Big planning changes in NSW – potential to create thousands of affordable rental dwellings in Sydney, Newcastle and the Illawarra

Over the last few months the NSW Government has made a series of announcements which it broadly calls new reforms to create more affordable housing.  One of our 5 key policy priorities for 2023-2025 at Shelter NSW is that the planning system ought to be made to systematically deliver more and better Affordable Rental Dwellings. So, we’re are pleased to see the Government push on with this reform, though some of our concerns remain. We will continue to raise these with Government.

Key reforms by Government include:

  1. New planning rules to fill address the ‘missing middle’

There will be a new  planning rules to allow terraces, townhouses, duplexes, 1-2 storey apartment blocks and residential flat buildings of 3-6 storeys in R2 and R3 zones where they are currently banned under local council rules.  According to the NSW Government, these local rules have created a ‘missing middle’, of low-rise density in suburbs and towns; holding back general housing supply and diverse housing types.

2.  Government rezoning around transport to drive increased density – mandatory inclusionary zoning (MIZ) for affordable housing required in perpetuity

In early December the NSW Government announced the long-anticipated program intended to drive significant increases in housing around 39 transport hubs. Prior to this, Shelter NSW has partnered with the Planning Institute of Australia (NSW) and within the Sydney Alliance calling for substantial proportions of affordable rental housing to be required within any future upzoned transport precincts (under a Mandatory Inclusionary Zoning MIZ framework) and for that affordable housing to be required to be in perpetuity managed by not-for-profit community housing providers.In many respects, our advocacy has been successful.

The TOD program has two key parts:

A. Government-led rezonings within 1,200 metres of eight ‘priority transport’ hubs.

Key housing requirements:

  • ‘inclusionary zoning’ will be applied within the eight precincts to ensure the delivery of up to 15% ‘affordable housing’
  • affordable housing would be: managed by registered community housing organisations’; subject to rent and tenancy controls and be held ‘in perpetuity’. 

8 x TOD accelerated precincts are within:

  • Bankstown;
  • Bays West;
  • Bella Vista;
  • Crows Nest;
  • Homebush;
  • Hornsby;
  • Kellyville; and
  • Macquarie

B. Rezoning of 31 transport hubs or town centre locations to allow residential flat building within 400 metres.

The stations are: Adamstown, Ashfield, Banksia, Berala, Booragul, Canterbury, Corrimal, Croydon, Dapto, Dulwich Hill, Gordon, Gosford, Hamilton, Killara, Kogarah, Kotara, Lidcombe, Lindfield, Marrickville, Morisset, Newcastle Interchange, North Strathfield Metro, North Wollongong, Rockdale, Roseville, St Marys Metro, Teralba, Tuggerah, Turrella, Wiley Park and Wyong.

Outstanding issues and concerns for overall TOD reform package

  • The 15 % affordable housing is not guaranteed – being subject to feasibility testing, potentially undermining the eventual yield of new affordable housing supply.
  • Community Housing providers while registered, may be For-Profit
  • Rezoning and urban renewal risks leaving existing communities worse off. In some locations there is likely to be significant displacement of lower income renters from the redevelopment of (currently) lower cost private rental accommodation. There is a  pressing need for affordable housing impact statements to be required and acted on for each rezoned precinct.
  • Reforms may act as very blunt instruments, exacerbating community concern. Each station precinct is different and has unique opportunities. Consistent with our joint statement with the Planning Institute, calling for Inclusive Renewal, we want to see collaborative Master Plans that manage the cumulative impacts of density and invest in a more socially and environmentally sustainable communities
  • Transparency and Governance: who will administer the contribution schemes in the State Significant development precincts? Who will track the numbers of affordable dwellings being delivered over time? Who will ensure that affordable housing tenancy and rent obligations are met?

Voluntary Density bonus scheme locked in – major concessions made to developers 

‘Developers claim win with Minns Government’s affordable housing reform’. Now there’s a (paywalled) newspaper headline that doesn’t instill great confidence!
Yesterday the NSW Government locked in changes that will provide substantial density bonuses (up to 30% floor space ratio boost, and a height bonus of up to 30% above local environment plans) to private developers that agree to include 10- 15% affordable housing in their large developments. 
This scheme is not to be confused with the Government-led rezoning and planning reforms previously discussed. This scheme is voluntary and does not require any resulting affordable housing to be in perpetuity.

As noted in our submission to the Minister for Planning, Paul Scully, we were and remain concerned about the effectiveness and potential impact of this voluntary scheme.
We recently commissioned Professor Peter Phibbs to look at an earlier version of this scheme. His paper examines the costs and benefits to developers that might use the scheme, the likely market reaction and suggestions as to how it might be improved.

This research prompted our Senior Policy Officer Cathy Callaghan, quoted in today’s Sydney Morning Herald (above) to observe that these kinds of schemes would really only be used by developers if it made commercial sense to them. Relying on the Phibbs’ analysis she went further, “It’s probably going to make sense for big developers in the eastern suburbs, but it’s not going to stack up in Penrith”.
Cathy went further, noting Shelter NSW’s (and the broader community sector’s) disappointment that the government did not make it mandatory for any affordable homes created through the scheme to be managed by a not-for-profit, rather than any registered community housing provider (which may include private developers).
But overall, as Cathy noted in relation to this approach, “We don’t hate it,” but it is “ultimately secondary to the much more significant changes to housing density around transport hubs which the government announced last week.