By Aaron Gadiel, Partner

The NSW Government has now placed one of its proposals for the blanket uplift of land near train stations and town centres on public exhibition.  In doing so, the Government has released more detail on proposed new proponent-friendly development standards.

On 28 November 2023 the NSW Government announced its intention to introduce ‘new planning rules to fast track low and mid-rise housing’.

The Government said that these rules would ‘fast-track a greater diversity of homes like residential flat buildings of 3-6 storeys, terraces, townhouses, duplexes and smaller 1-2 storey apartment blocks in suburbs where they are not currently allowed’.

The Government promised that a formal document would be placed on exhibition.  This has now happened with the release of the ‘Explanation of Intended Effect: Changes to create low-and mid-rise housing’.

The proposal is for new state environmental planning policy provisions that would, in certain circumstances, override local environmental plans and development control plans.

The exhibition commenced on 15 December 2023 and will run to 23 February 2024.  The exhibition document can be found here.  The proposals have been released by the Department of Planning and Environment (to be re-named the Department of Planning, Housing and Infrastructure on 1 January).

This article summarises some key proposals set out in the ‘Explanation of Intended Effect’.  However, it does not cover all aspects of the proposals.  (For example, we have not dealt with proposals for dual occupancies.)  Additionally, the exhibition document is not a draft legal document.  This means that it is not written in a legally precise way.  Ultimately, it will be necessary to consider any legal document that emerges from the consultation process to properly understand the legal consequences of the changes.

It should be appreciated that these proposals are a separate initiative from the Government’s ‘Transport Oriented Development’ program announced on 7 December 2023.  More detail on that announcement is available here.

The Government emphasises the housing crisis

The ‘Explanation of Intended Effect’ relies heavily on the ‘housing crisis’ to justify the proposed changes.

The document says that ‘[i]n the context of heightened demand, the supply of new homes is also declining. Residential building approvals have fallen since mid-2021’.

It also says that: ‘[w]e must act urgently to address the housing crisis…  [The proposal will] create a more flexible planning system that can better respond to future shocks’.

The document argues that the ‘current zoning rules in Sydney … make it difficult to provide the diverse range of housing types we need to accommodate our growing population, changing demographics and a wide range of housing preferences’.

The document makes the point that:

• Within many residential areas, important and suitable housing types such as terraces and small apartment blocks are not allowed.
• Even where the zone technically allows a certain housing type, it may be prevented in practice by incompatible planning controls.

Mid-rise housing

The ‘Explanation of Intended Effect’ defines ‘mid-rise housing’ as residential flat buildings and shop top housing that is ‘generally’ between three to six storeys.

The document says that residential flat buildings are prohibited in about 60 per cent of ‘R3 Medium Density Residential’ (R3) zoned land,

Examples that come quickly to our mind include R3 zones under :

• the Ku-ring-gai Local Environmental Plan 2015;
• the North Sydney Local Environmental Plan 2013; and
• the Georges River Local Environmental Plan 2021.

The document says that the average maximum height control is around 9.9 metres, and the average maximum floor space ratio control is 0.73:1 in all medium density lots in the ‘Six Cities Region’ (broadly, Sydney, the Central Coast, the Lower Hunter and the Illawarra/Shoalhaven).

To offer an example, we observe that land around Blues Point Road in North Sydney is zoned R3, with a maximum building height of 8.5 metres (consistent with two storeys).

The document says that even in ‘R4 High Density Residential’ zones, the average maximum is about 15.8 metres and the average maximum floor space ratio is 1.25:1.

Multi dwelling manor houses and manor houses

The ‘Explanation of Intended Effect’ says that:

• multi dwelling housing; and
• ‘manor houses’,

are prohibited in all ‘R1 Low Density Residential’ zones.

In brief terms a ‘manor house’ is a residential flat building containing 3-4 dwellings, limited to two storeys.

New rules for ‘station and town centre precincts’

The ‘Explanation of Intended Effect’ proposes changes the planning rules in ‘station and town centre precincts’.  These are areas that are:

• within the ‘Six Cities Region’; and
• within either:
  • 800 metres walking distance of a heavy rail, metro or light rail station; or
  • 800 metres walking distance of land zoned ‘E2 Commercial Centre’ or ‘SP5 Metropolitan Centre’; or
  • 800 metre walking distance of land zoned ‘E1 Local Centre’ or ‘MU1 Mixed use’ but only if the zone contains a wide range of frequently needed goods and services such as full line supermarkets, shops and restaurants (to be determined by the Department consulting with local councils).

Residential flat buildings would be made permissible in all R3 (medium density) zones in the above precincts.

Multi-dwelling housing and manor houses would be permitted in R2 (low density) zoned land in the above precincts.

The exhibition document says that in areas of particularly high flood risk, such as the Hawkesbury-Nepean Valley, the Department will ‘work with councils’ to exclude the relevant areas from the application of the proposed reforms.

‘Non-discretionary’ development standards — mid-rise housing

The proposal includes the introduction of a series of new ‘non-discretionary’ development standards.

The label ‘non-discretionary development standards’ is misleading.

Non-discretionary development standards are typically welcomed by developers.

The purpose of such development standards is to set out standards that — if complied with — prevent the consent authority from requiring more onerous standards for those matters.

Non-compliance with such standards does not prevent development consent being granted.  In short, these development standards limit the discretion of the consent authority, but do not limit the freedom of the developer.

The proposed new ‘non-discretionary’ standards for ‘mid-rise housing’ are as follows:

• in the inner part of the precincts within 400 metres of the stations/centres:
  • maximum building height — 21 metres; and
  • maximum floor space ratio — 3:1; and
• In the outer part of the precincts from 400 to 800 metres of the stations/centres:
  • maximum building height — 16 metres; and
  • maximum floor space ratio — 2:1.

The proposal is that a consent authority would be prevented from refusing a development application based on height, bulk and scale if the above standards are met.  This would override inconsistent local environmental plan and development control provisions.  (Although, we note that there sometimes can be a legal debate about precisely which controls are overridden by provisions of this kind.)

The non-refusal standards would apply to any residential flat building and shop top housing development on land in station and town centre precincts (with the exception of land zoned R2).

For residential flat buildings, the non-refusal standards would apply to land where this development type is:

• currently permitted (such as an R4 zone and some R3 zones); and
• proposed (by the ‘Explanation of Intended Effect’) to be permitted (such as other R3 zones).

For shop- top housing, the non-refusal standards apply, where this land use is currently permitted.  (No expansion is permissibility for shop top housing is proposed.)

The ‘Explanation of Intended Effect’ also proposes to turn-off minimum site area/width standards in local environmental plans for mid-rise housing. The document says that this would ‘allow development assessment to consider the individual merits of mid-rise developments on a case-by-case basis within the context of the site’.

Changes to the application of the Apartment Design Guide

The ‘Explanation of Intended Effect’ proposes new ‘suitable design criteria’ that would vary some Apartment Design Guide provisions.  The document says that ‘measures will ensure that design controls applying to new mid-rise housing proposals are appropriately differentiated to facilitate smaller apartment buildings’.

The intent of the proposed changes is as follows:

• Building separations: Reducing the minimum building separation design criteria for 5-6 storey buildings (18 metres between buildings where there are habitable rooms and balconies on each building) to match the current requirements for up to four-storey buildings (12 metres).
• Setbacks: New design criteria would say that front setbacks are to be the average of neighbouring buildings, with a six-metre maximum. Side and rear building setback criteria are to increase by an additional one metre for every two-storey difference in height between neighbouring buildings.
• Vehicle access: In a mid-rise building, the design of basement and ground floor for would not need to accommodate large vehicles entering or turning around within the site.
• Visual privacy: To be managed through the proposed modified building and separation provisions (above).
• Communal open space: A minimum of 8m² of communal open space is to be provided per apartment, up to a maximum 25 per cent of the site area.
• Landscaping: Deep soil would be as per the Apartment Design Guide. Tree canopy cover would be 15 per cent of site area for sites of up to 1,500m² — and 20 per cent for larger sites.  There would also be a tree-planting rate, scaled up as sites become larger.
• Car parking: Minimum car parking rates ‘to create a consistent set of appropriate requirements for mid-rise housing across the Six Cities’.

Affordable housing

The ‘Explanation of Intended Effect’ says that Department is also proposing ‘to work with local councils to introduce affordable housing contributions schemes (inclusionary zoning) on more land across the Six Cities where the has been sufficient value uplift’.  The document says that further consultation is expected in 2024.

‘Non-discretionary’ development standards — multi dwelling housing and manor houses

There is a proposal for non-refusal standards for multi-dwelling housing (terraces), multi-dwelling housing and manor houses in station and town centre precincts are as follows:

• Multi dwelling housing (terraces):
  • maximum building height: 9.5 metres;
  • maximum floor space ratio: 0.7:1;
  • minimum site area: 500m²;
  • minimum lot width: 18 metres; and
  • minimum car parking: 0.5 space per dwelling.
• Multi dwelling housing:
  • maximum building height: 9.5 metres;
  • maximum floor space ratio: 0.7:1;
  • minimum site area: 600m²;
  • minimum lot width: 12 metres; and
  • minimum car parking: one space per dwelling.
• Manor houses:
  • maximum building height: 9.5 metres;
  • maximum floor space ratio: 0.8:1;
  • minimum site area: 500m²;
  • minimum lot width: 12 metres; and
  • minimum car parking: 0.5 space per dwelling.

The non-refusal standards would apply to any multi-dwelling housing, multi-dwelling housing (terraces), or manor house in station and town centre precincts, where they are:

• currently permitted; or
• proposed to be permitted under the ‘Explanation of Intended Effect’.

A consent authority will be obliged to consider the Low Rise Diversity Design Guide when determining a development application.

Subdivision — multi-dwelling housing (terraces)

There is a proposal to permit the Torrens subdivision of multi-dwelling housing (terraces) — provided the proposed lots meet the appropriate size, width and access requirements.

Infrastructure levies

The ‘Explanation of Intended Effect’ says that the Department is seeking feedback on local councils’ ‘preferred approach to identifying and addressing additional infrastructure needs that arise as a result of the proposed changes’.

This suggests that there may be new or increased development levies introduced as part of (or following) the implementation of these proposals.

Comment

These proposals for reform are a significant step towards unlocking land currently burdened by restrictive planning controls.

The changes are generally responsive to calls from housing supply advocates for widespread, stroke-of-the-pen changes to overcome the limitations of current planning rules.

The roll-out of non-discretionary development (‘do not refuse’) standards for height, bulk and scale to conventional housing development is a first.  Traditionally these proponent-friendly measures have been limited to niche forms of housing, such as ‘affordable’ (rent-controlled) housing, seniors housing and boarding houses.

It has always bemused us that — despite the widely-acknowledged difficulty in securing approval for new development — past governments have resisted giving market-rate housing the benefit of ‘do not refuse’ standards for height, bulk and scale.  Refreshingly, the new government seems ready to break away from the conservatism of its’ predecessors.

However, there is a potential ‘Achilles heel’ in the proposed policy.  At present, the government is only proposing to override local controls when a developer chooses to comply with the relevant ‘non-discretionary’ development standard.  Of course, if a developer has to choose between an 8.5-metre local height control and a 21-metre non-discretionary development standard, you would think that choosing compliance with the latter is a ‘no-brainer’.

However, the strict compliance with development standards can sometimes have unintended consequences.

For example, for infill sites, the Land and Environment Court now regards the proper starting point for the measurement of building height as the excavated ground level under an existing building.  This means that the 21-metre height standard (if defined in the normal way) will, in many cases, not be measured from the natural topography of the land, but from an artificially lower point, below the street level.  Often, this kind of problem could be overcome with a ‘clause 4.6’ request seeking to contravene the development standard.  However, under the government proposed policy this may not work so well.

For example, let’s assume that a developer is re-developing a site which already has an excavated two level based, extending eight metres below natural ground level.  To comply with a 21-metre ‘non-discretionary’ height standard, a developer would have to limit its development to 13 metres above the natural ground level.  This would lead to a poor planning outcome.  The land would be under-utilised.  The new building’s height may be out-of-keeping with its neighbours and may not reflect the desired future character of the area.

If the developer chooses to pursue a building that is 21 metres in height from the natural ground level (being 29 metres in height from the ‘existing ground level’) a ‘clause 4.6’ request would be needed.  However, the state’s non-discretionary standard would not apply, and the developer would have to justify the contravention with reference to the 8.5 metre local height standard.

While this problem might be overcome in individual cases, we hope that the Government, in its final package, also directly overrides local controls (in local environmental plans and development control plans) to the extent that such controls encourage a development outcome that falls short of the new planned level of development intensity.

Such provisions should, in our view, have no effect even when a developer is unable to strictly comply with a non-discretionary development standard.

At this point, there is no Government commitment to any specific timetable for introducing these changes.  In fact, there is no assurance that the Government will proceed with the reforms at all, or if it does, what the final form the changes will take.  Stay tuned.