Radical break with past planning policies to boost housing supply

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Aaron Gadiel, Partner

In two major announcements — in just two weeks — the NSW Government is striking out on a bold new path on land use planning policy.  Both announcements initially just comprised a media release, but some further detail has now been released.

The 28 November announcement — changes in the R2 and R3 zones

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 claimed these reforms would create capacity for private developers to deliver up to 112,000 new homes across the Greater Sydney region, the Hunter, the Central Coast and the Illawarra-Shoalhaven region.

As part of this announcement the Government said that it would do the following:

  • Permit dual occupancies in all ‘R2 Low Density Residential’ zones across all of NSW.
  • Permit ‘terraces, townhouses and two storey apartment blocks near transport hubs and town centres’ in the ‘R2 Low Density Residential’ zone across the Greater Sydney region, as well as the Hunter, the Central Coast and Illawarra regions.
  • Permit ‘mid-rise apartment blocks’ near transport hubs and town centres in ‘R3 Medium Density Residential’ zones and ‘appropriate’ employment zones.

In terms of this last point, the Government’s media release implies that:

  • ‘near’ transport hubs means within 800 metres from such hubs; and
  • ‘mid-rise apartment blocks’ means buildings of 3-6 storeys.

The Government said that it would introduce these changes via a state environmental planning policy.  Such policies have the power to override local planning controls.

The Government promised that formal exhibition documents — which should contain more detail on the proposals — would be placed on exhibition ‘from’ last week.  However, as of the date of this article (11 December 2023) these documents are still not on exhibition.  We expect that — if the Government follows through on its announcement — the exhibition documents will be available here.

The precise details of how these changes would work are unknown as there is currently no draft or final legal document in the public arena.  It is not clear when these changes will come into effect.

The 7 December announcement — ’Transport Orientated Development Program’

On 7 December 2023 the NSW Government announced what it said was a ‘plan to begin addressing the housing crisis in NSW’.

The Government outlined a series of further measures as a ‘Transport Orientated Development Program’.  This program was said to ‘build’ on the measures announced on 28 November 2023.  The Government said that ‘housing… is the NSW Government’s top priority’.

After the announcement, the Government released a publication titled ‘Transport Orientated Development Program: December 2023’.  This publication is not a legal document and has no direct legal consequence.  It is an explanation of what the Government says it will do.  (Developers should be warned — governments do not always follow through on announcements such as these.)

The ‘Transport Oriented Development Program’ is about the delivery of housing around 39 transport hubs.

The program is to have two elements:

  • The delivery state-led rezonings within 1,200 metres of eight ‘priority transport hubs’.
  • A new state environmental planning policy to increase the capacity for more ‘mid-rise housing and mixed-use development’ within 400 metres of 31 other transport hubs and town centres.

The Government says that the above planning controls will not apply to land zoned for industrial uses.

The eight ‘priority transport hubs’

The state-led rezonings within 1,200 metres of eight ‘priority transport hubs’ are apparently intended to create capacity for 47,800 new homes over 15 years.

The Government describes these areas as ‘accelerated precincts’.

The eight accelerated precincts are within:

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

The Government says that state-led rezonings in the eight precincts will be completed by November 2024 (although it also says that some rezonings will be completed earlier).

The Government says that the objectives of the program are to:

  • increase housing supply in well-located areas;
  • enable a variety of land uses (residential, commercial, recreational) within walking distance of train and metro stations;
  • deliver housing that is supported by attractive public spaces, vibrancy, and community amenity; and
  • increase the amount of ‘affordable housing’ in these areas.

The Government says that housing will range from low-rise housing types such as terraces and duplexes within the 1,200 metre radius — through to high-rise developments very close to the eight identified stations.

Apparently the eight state-led rezoning processes will create capacity for up to 47,800 new homes over the next 15 years.

The Government says it has committed $520 million to provide community infrastructure in these precincts.  This is intended to cover the costs of critical road upgrades, active transport links and public open spaces.  The Government says that further details about how the funding will be allocated will be provided in early 2024.

The NSW Department of Planning, Housing and Infrastructure (the new name for the Department of Planning and Environment from 1 January) will undertake master planning for each precinct — supported by technical studies — to determine boundaries and opportunities for new housing.  These plans will then inform NSW Government decisions on the actual rezonings.  Master plans and the rezonings proposed for each precinct will be subject to a public consultation process.

In these eight accelerated precincts the Government says that there will be a new temporary state significant development assessment pathway for residential development.  This new assessment pathway will be triggered when a development has a residential component with a capital investment value of $60 million. The temporary state significant development pathway would only remain in place until November 2027.

Development approvals will apparently be ‘time-limited’ for two years to facilitate rapid construction.

The NSW Government says it will incorporate ‘inclusionary zoning’ within the eight precincts to ensure the delivery of ‘affordable housing’.  This typically means that a proportion of newly zoned housing capacity will be:

  • reserved for housing managed by registered community housing organisations; and
  • subject to rent and tenancy controls.

Such housing would need to be held ‘in perpetuity’.  It will make ‘up to’ 15 per cent of homes in the eight precincts.  The exact proportion of such rent-controlled housing in these precincts will apparently be based on ‘feasibility testing’ (undertaken as part of the master planning process).

The Government says that developers of ‘high and mid-rise developments’ in these accelerated precincts, will have ‘the opportunity’ to select an architect from a list pre-approved by the NSW Government Architect. This new process ‘may’ allow developers to bypass the requirement to run a design competition (shortening the assessment time by many months).  This would appear to pave the way for a new kind of ‘super’ registered architect.  No details have been released as to how architects could get themselves on this pre-approved list.

There is no legal drafting available for any of the above.  This means that the fine points of how all this will work are unknown.

The 31 other transport hubs and town centres

The Government says it will introduce a state environmental planning policy that will increase the capacity for more ‘mid-rise housing and mixed-use development’ within 400 metres of 31 other transport hubs and town centres.  This is intended to create capacity for 138,000 new homes over 15 years.

The Government says that the precincts subject to this approach are equipped with existing infrastructure that can readily support this extra development.

These 31 locations are:

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

The Government says that ‘from’ April 2024, new planning controls will apply within 400 metres of these train stations and town centres.  The Government intends that the changes will increase the supply of mid-rise flat buildings (up to six storeys) within 400 metres of stations.  This will also include apartment buildings that contain shops on the ground floor.

The new planning controls will apparently allow:

  • Residential apartment buildings in all residential zones (R1, R2, R3, and R4) within 400m of identified (The ‘MU1 Mixed Use’ zone has not been nominated.)
  • Residential apartment buildings and shop-top housing in local and commercial centres (E1 and E2 zones) within 400 metres of the above stations.

The ‘proposed’ changes to planning controls are as follows:

  • maximum building height 21 metres (described as ‘approximately’; six storeys);
  • a floor space ratio 3:1;
  • no minimum lot size or lot width;
  • minimum active street frontage controls in E1 and E2 zones; and
  • maximum parking

The Government is also proposing to introduce new design criteria for mid-rise residential apartment buildings in relation to:

  • building separations;
  • setbacks;
  • vehicle access;
  • visual privacy; and
  • communal open space.

These may vary some existing Apartment Design Guide provisions.  While it is not crystal clear — the context of the announcement implies that these changes will only apply in these 31 locations.

The Government has repeated its earlier announcement that there will ultimately be a pattern book of endorsed housing designs for both low-rise and mid-rise buildings (up to six storeys). Developers who choose to adopt the endorsed pattern book designs will have apparently access to an ‘accelerated approval pathway’.  The nature of this ‘accelerated pathway’ is not yet clear.

These 31 locations will also be subject to a new ‘inclusionary zoning’ regime.  The Government says that a ‘mandatory’ minimum two per cent affordable housing contribution will apply for all new developments in these areas.  The Government also says that the existing in-fill affordable housing provisions (which allow for extra floor space ratio) set out in the State Environmental Planning Policy (Housing) 2021 will continue to apply in these locations.

Developers should bear in mind that there is a history of governments that make ambitious announcements such as this — and then walking back from them when local councils and ‘NIMBY’ groups begin to push-back.  The Mayor of Burwood, John Faker, has already expressed public alarm at the impact these changes will have in heritage-listed parts of Croydon.

The Government has promised that local councils in the 31 areas ‘will be able to have their say on the proposed changes to the planning controls during the targeted consultation period’.  No specific equivalent commitment was made in relation to the property development industry or the new ‘YIMBY’ movement pushing for more housing.

The Government says that the state-level planning controls will remain in place in these 31 locations until local councils have finalised their strategic planning in ways that align with the NSW Government’s policy objectives.  Other relevant controls will apparently apply in these areas, but only to the extent they are ‘not inconsistent’ with the new state-level standards.

It should be appreciated that, in some of these locations, there are significant heritage conservation areas with controls favouring the retention of single dwelling housing.  Radically, it seems that these new controls will override local heritage conservation area controls.  The Government says that a merit-based assessment will continue to apply to developments in these locations and ‘relevant heritage controls will apply to the extent they are not inconsistent with the new standards’.  This is a ground-breaking move away from past practice.  We have not previously seen such a wide-scale watering down of heritage conservation area controls in this way.

When local councils undertake their own strategic planning for these areas they will apparently be required to consider:

  • uplift in these locations equal to or exceeding the SEPP controls;
  • use of planning controls and zones that reflect medium-high density potential in these areas;
  • residential supply pipeline into the future to make sure uplift in these areas is sustained;
  • long-term ‘affordable housing’ provisions (‘in perpetuity’); and
  • amenity outcomes, including open space

A comment on the new policy approach

The NSW Government’s new policy approach marks a significant break with that of its predecessor.  It seems that the Government is prepared to give housing supply a very high priority — even at the expense of its relations with local government.  This type of approach would have been unthinkable under the previous government.

The policy does have some echoes of the approach taken by the last Labor Government (that left office in 2011).  That government pursued aggressive urban renewal policies in the Ku-ring-gai Council area and on an ad-hoc basis in other locations via ‘Part 3A’ approval processes.

However, this new approach is more broadly-based (and systematic) than that of the previous Labor Government.

The real test for the Government will be to see how it reacts to the inevitable push-back from local councils and ‘NIMBY’ community groups.  Many developers will be wondering whether the government will hold-firm — or whether it will retreat under the pressure of sustained local political campaigns.  Time will tell.

For further information, please do not hesitate to contact us.

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