Sydney must allow for more homes in inner urban areas or risk becoming a city with no grandchildren, the NSW Productivity Commissioner has warned.

The NSW Productivity Commission has released its third paper in a series of papers about housing.

The paper warns that the city risks a continuation of an exodus of grandchildren if it fails to deliver affordable housing in desirable areas.

According to the paper, Sydney lost twice as many people in the 30 to 40 age bracket as it gained over the five years spanning 2016 until 2021 (Census data).

Whereas 35,000 new residents aged between 30 and 40 arrived in Sydney over that time period, as many as 70,000 from that same age group left over the same period.

This is concerning as residents in that age group are the most likely to be currently raising young children in their homes.

NSW Productivity Commissioner Peter Achterstraat AM said that excessive housing costs are driving an exodus of young families from Sydney into regional New South Wales and other states.

He said that if this not addressed, Sydney risks becoming a city with no grandchildren.

“Many young families are leaving Sydney because they can’t afford to buy a home,” Achterstraat said.

“Or they can only afford one in the outer suburbs with a long commute.

“Sydney is losing its 30–40-year-olds; if we don’t act, we could become known as the city with no grandchildren.”

According to the paper, when density is done well, large, compact cities deliver economic and social benefits across several areas in addition to creating more housing supply.

These include:

• Greater access to transport, education, employment and professional development
• Lower carbon emissions
• Ongoing attraction and retention of up-and-coming talent
• Reduced commuting times to education or employment
• Preservation of land for green spaces
• Giving families more access to good schools, quality open space, more goods and services and more time with friends and family.
• Social equity benefits through enabling those on modest incomes to live closer to a better range of transport, employment and education opportunities including children having greater access to higher performing schools.
• Enabling young families to live closer to their parents and their children’s grandparents.

In a Sydney specific context, the paper added that building homes in the right places may help to mitigate the worst of the impacts in respect of climate change.

For example, building near the coast could reduce the degree to which families are subject to extreme heat.

Between 2007 and the most recent summer of 2022/23, the Sydney CBD experienced only 66 days where the temperature reached 35 degrees or higher.

Over that same time period, some locations on the metropolitan area fringe experienced almost a year’s worth of days where the temperature exceeded this level.

According to Achterstraat, planning and building reform is needed in two areas.

First, more housing could be achieved by allowing for greater building height.

Between 2017 and 2022, greater building height could have enabled construction of an extra 45,000 additional dwellings without using any additional land.

This could have seen prices and rents lower compared with the current situation to the tune of five and a half percent.

For prospective renters, this would have saved $35 per week or $1,800 per year on a median priced apartment.

Beyond that, the city needs to have a fresh discussion regarding heritage restrictions that are placed on housing close to the CBD.

According to Achterstraat, a proliferation of Heritage Conservation Areas has been placed on more than half of all residential land in prime suburbs such as North Sydney, Newtown, Edgecliff and Redfern.

This has reduced the amount of land which is available for new housing near the city, near trains stations, and close to employment.

He says that the entire city will benefit from greater density being delivered via sensible approaches.

“We know from overseas that density done well provides benefits for households, communities, and the economy,” Achterstraat said.

“I’m confident we can make density work for us.

“In the last year, we have seen a mature and reasoned discussion from all sectors of the community.

“The key to progress from here is to listen to the opponents to change but also give due weight to the benefits of density and the views of the broader community.

“We can preserve the gems of Sydney’s heritage without inadvertently freezing young people out.”

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