Budget time for a fiscally challenged State like NSW is never that tantalising a prospect.

Yet there are opportunities in the upcoming budget to kick start housing, generate billions of dollars in revenue, and send a positive message to the development industry and investors here and aboard that NSW is open for business when it comes to jobs and housing.

This does not require bucket loads of cash up front, but with a few tweaks could unleash the animal spirits of the market and start to drive a much needed shot of confidence in the sector.

1. Reduce fees, taxes and charges on housing

The cumulative impact of various imposts on the supply of housing in NSW is holding back industry and casting a shadow over the prospects of getting anywhere near the 377,000 new homes required in NSW under the National Housing Accord.

A myriad of fees, taxes and charges exists that are simply lumped onto the cost of construction. What’s more – these charges are passed onto new home purchases  – many of which are exactly those families and individuals Governments purport to help.

The Government’s Housing and Productivity contributions, levied at $12,000 per house and $10,000 per apartment in Sydney, is the latest hit to the sector struggling with tight margin, rising rates, construction costs and labour shortages.

Here’s an idea for the NSW Treasurer – simply push the payment of the HPC from the time of issuing the construction certificate (early in the process when cash flow is at its tightest) – to the time of the issuing  of the occupation certificate – a later stage where money is flowing, and accounts/debts can be settled.

State revenue will still get the money – just a year or two later. The alternative? An upfront hit on feasibility when most in the industry can least afford it – and  a huge threat to progressing any development approval. A stalled housing pipeline depriving the state of billions of dollars in potential revenue.

Only last week KPMG analysis saw a growing lag between development approval and commencement. It is these sorts of ‘stings’ at the earlier stages of development that helps explain why developments don’t proceed.

The shift to payment at Occupational Certificate was made during COVID, and a number of councils like Liverpool are now proposing a delay in payment. Faced with an unprecedented housing supply crisis – with every metric deteriorating since 2020 – why wouldn’t you make this change now?

2. Faster state-led decision making on housing proposals

The NSW Government announced a streamlined assessment process for Government-backed social and affordable housing projects. Great, but this will deliver only a small part of the 377,000 new homes required in NSW over the next five years.

In a crisis  – we need all cylinders firing – especially the market housing sector which will need to deliver 95% of the housing under the Accord.

Why not extend these provisions for a small part of the housing sector purely for the benefit of State Government agencies to the broader sector? Even place a 5-year time frame on it if you want.

A quick yes or no from the State Government (the same approach taken by the likes of Victoria and Queensland) would take just that bit more risk, uncertainty and time our of developers’ decision making.

And the message for the NSW Treasurer – more funding for the development assessment team in the Department of Planning, Housing and Infrastructure to recruit more planners and speed up state led rezonings.

More state-led rezonings will take pressure off councils on high value, high yield projects which are complex and often need the corralling of State infrastructure agencies.

3. End the ivory tower approach on strategic planning

For too long the strategic planning function of the NSW Government was largely divorced from the decisions made by the big infrastructure providers like Roads and Water, as well as the market’s appetite to help pay for infrastructure.

It should be accepted wisdom that any rezoning is accompanied by a plan for the infrastructure required to meet the objectives of the rezoning. The Western Sydney roads funding announced by the Albanese and Minns Government recently is welcome but is playing catch up from mistakes made under the previous NSW Coalition Government where with a stroke of a pen, 12,000 hectares of land was rezoned around the new Western Sydney airport without the infrastructure agreed to and paid for.

We should never have to face such a situation again.

These principles should also apply to the conversations had between Government and the private sector – which is all too often hit up with “voluntary” planning agreements to pay for a whole host of infrastructure items.

Not only does the Government need to get more savvy when it comes to knowing where the market is up to and who is shovel ready, but equally they need to be attuned to the appetite and capacity of the private sector is eager to work with them on infrastructure delivery.

The days of strategic planners sitting in an ivory tower away from the day-to-day realities of the private sector and the large Government infrastructure providers needs to draw to a close, and quickly.

4. The upshot?

These three initiatives would hardly make a dint in the NSW budget, and would for a large part be cost neutral.

In return it would help mobilise billions of dollars of capital back into residential development in NSW.

And the positives for the NSW Treasurer? If NSW delivers the 76,000 new homes each year, assuming  the median price for a new dwelling is $1 million,  the annual stamp duty take would be conservatively an additional $3 billion each year – or around  $15 billion over the duration of the Accord (impacts of first home buyers exemptions would  be offset by other positive revenue impacts land tax increases etc).

The potential of $15 billion in revenue over 5 years is a figure no Government should ignore.

New housing offers a win-win when the settings in Government and the market are right.  In recent times we have had market distortions like the post COVID supply restrictions being compounded with a planning system that refused to acknowledge housing was slipping into a crisis.

By Stephen Fenn, Acting Chief of Staff, Urban Taskforce Australia

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