The ACT's updated planning system was unable to deliver on Labor's freshly adopted policy of upzoning all detached housing suburbs, with Chief Minister Andrew Barr saying the system had to "operate in the art of the possible".
Labor and the Greens had been through a "pretty severe" negotiation process, while the Liberals had offered no serious engagement on the issue, he said.
Meanwhile, the Canberra Liberals have said the changes to zoning have not gone far enough with opposition planning spokesman Peter Cain saying it was an "unambitious copy" of a plan the party had taken to the 2020 election.
The ACT government unveiled a new territory plan on Monday, which has outlined the possibility of adding nearly 150,000 homes to the nation's capital over the next three decades.
Zoning boundaries that govern what types of housing can be built will largely remain the same but unit-titled dual occupancies will be permitted on larger RZ1 blocks and two-storey blocks of flats will be allowed in RZ2 areas.
Dual occupancies are already allowed on some RZ1 blocks but people are unable to separately titled the properties meaning the homes must be sold together.
Under the plan, a second dwelling can be built on a block larger than 800 square metres but it must not be larger than 120 square metres.
Mr Cain said he believed a limit on the size of the second dwelling would not encourage more people to build a second property. He said the policy was similar to one the Canberra Liberals took to the last election which would allow blocks of 700 square metres and above to be subdivided.
"Why put a size limit on the size of the dwelling," he said.
"There are blocks out there in Belconnen that are 1700 square metres, why limit that owner to a 120 square metre granny flat.
"Would a family be able to live effectively in a 120-square-metre granny flat. Basically they have copied a smaller version of our policy leading up to the election last time."
ACT Labor adopted a policy of ultimately overhauling zoning to allow medium density housing in all areas previously zoned RZ1, which currently allows only detached housing, at its conference in July.
The ACT Greens also adopted a similar position in a party vote last month.
However, Mr Barr said there had to be compromises between Labor and the Greens, saying he would rather settle on an outcome and get 80 per cent of the Labor position through a "good and workable" compromise.
"The Labor party does not have a majority of Assembly members, so, as in all things planning, there will be probably as many opinions, sometimes even more opinions, than Canberrans," Mr Barr said.
"So we need to take account of the respective views of other political parties, other stakeholders and the broader community. We have a position which clearly indicates that we want to see an increase in housing supply within the existing footprint, but we also have to operate in the art of the possible."
Greens' ministers recused themselves from cabinet discussions about the planning bill as they did not agree with the initial bill that was introduced to the Assembly.
The bill passed the Assembly earlier this year with the Greens voting in support following a series of amendments. The changes to RZ1 blocks were included as part of changes to the district strategies and territory plan which governs how the system works.
Environment Minister Rebecca Vassarotti, who is part of the Greens, said she believed the planning package did lift the ambition in terms of planning in Canberra. But she said she did not think this was the end of the discussion and flagged the need for different ways to provide medium density development while ensuring there was enough green space.
"We don't think this is the end of the discussion around planning. I think it's really important with the interim territory plan that we ensure that it does deliver on its ambition in terms of lifting the bar around development in the city and we'll continue to scrutinise that closely to ensure it is delivering on its ambition," she said.
"We actually think that we do need to look at different ways that we can provide more medium density development that also delivers great green space and community space for people.
Ms Vassarotti said while the RZ1 changes had the potential to be applied to a significant amount of homes she did not think it would result in a "massive increase" and said it was a "fairly modest change".
"Dual occupancy will be part of the picture, it's probably not the whole story and we'll continue to work with this new interim territory plan to work through what are the additional changes that we need to make," she said.
The new planning system was welcomed by the property industry.
Master Builders ACT chief executive Michael Hopkins, who was part of a campaign for more medium density housing, said the release of the strategies signalled a new era for planning in the territory.
He said the "modest housing reforms" would allow increased housing choice within established suburbs.
"The outcomes-based approach, combined with the district strategies, design guidelines and technical specifications provide a more contemporary way of encouraging design innovation, providing flexibility and maintaining the character and streetscape that is valued by Canberrans," he said.
Mr Hopkins said the industry expected there would be some "teething problems" in early stages and said the government needed to work with stakeholders in these stages. He also wanted government to make other changes to attract greater investment into Canberra.
"With the ACT planning system project now nearing completion, it is important government align other policies including infrastructure planning, taxation and proposed developer regulation to its planning and housing objectives so that investment is attracted into Canberra to create more housing, expand our economy and build the infrastructure necessary to support our growing city."
Property Council of Australia ACT and capital region executive director Shane Martin said the current ACT planning system was not equipped to deal with a growing population. He said the changes to RZ1 blocks would help to address housing issues.
"There is still a long way to go but being able to now provide a modest dwelling that is able to be unit titled, owned and sold separately from the main residence will start the journey of addressing our housing issues," he said.
"As with any new system and reform it is expected that there will be issues and learnings that need to occur. We ask and call on the government to continue to engage with industry and community to monitor these changes."
