By Aaron Gadiel, Partner

The NSW Government has moved forward with its efforts to improve the rules for developer-requests to change planning controls.

Just before Christmas, the NSW Government withdrew two 2018 policy documents A guide to preparing local environmental plans and A guide to preparing planning proposals.  Both have been replaced by a new policy document: Local Environmental Plan Making Guideline: December 2021.  This new policy makes some immediate changes to how proposals to adjust planning controls are progressed.

At the same time, the NSW Government also released a discussion paper: A new approach to rezonings: December 2021.  This sets out proposals for further reform, beyond the immediate changes set out in the new policy document.

This article addresses both the immediate changes and the proposals.  It does so at a high level (and does not seek to cover all of the detail of the new policy and the latest proposals).

Background

The fate of urban development efforts in NSW is closely linked to rezoning (or other changes in planning controls).  This is because, in Sydney and NSW, there is a strong emphasis on prescriptive controls.

For example, planning systems in some other jurisdictions might provide for, say, eight different types of standard zones in total.  In NSW, there are 43 standard zones, including 18 different types of business and employment zones.

This means that development proponents can often face inflexible prohibitions that stop land being put to its highest and best use.

A prohibition might be justified if it is in place as part of a well-thought-out (and current) strategic plan.  However, often development prohibitions only exist because of a decision made long ago — that may no longer reflect current strategic land use thinking.

Sometimes a prohibition may exist because of a relatively recent review of planning controls.  Nonetheless, it may have been implemented with just a short desktop review by public officials — rather than through any detailed and comprehensive site planning (of the kind that generally only landowners/private developers are able to fund).  This may mean that development is prohibited because of fears about adverse impacts — when, in many cases, such impacts could be avoided through measures that were not anticipated by strategic planners.

Additionally, some prohibitions seem almost accidental — and lack any merit justification.  A judge of the NSW Court of Appeal once famously observed that ‘any attempt to always find planning logic in planning instruments is generally a barren exercise’.  This judicial statement has been relied on by local government in subsequent court proceedings (when defending apparently illogical applications of local environmental plans).

In July 2020 the NSW Government announced that development proponents were to be given a right to appeal rezoning decisions to ‘unblock the planning system’.

The announcement was made by the then Premier, Gladys Berejiklian, as part of her release of the government’s ‘Planning Reform Action Plan’.  A key feature of this plan is a promise to ‘[b]oost the role and resourcing of the Land and Environment Court by establishing a new class of appeals for rezonings’.

At the time, the government’s published timeframe to implement this change was July to October 2020 ‘and beyond’.  This change has not yet been implemented (and, as discussed below, may now never be implemented).

The new policy — overview

Under the Environmental Planning and Assessment Act 1979 (the EP&A Act) there is a set of rules that must be followed before local environmental plans (LEPs) can be changed.

In broad terms, there are normally four key decision points in securing a change in planning controls:

• the adoption of a planning proposal by the ‘planning proposal authority’ and its submission by that authority to the Planning Minister for ‘gateway determination’;
• the making of a gateway determination (ie a decision) by the Minister;
• the public exhibition of the planning proposal and the consideration of the outcome of that public exhibition by the planning proposal authority; and
• the actual changing of planning controls by the ‘local plan-making authority’.

The current process for securing a rezoning of land is complex and time consuming.  There are many opportunities for the process to head off-the-rails.  There is considerable risk and cost for a development proponent.

The two policy documents that have been replaced largely spelled out administrative detail as to how this legislated process works.  The policies also provide for a ‘rezoning review’ process (when a local council blocks a request for a planning proposal).  A rezoning review allows a proponent to make a request that an independent body review a request for a planning proposal.  The review process largely operates on the grace and favour of the Department of Planning and Environment (it is only referred to indirectly in the EP&A Act).

Significantly, the old policy documents sought to limit the circumstances in which a change in planning controls should be supported.  That is, the old policy documents sought to discourage the full exercise of the wide legal discretion given to planning authorities to support changes to planning controls.

The substance of the new policy document largely replicates the old policy documents — although an effort has been made to make the policy more readable.

The strategic merit test

Like the old policies, the new policy still attempts to build a fence around the use of discretion by planning authorities to support changes to the planning controls.  For example, the dual tests of ‘strategic merit’ and ‘site-specific merit’ have been retained (even though they are not requirements of the EP&A Act).

However, there are some minor incremental improvements.

Firstly, the old policies did not allow for any amendment of a developer-initiated planning proposal by a proponent, other than by starting the process again.  (This aspect of the old policies was often not applied inconsistently.)

The new policy expressly allows for planning proposal amendments (although an amendment to a planning proposal will re-start the clock as to when a rezoning review can be sought).

Secondly, the old policies included a presumption against a successful rezoning review request that seeks to amend LEP controls that are less than five years old (unless the proposal could ‘clearly justify that it meets the Strategic Merit Test’).

The new policy does not include this presumption.

Thirdly, while the old policy did allow for planning proposals to satisfy the strategic merit test even when they were inconsistent with, say, a local strategic planning statement, the circumstances in which this could be done were vague.

The new policy gives some greater clarity on this.  It says that factors that lead to responding to a change in circumstances may include (but do not need to exclusively relate to):

• key infrastructure investment or opportunities to plan for future infrastructure unanticipated by the existing strategic planning framework;
• a response to key government priorities – Premier’s Priorities, climate change, or a shift in government policy (eg the NSW Government’s ‘Net Zero Plan’); and
• changes to population and demographic trends.

Many local strategic planning statements (prepared by local councils) discourage any change to planning controls.  For this reason, many developers will welcome this clearer explanation of the strategic merit test’s flexibility.

A new ‘scoping’ process

Developers now face an extra step in the process of requesting a planning proposal.

The new policy includes a new ‘stage 1’ in the process titled ‘scoping proposal and meeting’.

The stage occurs prior to what is now ‘stage 2’ — the preparation and lodgement of the planning proposal.

This will come with extra costs — as a ‘scoping proposal’ will now need to be prepared in advance of a planning proposal.

Past experience suggests that the introduction of additional stages in complex planning processes generally adds to costs and delays (in a way that is disproportionate to any benefit).

This new stage 1 is theoretically optional.  However, given the wide discretion enjoyed by the planning authorities to block requests to change planning controls, it would generally be prudent for most developers to participate in stage 1 (if only to avoid later criticisms for not utilising the full extent of the engagement process).

Rezoning reviews

Under the old policies, a rezoning review may have been sought by a proponent if a request for a planning proposal had been given to the local council and more than 90 days without a decision passed.

Under the new policy, this time period has been extended to 115 days for ‘complex proposals’.  The policy anticipates that the Department of Planning and Environment will confirm whether a proposal is a ‘complex proposal’ as part of the stage 1 ‘scoping proposal and meeting’.

Probably more worrying is the new ability of the local councils to reject the lodgement of a planning proposal request within 14 days if it is ‘unclear’.  This is not supposed to be an opportunity for local councils to filter out planning proposals they do not like, however, there is a real risk that this new discretion will be abused.

The proposals for further reform — overview

The discussion paper sets out the proposals for public comment.  Submissions are open until 28 February 2022.

In very broad terms the proposals include the following:

• Developers would have a new formal status as an applicant for planning proposals. (At present, the local council is generally regarded as the proponent of a planning proposal.)  This change will likely have procedural benefits for developers.
• The new ‘stage 1’ scoping process (referred to above) would become mandatory.
• The gateway determination process would be abolished and replaced with a check that all the required technical information was included in the planning proposal. The check would need to be satisfied before any public exhibition. This (in theory) defers a merit decision until after the public exhibition of a complete proposal. (There is a risk that this ‘check’ process may be abused.)
• A proposal for a more robust appeal right when proposals to change LEPs are blocked.
• Proposals for more substantial fees, including full cost recovery. These fees would apply whether the change in planning controls goes ahead or not.  There is also a proposal for a ‘planning guarantee’ where there may be some sort of fee refund if there is a delay in the process.

Appeal rights

The current rezoning review process exists as the result of an administrative policy that has been adopted by the NSW Government.  This means that the rules surrounding how and when a rezoning review may be conducted are not rigid (and therefore are unreliable).

The administrative policy lays-down a process by which a panel might decide to make a statutory recommendation to the Minister (or decide as the Minister’s delegate) that it should be a planning proposal authority, rather than the Council.

Even if a proponent is successful in a rezoning review, their planning proposal may not necessarily proceed to finalisation (because the rezoning review only relates to the first part of a multi-stage process).

At the end of the day, the rezoning review process does not offer the kind of robust independent review that a merit appeal does in the Land and Environment Court.  By way of example, for a large complex development, it would not be unusual to a commissioner of the Court to spend four hearing days taking evidence and listening to submissions.  However, a panel could easily only spend one hour holding a meeting for a development of the same complexity.

Despite the government’s 2020 commitment to legislating for an appeal right in the Land and Environment Court, the discussion paper weakens any commitment to the path.

Instead the discussion paper sets out two options as to appeal venues.

Firstly, the Land and Environment Court.  This is criticised (among other things) for being ‘costly and time consuming’.

Secondly, the Independent Planning Commission.  This is praised (among other things) as being ‘likely to be quicker and cheaper’ and ‘less adversarial’.

We have appeared before countless panel meetings, the Independent Planning Commission and (of course) the Land and Environment Court.

There is no denying that the level of rigour that the Court brings to any decision it makes far exceeds that of any panel or the Independent Planning Commission.  However, in our view, that rigour comes with benefits to developers and the wider community.  We consider that it means the following:

• The Land and Environment Court is, without doubt, the most trusted institution in the NSW planning system. There has never been any serious attack on its independence or integrity.
• The extent of community trust in the Court means that it does not hesitate to make unpopular decisions, when justified by the evidence and the law. This can assist developers — who are often friendless when there is a sustained NIMBY campaign against them.
• The Court currently brings discipline to the whole development assessment system. While most development applications are not appealed to the Court, the fact that they can be appealed is often a check against abuse of discretion by local council officers and panels.  The current haphazard decision-making on planning control changes merely flows from the absence of an appeal right to the Court.
• The Land and Environment Court has had 41 years to build-up community trust and establish its rigorous and credible approach. The Independent Planning Commission is a relatively new institution and its current role will not be readily adapted to the proposed new role.
• The Independent Planning Commission is unlikely to have the resources or structure that would allow the cross-examination of experts, subpoenaing of documents or the taking of sworn testimony. These tools are all vital if members of the public (such as developers) are able to consistently and meaningfully challenge well-resourced and sophisticated public authorities.

At least there is a focus …

Like all things in planning, any ‘reform’ appears to come with a fair dash of new red tape.

Nonetheless, both the new policy and the proposals do indicate a genuine effort to try and tackle the systemic problems in the process of updating planning controls.

Time will tell if any of this is going to work out.