With changes already in place since its inception, the Minns Labor Government has begun the process of fulfilling its election promise to review and act on the proposed reforms to State infrastructure contributions set out by its predecessors.

On 28 June 2023, the NSW Parliament passed the Environmental Planning and Assessment Amendment (Housing and Productivity Contributions) Bill 2023 (the Bill). The changes introduced by the Bill are intended to set out the new State government's approach to meeting the housing needs of its fast-growing population. At the time of writing, the Bill is awaiting assent.

A review of current trends and forecasts revealed an expected shortfall of the number of new dwellings required to meet NSW population growth over the next five years by some 134,000 dwellings.

Yet, these current forecasts are expected to quickly become outdated. With the pandemic-induced population stagnation dissipating, the NSW population growth is already above the previous 10-year average. Existing projections have the potential to leave roughly 83,000 people without a dwelling over the next five years.

Overview

The new legislation seeks to facilitate the provision of regional infrastructure that supports and promotes housing and economic activity by imposing a contribution. This establishes the "housing and productivity contributions scheme".

The 'provision' of regional infrastructure is defined broadly to include recouping costs of regional infrastructure, and the recurrent spending on such infrastructure – including paying councils to provide the infrastructure – as well as research, reports, and the general administration of the new provisions by the State government.

The critical mechanism underpinning the scheme is the ability of the Minister to issue orders – with the Treasurer's concurrence – requiring a "housing and productivity contribution" (HAP Contribution) towards the provision of regional infrastructure. Similar to the current Special Infrastructure Contributions (SIC) system, such an order will set out the development to which the order applies, how the contribution is determined and other important matters.

A further critical element of the scheme is that contributions collected can only be used within the region for which they are collected, subject to one exception. That exception is where the contribution relates to "measures to conserve or enhance the natural environment".

However, no connection is required between the development on which a HAP Contribution is imposed and the regional infrastructure provided from the contribution, except where the contribution includes a "transport project component" for the specific area, or a "strategic biodiversity component" for measures to conserve or enhance the natural environment required for biodiversity certification of the land.

Monies collected from the HAP Contribution (except for those relating to strategic biodiversity contributions) will be accounted for in the "HAP Fund", and can be drawn on for the provision of regional infrastructure that is:

  • identified in a strategic plan, or a State infrastructure strategy or infrastructure plan under the Infrastructure NSW Act 2011
  • recommended for funding by the Minister because the Minister considers the infrastructure assists in achieving the purpose of the HAP Fund.

Monies collected from strategic biodiversity components of the HAP Contribution will be paid into a "Strategic Biodiversity Fund" and can be drawn on to fund the "measures to conserve or enhance the natural environment" summarised above.

Upon commencement, the SIC provisions that would be repealed continue to apply previous SIC determinations, directions and conditions of development consent, until repealed by a new HAP Ministerial order or under the previous SIC provisions.

As is the case for SICs now, HAP Contributions can be wholly or partially excluded under a planning agreement with the approval of the Minister or a development corporation designated by the Minister to grantsuch approval.

Rates

The contribution rates will be indexed quarterly using the ABS PPI index, but are set to begin as follows:

  • in the Greater Sydney Region, $12,000 per dwelling or lot for detached and semi-detached houses and townhouses and $10,000 for other residential dwellings or lots
  • in the Illawarra, Central Coast and Lower Hunter regions, $8,000 per dwelling or lot for detached and semi-detached houses and townhouses and $6,000 for other residential dwellings or lots
  • $15 per square metre of new gross floor area for industrial development
  • $30 per square metre of new gross floor area for commercial development
  • $30 per square metre of new gross floor area for retail development.

The rates are intended to be phased in from 1 October 2023 at a 50 per cent discount, reducing to a 25 per cent discount in July 2024, and eventually as a full contribution from July 2025 onwards.

Conclusion

The State government ultimately expects the proposed reforms to generate around $700 million a year for regional infrastructure development. While there is a clear optimism within the State government for the potential benefits of the HAP Contribution scheme, the classic tension which arises from requiring contributions to provide for and stimulate development from the developers themselves will remain.

While the HAP system introduces a new and potentially more targeted approach to the collection and use of State level infrastructure contributions, it is an iteration of the SIC system with which the development industry is ultimately familiar. The achievement of the HAP system may depend on how it works in concert with other components of planning and housing policy, including at the federal level, to increase the supply and delivery of housing.

If you have any questions about this article or the HAP Contribution scheme, please get in touch with a member of our team below.

This publication does not deal with every important topic or change in law and is not intended to be relied upon as a substitute for legal or other advice that may be relevant to the reader's specific circumstances. If you have found this publication of interest and would like to know more or wish to obtain legal advice relevant to your circumstances please contact one of the named individuals listed.