The Transforming Australian Cities study, commissioned by the Department of Transport and the City of Melbourne and released this month, says high-density buildings along tram and bus corridors could cater for much of Melbourne's projected population growth, reducing the pressure on the majority of existing suburbs and the need to expand Melbourne's outer suburbs.

The State Government's growth plan, Melbourne @ 5 million, released late last year, has mandated an expansion of Melbourne's growth boundaries and a need for 316,000 new dwellings in existing suburbs to cater for projected growth.

The study says concentrating development along transport routes rather than allowing urban sprawl would save billions of dollars - $300 million per 1000 housing units - and reduce energy consumption.

To achieve those savings, population density would have to increase from 30 people per hectare to 400 people per hectare, or 200 dwellings per hectare.

Maribyrnong's population of 69,000 could cater for another 160,000 people, according to the study, and Hobsons Bay, with a population of 86,000, could take 40,000 more.

But Maribyrnong Mayor Michael Clarke said open spaces and equal access to community services for residents were more important than cramming in residents, "cheek by jowl".

Cr Clarke said Maribyrnong had a role to play in housing growth but not at the expense of amenity and the health and safety of residents.

"The reality is that we've got to be considering Melbourne at 10 million."

Meanwhile, the State Government has asked councils, including Maribyrnong, to look at their ability to house more people.

The council's sustainable development manager, John Luppino, said the council had been asked to provide information on the Government's growth requirements projects.

"At this early stage, all we know is that a study of the local housing capacity will be undertaken by June 2010."

The council predicts a further 7461 dwellings will be built within its boundaries by 2026.

This would mean a population increase of about 14,000 between 2009 and 2026. A Government spokesman said the project would identify housing capacities at a local level.