Developers of large-scale apartment complexes in New South Wales who include affordable housing within their developments are set to receive larger building allowances and faster approval times under changes to planning rules which were announced last week.

On Thursday, the NSW Government announced that developers who allocate at least 15 percent of the ‘gross floor area’ of residential developments that are worth over $75 million will be rewarded with bonuses in terms of approval processes, allowable building height and floor space ratio.

Specifically, such developments will gain:

• Faster approval processes through access to the State Significant Development planning pathway (see below).
• The ability to add additional floors to their development though a height bonus that will allow the developments to reach a height which is 30 percent above that which would have been available under local environment plans.
• A 30 percent increase to the floor space ratio compared with that which would have been allowable under local environment planning.

Established by the former Coalition Government, the State Significant Development pathway for planning assessment sees development proposals assessed by the State (rather than local council) through the Department of Planning and Environment under a streamlined assessment process.

Normally, this is used for larger developments which are expected to either deliver significant benefits to the state or have a significant environmental impact. Examples include hospitals, schools, univiersities, chemical industry facilities, manufacturing facilitieis, mining and extraction operations, tourist and recreation facilities and significant infrastructure in areas such as energy, waster or ports.

The changes announced last week will represent the first time that such an instrument is available to new housing developments. It reflects a recognition of the importance of new large developmetments which include affordable housing.

Projects which are approved under this pathway are evaluated according to a rapid assessment framework that speeds up approval timeframes.

Meanwhile, the floor area and height bonuses referred to above will enable developers to achieve higher yields and return on investment in relation to developments that incorporate the aforementioned affordable housing component.

According to the Government, affordable housing is open to people who are on a wider range of incomes compared with social housing tenants. Often managed by not-for-profits, such dwellings are usually made available at a discounted rate to those whose income is not sufficient to pay the market rent in the area where they live or work.

To receive the bonuses, at least 15 percent of the total gross floor area of the development will need to be allocated to affordable housing. The affordable housing component will need to be made available at the discounted rental rates for at least fifteen years.

In its announcement, the Government said the importance of the new measures should not be underestimated.

It said that initial briefings with which it has been provided suggest that the state has a projected housing shortfall of 134,000 dwellings over the next five years.

It added that the measures will form part of the state’s commitment to expedite planning and land releases for social and affordable housing under the National Housing Accord which was announced by the Commonwealth Government last October.

In addition to the new policy, the government is undertaking a statewide audit to identify any surplus land which could be rezoned for housing and associated uses. Prior to its election in March, the Government promised to ensure that at least 30 percent of housing which is delivered on such land is allocated to social and affordable housing.

Beyond this, the Government has announced its intention to build on efforts of the previous Coalition Government to improve the quality and safety of buildings across the state.

Toward this end, it has promised to introduce a new Building Commission and create a modern Building Act by the end of this year.

“We are looking at ways we can help address the housing supply crisis, and this is one of them,” NSW Premier Chris Minns said in a statement accompanying the latest announcement.

“These reforms will provide more homes and more affordable housing in places where people want to live.”

“It is an important step, but we know our work to improve housing supply does not stop here.”

The latest announcement comes amid ongoing debate about the best way to generate greater volumes of social and affordable housing supply within new housing developments.

There are two main approaches to this.

The first is a mandatory model, which mandates that a percentage of social or affordable homes are included in new developments as a condition of planning approval.

The second – and the one adopted by NSW in its latest announcement – involves provision of developer incentives such as increased height limits where a certain number of social and affordable homes are included in a new development. These are often referred to as density bonuses.

Some academics support the mandatory model. Many in this camp remain concerned about the impact which density bonuses such as greater building height may have upon the urban form.

However, such an approach is staunchly opposed by development lobby groups, who argue that such requirements would add to the cost of new housing development and act as a roadblock to new housing supply.

Instead, the groups have argued for incentive-based approaches such as those now being pursued in New South Wales.

Not surprisingly, therefore, property industry lobby groups welcomed the latest announcement.

Property Council of Australia Acting NSW Executive Director Anita Hugo said the measures would boost overall housing supply in a tight market.

“The Government’s new planning rules are a big endorsement of the density agenda and will play an important role in addressing our housing affordability crisis,” Hugo said.

“It’s good to see the Minns Government has rejected inclusionary zoning and embraced significant gross floor area and height bonuses, which will ultimately grow the housing pie rather than cut it up.”

Hugo stress, however, that more resources will need to be directed to the State Significant Development pathway to ensure that projects being assessed under this pathway do not become stuck in a backlog of assessments.

In addition, she said the government should examine other options to unlock even more housing.

This could include a specific new planning instrument to support the delivery of sustainable development around key transport hubs.

Urban Taskforce Australia CEO Tom Forrest agrees.

In a statement, Forrest cautioned that the details of the policy will need to be carefully worked through but said that the new policy was a step in the right direction.

Forrest particularly welcomed the rejection of mandatory inclusionary zoning, which he described as ‘failed’ policy which saw developers being slugged with what was effectively an affordable housing tax that represented a ‘massive disincentive’ to new housing delivery.

“While the devil is in the detail, this is a big step in the right direction and shows the Minns government has listened to the Urban Taskforce and is serious about fixing the housing supply crisis,” Forrest said.

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