By the time 2024 was in its twilight, the NSW Premier, the Planning Minister, the media, millennials, the NSW Productivity Commission, YIMBY Sydney and the vast majority of the public were exasperated by the complete failure of the NSW Department of Planning to appreciate the size and significance of the housing supply and affordability crisis.

This is a story of failed incremental planning policy reform (which bureaucrats love because it does not upset the applecart too much) which resulted at the end of the year with an explosion of reform, with the new Housing Delivery Authority and bi-partisan calls for an overhaul of the tired and bloated NSW Planning Act.

So what actually happened in 2024?

Last year started with a political focus on planning reform and housing supply. Every State and Territory had its own version.  In NSW, we had four elements of reform to look forward to in 2024.

• An infill affordable housing bonus: was implemented early and saw a bonus on the permissible height and density of between 20% to 30%, with a proportional contribution of affordable housing (between 10% and 15% of total yield or GFA), managed by a Community Housing Provider, for 15 years
• Low and Medium density Housing Reform: focussed on increasing medium density housing within 400m (medium density) and 800m (low density) of town centres and transport nodes, supported by a pattern book of pre-approved designs
• 7 new Tier 1 Transport Oriented Development “accelerated precincts”: where the Department of Planning were to undertake detailed site by site rezonings within the designated precincts
• 37 Tier 2 TOD zones: where applicants were encouraged to consolidate land parcels, even in Heritage Conservation Areas, and could secure approvals for up to six stories in height, provided there was a 2% affordable housing contribution made in perpetuity (the hand over of 2% of the yield to a CHP as a gift or a tax). These Tier 2 TOD sites could also benefit from the affordable housing bonus, thus increasing the heights to a technically permissible 8 storeys, but applicants would also need to provide up to 15% of gross yield to a CHP for 15 years for affordable housing (in addition to the 2% in-perpetuity gift of GFA (apartments) to CHPs).

Confused?  Well that’s not surprising.  Everyone was. To make it even worse, if there is an existing LEP obligation to provide affordable housing, how does that fit in?

The most successful contribution to housing supply in 2024 in NSW was the infill affordable housing provisions.  The affordable housing contribution was for 15 years, with the developer able to secure up to 70% of the rent during that period (taking into account a discount to market rent for affordable housing along with a payment or fee to the CHP to manage the housing and the tenants).  The feasibility of this system works and its success can be seen by the number of applications in the system with a construction value greater than the State Significant Development threshold of $75 million.

But somehow, those responsible for policy development didn’t get (or ignored) the memo that the scheme had been a success, and by the time the TOD policies were finalised and released, the affordable housing contributions had changed to be “in-perpetuity”. Where previously (under the infill affordable housing bonus policy) you could derive rent and the capital gain after 15 years, what was proposed for the TODs was “a gift”, a “transfer of title”, to a CHP.  You simply hand over the keys. This change in the TOD policy to make affordable housing a straight gift (or a tax) on housing supply was a feasibility killer for the TOD precincts and remains so.

The early draft of the Tier 1 TOD accelerated precincts proposed that all sites within those precincts would have a new 10-15% of GFA affordable Housing Tax even where there had been no uplift in height or density.

It is hard to imagine how this proposal got through the Directors in DPHI, let alone the Executive Director, the Deputy Secretary, the Secretary, the Ministerial staff, the Minister, the Treasury or the Cabinet – without anyone raising concerns about the impact of the feasibility of the delivery of housing supply – but it did and was placed on public exhibition. C’est la vie.

After earnest representations, led by the Urban Taskforce, outlined the feasibility killing costs of the proposal, the final Tier 1 accelerated precincts TOD rezoning proposal, announced in late November 2024, was better as the rate of affordable housing contributions was lowered for most precincts. However in some locations, it actually increased to 18%. They applied hefty levies on the same “key sites” they had hoped would deliver substantial numbers of additional housing. An 18% tax on housing supply, in addition to all the other fees, taxes, levies and charges already killing supply in this state!

There was no choice with the Tier 1 TODs – if you were in the designated precincts, the new rezoning rules applied.  Further, access to the infill affordable housing bonus (the only successful policy up to that point) was removed for sites within the Tier 1 TOD accelerated precincts, even though it still applied to sites within the 37 Tier 2 TOD zones.

Consequences – the numbers tell the story

It is little wonder then that the total number of approvals across NSW continued to dwindle at less than half the number required for NSW to meet its National Housing Accord commitments.

The number of new build completions in NSW in the 12 months to the end of June 2024 was 46,479.

The worrying statistic for the NSW Government is that the number of new dwelling construction commencements has dropped to 40,072.  Approvals have also plummeted. In the 12 months to November 2021 (the peak of COVID) NSW recorded 62,527 new dwelling approvals. That is well below what is needed to deliver the 76,000 completed dwellings per year required by the National Housing Accord, but it is certainly better than the miserable result for the 12 months to November 2024 which came in at 42,109 new dwelling approvals in NSW.

In worse news for the Minns Government (and anyone wanting to buy or rent a home), the number of new dwelling commencements is even lower than the number of new build completions last year – so supply is heading backwards, not forwards. This reflects a problem with the feasibility of new housing supply and explains why a simple tweak to the affordable housing contribution rules can kill off development feasibility. Put simply, the yield associated with a development is simply not enough pay for the cost of construction, make a profit and pay back the banks.

Ironically, the shortage in housing is driving up the cost of construction and development. Along with the cost of planners and construction workers driven upward by labour shortages, construction industry workers are demanding higher wages to cover the cost of their own accommodation. In the regions of NSW, it is hard to find any accommodation at all – so new houses are simply costing a fortune or not being built.

Timidity cast aside – the closing of 2024 saw some big changes

It’s no wonder then that the Premier, Chris Minns and his Planning Minister, Paul Scully publicly lambasted the gross excess of process and duplication associated with the NSW planning system with a front page spread in the Telegraph on November 13, lampooning the complexity of the NSW planning system.  Planning reform was starting to get the focus and attention needed to deliver results.

What followed was a significant keynote address by Premier Minns at the Bradfield Oration in mid-December 2024 announcing the new Housing Delivery Authority (HDA).

For the first time since the O’Farrell Government scrapped Part 3A of the Planning Act after coming to government in 2011, a clear State Significant Development pathway for high value, high yield housing projects has been established.

The new HDA will be jointly headed by: Simon Draper, the Secretary of the Premier’s Department; Kiersten Fishburn, the Secretary of the Department of Planning; and Tom Gellibrand, the CEO of Infrastructure NSW. This is a genuinely powerful combination with the gravitas to cut through planning obfuscation.

The new HDA appears to have been designed with the successes and failures of prior efforts at reform in mind.

This is an optional planning pathway which relies on Expressions Of Interest from the private sector. Those EOIs will be quickly assessed against published criteria. Assessments will be undertaken by DPHI’s State Significant Development assessment team and fast tracked with the determination to be made by the Minister. This is a new and welcome approach. The experience of TODs, where DPHI relied on external economic analysis (where was Treasury or the Productivity Commission?) and spent a year to produce an underwhelming dictum wrought with feasibility inaccuracy, has been cast aside.

This ensures that applications are feasible for development and cuts out the guesswork from DPHI (no applicant is going to apply for an unfeasible development – as has been shown through the lack of interest in the Tier 2 TOD sites).

The fast tracking includes a rationalisation of the number of referrals to state government agencies with the priority to be placed on housing supply.

New Year’s Eve fireworks

But the big change came about when it was publicly revealed on December 31 in the
Telegraph that the Minns Government was prepared to consider amendments to the EP&A Act (1979), while cautioning that it was unlikely to succeed without bipartisan support.

Within two days, there was bi-partisan support – at least for a round table. The Telegraph did the heavy lifting on the need for a review and changes to the Act, but the Sydney Morning Herald have also jumped on board.

The message appears to have finally sunk in. Bold reform is needed to overcome a crisis.  Stop using planning rules to deliver outcomes for which other portfolios are responsible. Focus the Planning Act on housing supply, employment, mixed use development, retail and entertainment centres and related infrastructure. Strip the Act back.  Remove site-specific considerations from strategic assessments and rezoning applications (these can be undertaken at the DA assessment stage) and allow for rezoning applications and development applications to be considered simultaneously with a single set of reports and application documentation.

Increase the funding for judges and commissioners in the NSW Land and Environment Court so there is a release valve to deal with any hold-out NIMBY obsessive councils or staff.

The HDA is a good start, but further change is needed to reinstate the flexibility and importance of merit-based assessment of non LEP/DCP compliant outcomes to favour the delivery of housing supply as an imperative in its own right.  We need to give planners back the licence to negotiate sensible, merit-based, feasible outcomes.

The media will need to stay on the case – but there is hope for improvement in 2025.

By Tom Forrest, CEO of Urban Taskforce Australia