The Department of Planning, Industry and Environment (the Department) has set the ambitious goal of providing more affordable housing in all local government areas in NSW. Linked with this aim is boosting economic recovery through residential development in NSW following the COVID-19 pandemic, and giving more certainty to stakeholders.

The Department will do this through the State Environmental Planning Policy (Housing Diversity) 2020 (Housing Diversity SEPP), which will consolidate and update the Government's housing-related policies. The Department has released an Explanation of Intended Effect (EIE), and is seeking feedback by 9 September 2020.

In this article we look at the proposed Housing Diversity SEPP and how it affects local government, developers and the planning industry.

Summary of the proposed new SEPP aims

The stated aims of the draft Housing Diversity SEPP are to:

  • introduce new definitions for build-to-rent housing (BTR), student housing and co-living
  • amend some state-level planning provisions, particularly for boarding house and seniors housing development
  • amend some state-level planning provisions to support social housing developments undertaken by the NSW Land and Housing Corporation (LAHC) on Government-owned land, and
  • consolidate the State Environmental Planning Policy (Affordable Rental Housing) 2009 (ARH SEPP), State Environmental Planning Policy (Housing for Seniors and People with a Disability) 2004 (Seniors Housing SEPP), and State Environmental Planning Policy No 70 – Affordable Housing (Revised Schemes) (SEPP 70) (together, the SEPPS).

We strongly encourage anyone who is undertaking development in this space, or who is responsible for assessing and delivering affordable housing, to thoroughly review the EIE aims and to make a submission.

Key takeaways and the future of housing diversity in NSW

Our review of the proposed Housing Diversity SEPP found positives, such as the prioritisation of BTR, and also areas for improvement in the next phase of consultation.

The good

Extension of site compatibility certificates

The extension of currency for a site compatibility certificate (SCC) from two to five years is a much needed amendment that probably does not need to wait for the Housing Diversity SEPP and should be incorporated into the existing Seniors Housing SEPP.

New housing categories

The introduction of new building and housing categories is a positive step and recognises areas for further development. For example, introduction of student housing recognises the need for this kind of accommodation, which "new generation boarding houses" under previous instruments were unable to provide, particularly when parking requirements were recently increased.

Co-living and re-defining affordable housing

The introduction of co-living is also welcome. The term "boarding house" unfortunately carries a lot of baggage, and the uptake of the "new generation boarding houses" was hindered by the old terminology. By making a clean break from this kind of development definition, this will allow room for this new kind of residential development to come into its own.

Build to rent

The introduction of BTR development is innovative, though further detail is needed.

Areas for improvement

Status of local development standards

The 'clarification' of local development standards applying to development under the various SEPPs being replaced is of some concern. Currently, the SEPPs override these controls because the Department identified a need for these kinds of development and many in the residential development sector have identified sites based upon the existing controls. There is a risk the proposed changes will make the delivery of these projects ambiguous as they will now have to base their designs upon local controls. This may lead to additional uncertainty for residential development sector stakeholders. Ambiguity should be avoided where possible.

Meaning and implications for boarding houses

The practical implications of changing the definition of a 'boarding house' so that it must be managed by a not-for-profit community housing provider will need to be further clarified. The Department is also considering feedback on whether it might be more appropriate to require rooms in new boarding houses to be rented at affordable rates for a minimum of 10 years, after which they could revert to market rates. At the moment, it is not clear what will happen to existing boarding houses, and whether these changes will apply retrospectively as there are no savings and transitional provisions that explain how the change in definition will impact existing boarding house development.

The Department may wish to consider adopting a new kind of development that is not called "boarding house" and retire this definition, rather than seeking to amend the existing boarding house definition. This could produce confusion for existing "new generation boarding house" development, particularly for councils who may have to construe any amended definition retrospectively to existing development. This kind of confusion is experienced with the many changes to the definition of "serviced apartments" over time, resulting from decisions of the Land and Environment Court. It may therefore be preferable to make a clean break rather than amending the definition.

The increase in the minimum room size for co-living has not been thoroughly explained at this stage. The reasons for adopting a larger room size are not clear from the EIE - any change should be based upon considered analysis of the how "new generation boarding houses" have performed to date in providing affordable housing options.

Incentives for affordable housing

The other points of concern is the removal of some of the incentives for affordable housing. Delivery of affordable housing could be impacted by removal of incentives, and this should be weighed up before any radical overhaul of the existing SEPPs.

Savings and transitional provisions

A further explanation of savings and transitional provisions should be provided to provide certainty to all stakeholders as well so that the EIE does not impact the supply of affordable housing in the coming years. The concern being that uncertainty will lead to lack of investment until the details of the Housing Diversity SEPP have been provided.


The new Housing Diversity SEPP promises a complete strategy to address affordable housing in NSW. Given the importance of the delivery of this kind of housing, it is important that feedback from all stakeholders has been received and considered.

Further studies may be needed before any significant changes are made to the existing SEPPs. However, there are certainly changes highlighted in the EIE that could be made now to the existing SEPPs to incorporate efficiency.

We are hopeful that the new Housing Diversity SEPP will deliver on its aims, though the devil will be in the detail.

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.