Australia: Greater Sydney Commission draft District Plans and the affordable housing challenge - Sydney cannot afford to get it wrong

If the draft District Plans tell us anything, it's that there is no magic wand the Greater Sydney Commission can wave to fix the affordable housing crisis.

The shortage of affordable housing in Sydney is at a crisis level and it threatens to undermine Sydney's competitive position as a global city. The Greater Sydney Commission has set 5 and 20 year housing targets and affordable rental housing targets.

These targets will drive different outcomes for developers, business investors, land owners, councils, affordable housing and community housing stakeholders and residents, so it is vital for all stakeholders to understand them.

The silver medal Sydney doesn't want

Last year Sydney was named the second-most unaffordable city in the world in which to buy a home (after Hong Kong) according to the 13th Annual Demographia International Housing Affordability Survey.

The draft District Plans focus on three themes in relation to each District: productivity, liveability and sustainability [each to link to other RE article in this edition].

These three elements are interlinked in relation to affordable housing. Each draft District Plan states that "the issue of housing is as much about liveability as it is about productivity and sustainability: our planning for jobs is as important to a productive city as it is to a liveable and sustainable city."

Put simply, the Greater Sydney Commission says a city cannot be liveable or be the best global city if people cannot afford to live there.

What does affordable housing mean to the Greater Sydney Commission?

It is important to understand that the draft District Plans use two distinct but interrelated terms in relation to housing.

  1. Housing affordability: a broad term used to describe challenges people across a range of income groups experience in finding affordable housing to rent or own.

More particularly, the Greater Sydney Commission says that if a household is spending more than 30% on housing costs this is likely to put them in "housing stress" and in need of affordable housing options, as their ability to pay for other living costs, such as food, transport, clothing and utilities, will be impacted.

  1. Affordable rental housing: a term used to describe the Greater Sydney Commission's approach to addressing the gap in housing provision for people on low and very low incomes.

How do the draft District Plans tackle housing affordability?

The draft District Plans propose to accelerate housing supply by:

  • the establishment of five year local housing targets for each local government area that maximise the opportunities to grow housing supply and diversity of housing choice;
  • a planning process for the long term that defines objectives and sets goals for housing in each district that will help accelerate housing supply and local housing choice; and
  • district-wide 20 year strategic housing targets which recognise that planning has a central role to play in ensuring sufficient capacity is created to support the need for at least 725,000 additional dwellings across Greater Sydney by 2036.

Council response to increased five and 20 year housing targets

The Greater Sydney Commission proposes to work with local councils, NSW Government, communities and industry to identify new and expanded opportunities for housing capacity close to existing and planned infrastructure. Once identified, these areas can be incorporated as investigation areas within the final District Plans and in the review of "A Plan for Growing Sydney" to be developed in 2017. This process will also assist the Greater Sydney Commission to establish a new and specific 20-year strategic housing target to 2036 for each local government area.

What the draft District Plans don't do is tell the councils how the 5 and 20 year targets can be achieved, other than to acknowledge that many councils have created opportunities to meet these targets in the short term and that:

  • it is important to support the realisation of these opportunities as housing supply via timely decision-making and by aligning these opportunities with infrastructure provision; and
  • the continued strength of the housing market also plays a key role.

Our review of the media and industry press has revealed that some councils have:

  • responded cautiously to the housing targets for the city by the Greater Sydney Commission;
  • referred to the need for the NSW Government to develop a consistent framework which can be applied consistently across the state;
  • indicated that the increased housing targets allocated to particular councils are ambitious and may be unachievable without upfront infrastructure support from the NSW Government; and
  • said that creating that much housing in a short space of time (ie. the five year targets) could prove difficult if the market goes into a downturn in the next two or three years.

As that the draft District Plans do not specify how the housing targets will be achieved, there is an opportunity for councils and other stakeholders to have input into the process to drive better outcomes, which may include adjusting the housing targets or having targets with sliding scales. The quality of the outcomes achieved by the District Plans will be influenced by the level of engagement from stakeholders who make submissions to the Greater Sydney Commission.

Affordable Rental Housing Target

The draft District Plans nominate an Affordable Rental Housing Target of 5% to 10%, subject to viability, in urban renewal and land release areas.

Of interest, the draft District Plans do not provide evidence for the target range nominated.

State and local governments must include Affordable Rental Housing Targets in planning proposals and strategic plans as a form of inclusionary zoning for new urban renewal and greenfield areas.

The Greater Sydney Commission proposes that the Affordable Rental Housing dwellings will be secured by the relevant planning authority and may be passed onto a registered Community Housing Provider to manage.

The Affordable Rental Housing Target:

  • will apply to land that is the subject of upzoning (a change of land use to residential or an increase in permissible residential development density);
  • will not be applied retrospectively to rezoning that has already occurred, but only for new areas nominated by the relevant planning authority;
  • must be announced before, or at the time of, rezoning to give the market certainty about the amount of affordable housing to be provided, and so that it can be factored into development feasibilities;
  • will apply to land within new urban renewal or land release areas (both government and private) identified via a local or district housing strategy, or another form of appropriate research that illustrates a current or future need for affordable rental housing; and
  • will be calculated as a proportion of all residential floor space above the base floor space ratio (that is, the residential floor space ratio that was permissible before the upzoning within the nominated area).

The Greater Sydney Commission does not propose a minimum dwelling threshold above which the Affordable Rental Housing Target would apply. They propose to prepare a Guidance Note this year which will investigate whether it would be appropriate for developments of a smaller scale to pay a financial contribution in lieu of providing affordable housing dwellings. They will also investigate whether there are other exceptional circumstances in which an in-lieu contribution might be acceptable, for example, where it would result in an overall improvement in the supply or location of affordable rental housing.

What is the Affordable Rental Housing Target viability test?

The identification of an appropriate Affordable Rental Housing Target will be subject to development feasibility testing across the nominated area to ensure that the Affordable Rental Housing Target will not make continued supply of market housing economically unviable.

Details on what the viability testing assumptions and parameters will be has not been provided yet. A proposed Guidance Note is to be issued by the Greater Sydney Commission this year. This detail will be critical to developers, councils and affordable housing stakeholders alike.

The Greater Sydney Commission states that:

  • it expects viability testing to give due consideration to development feasibility for a reasonable residential development in the nominated area including the reasonable costs of local, and where appropriate, State, contributions;
  • work to determine an appropriate and viable target for a nominated area is to be undertaken by the relevant planning authority responsible for the urban renewal or land release area (i.e. the relevant council, the Department of Planning and Environment or the Commission);
  • any assessment of a viable target must be transparent and robust; and
  • where required, the Commission will independently verify the development feasibility of a recommended target and provide advice to government to determine where exceptions may be granted if it is clear it would financially hinder delivery of a critical or major component of city-making infrastructure.

Is anyone happy with the Affordable Rental Housing Target?

The media and industry commentary since the draft District Plans were issued strongly reveal that developers are concerned about the cost of meeting the Affordable Rental Housing Target. Developers are seeking a model which sees the private sector receiving an appropriate amount of financial support to deliver affordable housing so that the whole industry is encouraged to produce affordable homes.

Conversely, affordable housing stakeholders and advocacy organisations have widely commented that the Affordable Rental Housing Target is inadequate.

Councils are also concerned that if the housing targets are not met (including provision of Affordable Rental Housing dwellings) then there will be limited scope for the jobs targets set by the draft District Plans to be met.

What next?

If the draft District Plans tell us anything, it's that there is no magic wand the Greater Sydney Commission can wave to fix the affordable housing crisis.

It should have come as no surprise that Gladys Berejiklian's three priorities are housing affordability, economic growth and infrastructure delivery. Importantly for the Greater Sydney Commission, these priorities are also the hallmarks of the draft District Plans' three key priorities of productivity, liveability and sustainability.

At her first press conference as Premier of NSW, Gladys Berejiklian said housing affordability is the "biggest issue" people have across the state and that boosting housing supply is "the best way to address housing affordability". It will be interesting to watch how our new premier tackles this challenge.

Once finalised, the District Plans will be critical to housing supply, housing prices, and to the liveability, productivity and sustainability of Greater Sydney. Developers, business investors, land owners, councils, affordable housing and community housing stakeholders and residents all have a stake in how these District Plans address housing affordability and affordable renting housing.

This impacts all of us who live and work in Sydney. It's a multi-faceted problem that requires a richly textured response, including a focus on these key questions:

  • how can affordable housing be delivered more quickly?;
  • how can the planning system drive solutions?;
  • how can delivery of affordable housing create positive outcomes for residents and developers?; and
  • if a district has no affordable housing will business and investment capital follow with jobs, transport, services and place making?

With submissions on the draft District Plans closing on 31 March 2017, it is crucial to understand how the affordable housing requirements of the draft District Plans will affect your land, developments and businesses.

We can help you better understand the impacts or help you prepare formal submissions to the draft District Plans.

RELATED KNOWLEDGE

Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this bulletin. Persons listed may not be admitted in all states and territories.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.