The new laws are likely to significantly reduce the height of Melbourne's future towers, because a developer who builds to the borders of their block will now be restricted to 24 floors. Alternatively the new laws could lead to an increase in open space, because those who apply to the minister to go higher will need to provide offsets such as open space. Developers will be able to apply to the minister to break the rules under unusual circumstances. Urban Development Institute of Australia, which represents many central city developers, slammed the change, branding it a "blunt" piece of "muscle flexing" by Mr Wynne that would "restrict development and cut jobs". Danni Addison, the institute's Victorian chief executive, said the changes could undermine investor confidence and send a message to the business community Melbourne was "closed for business".

"Unless Melbourne remains an attractive investment destination, we are in grave danger of losing future employment and limiting our ability to deliver the housing our communities need," she said. Ms Addison criticised the "severe and unexpected" way the new laws were introduced, and warned Mr Wynne he was "in danger of losing the confidence of the urban development sector". The Property Council also said that some developers who had bought sites expecting to put in planning applications for 40 or more levels would now be left millions of dollars out of pocket. "People who have purchased sites before Friday night, some of those sites may now be unviable [to develop] and a lot of money has gone into them," said the council's executive director Jennifer Cunich. "All of that has just evaporated overnight." She said the changes, combined with new residential planning zones last year that made it harder to subdivide suburban sites in Melbourne's eastern suburbs, made it hard to see where Melbourne's booming population would be housed.

"If the [CBD] can't cope with heightened density, where can?" she asked. And she said tall towers did not equate to poor building outcomes. "We want to have a vibrant city and one that has a legacy for future generations – we shouldn't get hung up on height being so important." Mr Wynne defended the new laws, saying many in the community wanted a check put on untrammelled development. He said Melbourne risked losing its character unless each new CBD building added rather than detracted from its surrounds. "This government is not anti-height and good building design and innovation working in line with the interim controls mean I expect to see some striking projects land on my desk," he said.

And he said some developers had wanted to "max-out sites with little regard for the public realm", and they would be the ones put off by the changes. "But architects, developers and asset owners with long-term interests should appreciate how strategic CBD planning will maintain values and the city's integrity," he said. City sales director for CBRE Josh Rutman said that, while the announcement had "caught the market somewhat by surprise", the density and height Mr Wynne had allowed was "still extremely generous in a global context when compared to high density cities like Hong Kong and Tokyo". Planners also lent some support to the changes, saying the number of inappropriately tall and super-high density buildings had run out of control. "We needed to temper the land speculation that has been going on," said senior planner Roz Hansen, who was part of a group employed recently by Mr Wynne to complete a review of the government's main planning blueprint, Plan Melbourne.

She said if people thought many of the buildings that had been approved in recent years were not too tall or tightly packed with apartments, "it's a nonsense – these buildings are higher than anything New York or Hong Kong is approving". The rules Mr Wynne had put in place were only interim – they will be replaced by new laws next September after a period of consultation – and this would "allow a conversation", Ms Hansen said.