EXCLUSIVE: The great Australian dream looks a little different these days, with many of the next generation growing up in apartments.

But because of supply problems, finding a unit for parents, kids, and a pet can prove difficult prompting new rules to build bigger.

Twin toddlers Sarah and Hannah love to roam free outdoors, but instead of playing in a backyard, they explore local parks close to their apartment block in the inner Sydney suburb of Zetland.

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"I don't feel like we need a backyard," the twin's mum Dorcas Lau said.

"We've got eight playgrounds around us, that are walking distance from our place. You don't have to take your car out, the community is friendly and warm."

Lau, who grew up in Singapore, has no reservations about raising her children in an apartment, but she does wish she could find one slightly bigger than her two bedder.

"One more room, that would make a lot of difference for us," she said.

But in an already squeezed market, larger apartments are difficult to find.

"Over the past five years about 80 per cent of apartments that have been built have been one and two bedders," said Professor of Urban Planning Nicole Gurran from Sydney University.

"We do need to do something differently."

Across most local councils in Sydney, development controls require that 10 per cent of apartments in new blocks have at least three bedrooms.

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The City of Liverpool has just increased its requirement to 20 per cent, joining the Hills and Parramatta, as some of the few local governments to mandate more.

"One in four apartment dwellers are families with children…I think planners might imagine that apartments are just for singles and couples," said Professor Gurran.

But some developers are aiming to tap into the growing market, with family-friendly builds.

A Mirvac spokesperson says its share of three-bed and larger apartments within its portfolio has doubled over the last five years.

In a new Morningstar development of 37 apartments in Auburn, 30 have three bedrooms or more.

"We're definitely seeing a shift in the market in what buyers are wanting," said agent Stefan Jones from 365 Property Group.

"With the cost of houses, families are seeking out alternates and three and four-bedroom apartments are the next best thing."

One four-bedroom, two-bathroom apartment in the block sold to a family from St Leonards for $920,000.

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"The reality is for many families apartments are going to be all they can afford," Professor Gurran said.

"(But) for families, living in an apartment can be wonderful," she said.

"Apartments tend to be well-located, near transport, near services. So provided that those infrastructure facilities are in place, living in an apartment can help a family do without the car for instance."

Professor Gurran also points to global cities, including New York, Singapore and Tokyo, where apartment living in bustling neighbourhoods is embraced by residents.

"Our cities are also starting to offer those wonderful services," she said.

"It's not so much a question of does the dream need to change, but we do need to think more about offering a variety of housing options for people."