It’s just past midnight on Friday at one of Melbourne CBD’s most loved clubs, and the room is jumping to the fast, syncopated rhythms of the DJs. Absorbed in the music and visual art projected around the room, the diverse crowd playfully bump and sway in a state of organised chaos. As the energy in the room reaches its tantalising climax, suddenly the house lights turn on, the DJ winds down the music and the event is over.

In minutes, the crowd is ushered out of the venue by the apologetic staff and onto Swanston Street. It’s 1am, a time when dance music venues would usually be just warming up, but due to a regulatory freeze on late-night liquor licences the club has to close. All this in the middle of a city that prides itself on its world-class nightlife and status as the cultural capital of the nation.

“When you restrict liquor licences to 1am it of course has a stifling effect on all nightlife in the city,” says Shane Homan, an associate professor at Monash University and author of numerous reports on cultural and music policy in Australia. “[These spaces] have important social benefits and economic spin offs. Too often their cultural value is overlooked.”

While the state government claims it is “placing creativity at the heart of Victoria’s recovery and prosperity” and boasts of the $3.5 billion dollar value of the city’s night-time economy in pre-pandemic times, there is a growing frustration from those in the dance music industry over a liquor licence freeze they say has been gradually eroding Melbourne’s celebrated nightlife for the past 14 years.

Critics of the freeze say poor planning and misguided regulation by successive governments threatens the existence of important cultural spaces in the city, and has done little to address community concerns. But as the inner-city population grows, new residents say they are happy to see the music dialled back.

Since an ill-fated attempt by the Victorian Government to introduce a 2am lockout of venues in 2008 was overturned after a wave of popular resistance, successive state governments have taken a back-door approach to regulating the sector. The Brumby government of the day instead introduced a late-night liquor licence freeze, effectively putting a stop to the creation of new dance music venues in the inner city councils of Melbourne, Port Phillip, Stonnington, and Yarra.

Initially conceived as a temporary measure to curb alcohol-related violence, the freeze has been extended every few years by both Labor and Liberal governments. It stipulates that no new liquor licences can be issued for venues after 1am, barring an exemption.

“If you’re running a nightclub, having a license until 1am is not really going to work,” says Daragh Kan.

Kan has been in the hospitality business for years, and was the owner of The Mercat, an iconic CBD nightclub which closed in 2017.

“As soon as the venue closes, that’s it, they’re not coming back [or] creating new licences,” says Kan. “So, if you want to start a new club you’re reliant on finding another venue with a pre-existing licence.”

Because these smaller venues are in prime locations and are limited in their ability to generate huge profits, he says they become attractive targets for development. Once a venue is developed, the licence is lost forever.

According to data from the regulator, since 2014, the number of active late-night liquor licences in metropolitan Melbourne has decreased by nearly 10%, despite the population growing 13% in that time.

The effect on the dance music industry has been pronounced.

“Obviously, venue owners first take the hit, then there is a series of knock-on effects with bar staff, catering staff; and the related network of DJs, musicians, managers, promoters and the like,” says Homan.

“Cities also experience a reputational hit,” he adds, citing the disastrous effect Sydney’s restrictive lockout laws had on the city, which lost credibility as a cultural centre as well as an estimated $16 billion in trade.

But beyond economic considerations, those in the industry say the freeze limits the diversity of the clubs that can exist, diminishing the cultural vitality of the music scene.

“The loss of formal licensed venues makes it harder to create spaces that are gender, race, sexuality and ability-inclusive,” says Paul Lewis, a town planner, DJ and former event organiser.

When there are no spaces that can cater to these groups, he says they are forced into less regulated spaces which can have safety implications and further contribute to public amenity concerns.

Kan says these “small, diverse venues allow people to find their niche, a place they’re comfortable in,” and must be protected.

Successive governments have cited alcohol-fuelled violence and antisocial behaviour as the justification for the freeze. In the memo explaining the latest extension to the freeze last year, Melissa Horne, the Victorian Minister for Liquor Regulation, reiterated the “correlation between antisocial behaviour in the early hours of the morning and the operation of licensed premises that supply liquor after 1am”.

Critics say while there were definitely safety concerns to tackle, the freeze is not well targeted and does not properly address the issues at play.

“As was pointed out at the time,” says Homan “the CBD violence in the main stemmed from the late-night adult/strip clubs, which were over-represented in police stats, and not from the wider bar and club sector.”

Having owned a club that catered to diverse subcultures, Kan agrees that these smaller clubs rarely had issues with alcohol related violence, and that the media helped blow the issue out of proportion.

Lewis, who now works in the urban planning sector, says that the general issues justifying the freeze warrant a response, but they would be better addressed through “targeted measures, rather than using licensing hours as a blanket ban… [which causes] a huge amount of largely avoidable collateral.”

Critics have also said creating binary links between all alcohol consumption and the venues that supply it with violence is unhelpful.

“I get really annoyed about these crude constructs because they attribute the cause of violence to alcohol, when actually we know that the effects of alcohol differ depending on who’s using it, the cultural meanings they associate with it and the spaces in which they’re using it,” says Kane Race, a Professor of Gender and Cultural Studies at the University of Sydney who has studied the cultural effects of Sydney’s late-night lockout laws.

Race also says the data used to justify government interventions often don’t capture the qualitative nature of the violence and who’s committing it. He says this has created a situation where these regulatory responses actually end up affecting those most at risk to late-night violence, people who found safety and community in these subcultural spaces.

Since 2015, exemptions to the freeze have been allowed for live music venues that can satisfy the regulator that the economic and social benefit of granting the licence will outweigh the impact of alcohol misuse and community amenity. But that’s a very difficult hurdle to overcome, says Kan.

“You’ve got a lot of different regulations to contend with… and restrictions on building new venues are also very tight. With the financial and practical pressures these put on small businesses that in their very nature cater to small crowds, satisfying these [exemption] criteria is difficult.”

Meanwhile, residents of increasingly crowded inner-city precincts would like to see even further regulation.

Artur Hajda has lived in the CBD since 2006. He is the vice president of Residents 3000, which represents the interests of others who live in the city. Like many residents’ groups, they support the freeze , citing its effects on amenity and perceptions of safety in their area.

“The problem is with the noise and behaviour of the people who are leaving venues as much as the music inside. People don’t feel safe and secure in the city”, says Hadja. He says residents have long argued for greater police presence in the CBD, and now even have a dedicated Neighbourhood Policing Coordinator to deal with their concerns.

He says he understands the perspective of the venue owners, and blames a lack of government planning over the past several decades that has created the tensions.

“There used to be no problem for a venue to run because there weren’t many residents around, they weren’t actually interrupting anyone’s life. But now there’ll be over 10 residential buildings higher than 30 storeys right next to a club.”

Since the Kennett government’s push to get people living in the city in the early 1990s, the population has skyrocketed from 31,000 in 1992 to 170,000 in 2021.

But Professor Race points out that what draws many new residents to the city are the very cultural activities they now wish to displace. He says the regulation should take the “right to the city” of those who use the city into account as much as those of the residents; if they don’t, they risk “depriving people of a space and context that they’ve traditionally relied upon to form community, meet people and work out who they are.”

Balancing the rights and concerns of residents and those who use the city has not proved easy for policymakers. But after 14 years under the freeze and with no end in sight, those in the industry say it’s time for a new approach. Former nightclub owner Kan echoes many in the sector who want the freeze scrapped.

“When you’re talking about spaces that are enabling the local music scene, I think there’s absolutely a wide amount of value there for the city,” he says.

With both the Government of Victoria and Melbourne City Council signalling an arts lead recovery to the long, gruelling effects of the pandemic, there may be tepid signs of the need for regulatory change.

For DJ and town planner Lewis, the issue is deeply personal. These late-night spaces have been the site of many of important moments in his life. He hopes that any future regulations will better reflect the cultural, commercial and individual value of these clubs and the communities they serve.

“We may emerge from our COVID slumber to welcome in a new era in Melbourne supported by a range of new and exciting venues, new treasures for our treasured city”.

A version of this story was co-published by The Guardian.