insulation and glazing upgrades.
4. Connecting to natural gas — small second dwellings cannot connect to gas. Design for all-electric from the beginning.
5. Planning to subdivide — not possible under current rules.

Frequently asked questions

Can I build a granny flat on my property?

If your property is in a residential zone, already has a house on it, and is 300sqm or more, you can almost certainly build a small second dwelling up to 60sqm without a planning permit. Check for overlays that might require extra approvals.

Do I need a planning permit?

Usually not. If your block is 300sqm or more, in a residential zone, and has no special overlays, you don’t need a planning permit for a small second dwelling up to 60sqm. You always need a building permit.

Can I rent it out?

Yes. Anyone can live there — the old dependency requirement is gone.

What happened to DPUs?

Transitional rules have been extended to 28 March 2027. Existing DPUs remain legal. New DPU applications can still be lodged until that date. After March 2027, everything is assessed under the small second dwelling rules.

How much does it cost?

Expect to pay between $142,000 and $213,000 including everything. Construction alone typically runs $120,000-$160,000. Use our cost calculator for a more accurate estimate.

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This guide is based on Victoria’s rules as of April 2026. Regulations can change — always check with your local council or Planning Victoria before starting your project. Use our granny flat cost calculator to estimate your build costs.