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Kicking out car yards from central Hobart and making it for easier apartment developers have been suggested as ways to meet the growing demand for inner-city living.
The building industry and real estate agents believe Hobart needs to encourage the construction of medium-density development, but planning experts are urging the city to proceed with caution.
Malcolm and Annette Grimes are approaching retirement and want to downsize from their three-bedroom house in Kingston with a large garden to a smaller apartment in the city.
Mr Grimes said finding a place had not been easy.
"Our research so far has shown there is very limited accommodation in the city area, so we would like to see some other options become available," he said.
About 2,000 houses are built in Tasmania a year and about 85 per cent of those are detached.
Tony Collidge from the Real Institute of Tasmania said the Grimes were among a growing number of baby boomer couples searching for a more convenient place to call home.
"The big issue there is property that they are looking for isn't available in the marketplace," he said.
The Master Builders Association's Michael Kershbaum believes there is a mismatch between the type of housing being provided and the type of housing being offered.
"The densification of Hobart is all wrong, it is too spread out, it is too sprawling," he said.
Mr Kershbaum said Elizabeth Street from the city to North Hobart and surrounds, parts of Sandy Bay Road and Bellerive on the Eastern Shore could be developed.
"We think there is absolutely pent up demand; we are just a little behind the eight ball when you look at cities like Melbourne and Sydney."
Mr Kershbaum said the State Government's new statewide planning scheme will allow for more medium-density development.
But he said more needed to be done to entice developers into the city.
"There could be a role for state government to play in coordinating the utility providers and the councils in galvanising better streets, with landscape with utilities, gas electricity, storm water sewerage and all those sorts of things, and ensuring that we have low-cost infrastructure in place and ready to go to ensure we can accommodate this densification," she said.
Hobart City Council Alderman Philip Cocker said one way of creating space in the city would be to kick out all the car yards, which he described as a "waste of space".
Mr Cocker said moving more people into the city would have many benefits.
"It would bring life to the city and it would also reduce traffic, because instead of going out to greenfield sites in Kingston and Sorell we can people bring to live in the city," he said.
RMIT planning expert Michael Buxton said he believed the new statewide planning scheme provided two pathways to the construction of multi-unit dwellings, which could lead to overdevelopment.
"What seems to be a measure that controls multi-unit dwellings really allows developers open up massive development opportunities," he said.
Melbourne University planning expert Dr Kate Shaw said examples of how not to increase densification could be found in Melbourne's Dockland and Southbank.
"Two classic examples, in fact, even the CBD is now full of ad hoc high rise developments that have really been determined by the financiers and developers, not any planning guidelines from the city or the state," she said.
Instead, she said, Hobart should look to European cities for inspiration.
"Cities like Berlin, Paris and Barcelona all have a medium density quality that accommodates a lot of people but maintains a certain historic and very liveable quality," she said.
A State Government spokesman said the Government was confident the statewide planning scheme would not lead to overdevelopment.
The Hobart City Council said it was important to protection measures for heritage sensitive areas and maintaining a reasonable level of residential amenity.
Topics: housing-industry, hobart-7000
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