By Aaron Gadiel, Partner
The NSW Government has taken steps to clear up some problems with its ‘Low and Mid Rise Housing’ and ‘Transport Orientated Development’ policies.
The changes are made by the State Environmental Planning Policy (Housing) Amendment (Diverse Housing) 2025. These changes came into effect last Friday (20 June 2025).
The article analyses some key changes — from the perspective of a property developer. Not all the changes in the amendment are addressed.
On 28 February 2025, the NSW Government implemented its ‘Low and Mid Rise Housing’ policy by inserting a new Chapter 6 into the State Environmental Planning Policy (Housing) 2021 (the Housing SEPP).
Mills Oakley published an article about the changes at that time. Following a further amendment to the scheme, we published a supplementary article on 16 March 2025.
One of the potential issues that we flagged in our first article related to the new storey controls.
As we explained, from 28 February 2025, there have been new storey controls that apply to all residential flat buildings and shop top housing in R3-R4 zoned land in a ‘low and mid rise housing’ area.
In the ‘low and mid rise housing inner area’:
In the ‘low and mid rise housing outer area’ a consent authority must be satisfied that residential flat buildings with a building height of up to 17.5 metres have four storeys or fewer.
(Importantly, these storey controls do not apply to buildings that are taller than the nominated height limits. We consider that this means, for example, that the storey controls do not apply to buildings that exceed this height limit due to the affordable housing incentive.)
In our last article, we explained that, normally, a planning control in the Housing SEPP is understood to be using defined terms in the ‘Standard Instrument’.
A ‘storey’ is defined in the ‘Standard Instrument’ as:
A ‘storey’ does not include:
This definition includes storeys even if they are below ground.
For this reason, we normally would have expected to see an express carve-out in a storey control that excludes storeys that are basement levels. For example, section 144(3)(b) of the Housing SEPP applies the Apartment Design Guide to a building of at least three storeys, but expressly excludes ‘underground car parking storeys’.
In our article, we said that we thought the failure to exclude basement levels from the new six-storey and four-storey controls was an oversight. We expressed the hope that the Planning Department will quickly move to correct this apparent error.
Thankfully, the latest changes have addressed this oversight.
Provisions have been inserted to say, in respective of the above controls, that a ‘storey’ does not include a ‘basement’ within the meaning of the ‘Standard Instrument’. This means that, for these controls, a ‘storey’ does not include the space of a building:
While this will fix the issue for most sites, it does not directly address a site that already has a building with existing basement level(s).
In Merman Investments Pty Ltd v Woollahra Municipal Council [2021] NSWLEC 1582, the Land and Environment Court interpreted ‘ground level (existing)’ as the existing level of the site at a point beneath an existing building.
In a later decision, the Court held that the existing ground level was the ground below the lowest floor (or lift well, etc) concrete slab: Hayek v Randwick City Council [2024] NSWLEC 1631 at [64].
Accordingly, for sites where there is an existing building, the subsurface levels that are technically not ‘basement’ under the ‘Standard Instrument’ will count towards the four/six storey limit established under the Chapter 6 of the Housing SEPP.
However, as we have explained above, we consider that these storey controls do not apply to a building that exceeds the nominated height limits. As these height limits are measured from the existing ground level, it is likely that where there is an existing building with an excavated basement, the developer would be likely to seek approval for a building that exceeds the nominated height limits.
Such approvals are often granted with the assistance of a ‘clause 4.6’ request. With respect to height exceedances due to prior excavations or a former building on the site, in Merman the Court said (at [74]) that the prior excavation of a site within the footprint of the existing building — which distorts the height of buildings development standard plane overlaid above the site when compared to the topography of the land — can properly be described as an ‘environmental planning ground’ under clause 4.6. This may assist in justifying a contravention.
A similar conclusion was reached by the Court in Heath v Mosman Municipal Council [2022] NSWLEC 1628 at [10] and Zhang v Randwick City Council [2022] NSWLEC 1386 at [56].
Another aspect of the ‘Low and Mid Rise Housing’ policy was to make residential flat buildings permissible (with development consent) on land zoned ‘R2 Low Density Residential’ or ‘R3 Medium Density Residential’ within a ‘low and mid rise housing’ area.
However, ‘residential flat buildings’ are defined to exclude ‘co-living housing’.
This has meant that co-living housing was not permitted on such land when residential flat building were only permitted because of the new ‘Low and Mid Rise Housing’ controls.
This anomaly has now been fixed (by an amendment to section 67 of the Housing SEPP).
Development for the purposes of co-living housing may now be carried out with consent on land in a zone in which:
However, for some reason, the Government has not fixed a similar anomaly.
The ‘Low and Mid Rise Housing’ non-discretionary development standards (which are there to assist developers) only apply to ‘residential flat buildings’ or ‘shop top housing’.
As mentioned above, the expression ‘residential flat buildings’ is defined to exclude ‘co-living housing’. As a result, a co-living housing development — that is exclusively comprised of residences — is not subject to the non-discretionary development standards that allow greater height or floor space ratio in ‘low and mid rise housing’ areas.
It is possible for a co-living housing development to be regarded as ‘shop top housing’. However, this would require:
If the co-living housing can also be regarded as ‘shop to housing’ the development would be subject to the relevant non-discretionary development standards that allow greater height or floor space ratio in ‘low and mid rise housing’ areas.
It is curious that the Government has elected to retain an apparently flawed status quo — where some mixed use co-living housing developments are able to access greater height and floor space ratio in ‘low and mid rise housing’ areas’, while purely residential co-living housing development cannot.
(Having said this, there may be potential for a clause 4.6 request to be crafted for a purely residential co-living housing development that, in part, relies on the desired future character signalled by the non-discretionary development standards.)
The ‘Low and Mid Rise Housing’ policy provisions are directed to:
The absence of any express reference to ‘seniors housing’ has led some to believe that seniors housing could not benefit from the new scheme.
However, development types may be defined in ways that overlap.
In Abret v Wingecarribee Shire Council [2011] NSWCA 107, the Court of Appeal concluded (at [67]-[68]) that a development that fell within a definition of ‘seniors housing’ could also be characterised as a ‘residential flat building’.
That is, the mere existence of two definitions in the LEP does not stop the same development from falling into both of those definitions.
The expression ‘seniors housing’ is defined to include ‘a group of independent living units’.
An ‘independent living unit’ means a dwelling or part of a building, whether or not attached to another dwelling-
but does not include a ‘hostel’.
Accordingly, the key elements of an ‘independent living unit’ are as follows:
Arising from the ‘hostel’ exclusion, either:
In our view, there is nothing in the definitions of ‘seniors’ housing’ or ‘independent living units’ that would necessarily prevent a group of independent living units from also being ‘multi dwelling housing’ or a ‘residential flat building’ (as defined in the ‘Standard Instrument’).
Of course, the dwellings would still need to meet the standard component of the relevant definition. (For example — for the definition of ‘residential flat building’ — the building must contain three or more dwellings, but does not include an ‘attached dwelling’, ‘co-living housing’ or ‘multi dwelling housing’.)
The upshot of all of this is that in the right circumstances, we consider that seniors housing already benefits from some of the provisions in the ‘Low and Mid Rise Housing’ policy set out in Chapter 6 of the Housing SEPP.
However, there has been an anomaly.
The seniors housing incentive floor space ratio for (what used to be called) ‘vertical villages’ has not been available where residential flat building or shop top housing is only permissible by reason of the ‘Low and Mid Rise Housing’ policy.
This has now been fixed.
Section 87 of the Housing SEPP has now been amended so that the seniors housing incentive floor space ratio now applies when development for the purposes of a residential flat building or shop top housing is permitted on land under Chapter 6 of the Housing SEPP, as well as land where:
When the ‘Low and Mid Rise Housing’ provisions were inserted into the Housing SEPP, express provision was made to ensure that some aspects of the build-to-rent housing scheme were available on land on which development for the purposes of:
is permissible under Chapter 6.
However, the ‘non-discretionary’ development standard that limited a consent authority’s ability to:
as a result of a building height, did not apply.
This anomaly has now been fixed by an amendment to section 74 of the Housing SEPP. This non-discretionary development standard now applies if the height of all proposed buildings is not more than the maximum building height permitted under Chapter 6 of the Housing SEPP.
Similarly, there has also been an amendment to the non-discretionary standard for floor space ratio.
When the ‘Low and Mid Rise Housing’ policy was introduced, it was introduced with some sweeping exclusions from the new provisions.
Land affected by aircraft noise in an ‘ANEF contour or ANEC contour of 20 or greater’ was excluded from the scheme.
This has now been adjusted so that the exclusion applies to land in an ‘ANEF contour of 25 or greater or ANEC contour of 20 or greater’.
An ANEF chart is a more refined ANEC, which is generated based on the final approved flight path design. ANEF noise contours are formally endorsed for technical accuracy and practical operational application by Airservices Australia (the government air navigation services provider). ANEFs are published for all federally-leased airports.
Typically, in areas affected by aircraft noise, tougher standards are triggered when the ANEF contour is 20 or greater. Under AS 2021:2015, residential housing is conditionally acceptable between ANEF contours 20-25. It was always odd that the ‘Low and Mid Rise Housing’ policy was not applied to areas that in an ANEF contour of less than 25.
This change to an ANEF contour of 25 or greater may (subject to the land not also being subject to an ANEC contour of 20 or greater) mean more land is subject to the ‘Low and Mid Rise Housing’ policy.
In May 2024, the NSW Government introduced new rules for its ‘transport orientated development program’.
We published an article on the changes at the time.
The provisions relating to the ‘transport oriented development program’ are set out in Chapter 5 of the Housing SEPP.
To date, these provisions only applied to the mapped ‘Transport Oriented Development Area’.
However, it now appears that the NSW Government wants to extend these provisions.
Firstly, Chapter 5 now applies to a whole lot, even if only part of the lot is in a mapped ‘Transport Oriented Development Area’. This means, for example, the landowner can consolidate two adjacent lots and — if only one of the former lots is in the mapped area — the other lot will, as a result of the consolidation, also be subject to Chapter 5. Development consent is not required for lot consolidation as such.
Secondly, the whole parcel of land (as proposed to be amalgamated) will be subject to Chapter 5 if:
The above changes do not apply to a lot on which a State or local heritage item is located.
Having said all this, there appears to have been a drafting error.
Despite the apparent intention to extend the ‘transport orientated development program’ to adjacent lots where:
the Government has not actually amended the definition of ‘Transport Oriented Development Area’.
This definition still says that such an area is ‘land identified as a “Transport Oriented Development Area” on the Transport Oriented Development Sites Map’.
The operative provisions of Chapter 5 are all directed to development within a ‘Transport Oriented Development Area’. This makes it likely that some local councils will argue that — despite the apparent extension of the application of Chapter 5 — the operative provisions of the chapter actually do not apply to the parts of land parcels that sit outside of the mapped area.
We hope that the Planning Department will move to rectify this apparent error quickly.
The changes make some welcome improvements to the ‘Low and Mid Rise Housing’ policy. Regretfully, some of the changes are not as clear and helpful as they could be. Nonetheless, it is a step in the right direction.
The alteration to Chapter 5 (‘Transport oriented development’) appears well-intentioned, but a further amendment is required if legal argument with local councils is to be avoided about the meaning of the change.
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