NSW moves to reform planning for build-to-rent and affordable, seniors and social housing

As part of its COVID-19 response, and broader moves to more build-to-rent housing, the NSW Government has been considering planning reforms to ensure that state planning provisions are fit for purpose to facilitate the construction of affordable and well-designed residential accommodation. The latest proposed reform is a new Housing Diversity SEPP which will change and consolidate state planning provisions for affordable, seniors and social housing. While we haven't seen the actual draft SEPP yet, the NSW Department of Planning, Industry and Environment (DPIE) has released an Explanation of Intended Effect (EIE) for it, and is calling for submissions by 9 September 2020.

Proposed changes will introduce an affordability requirement to boarding house developments. "New generation" boarding houses and student accommodation will no longer be facilitated under broader boarding house provisions and developers will need to meet new design requirements without the same incentives.

Developers should review the changes in detail and consider providing feedback.

Main changes in the Housing Diversity SEPP

The Housing Diversity SEPP will consolidate three State Environmental Planning Policies:

• State Environmental Planning Policy (Affordable Rental Housing) 2009 (ARH SEPP);
• State Environmental Planning Policy (Housing for Seniors and People with a Disability) 2004 (Seniors SEPP); and
• State Environmental Planning Policy – Affordable Housing (Revised Schemes).

In their place, the new SEPP will:

• Introduce "built to-rent housing", "student housing" and "co-living" development types into the Standard Instrument - Principal Local Environmental Plan (Standard Instrument);
• Introduce an affordability requirement to boarding house developments, standardise the Floor Space Ratio (FSR) uplift to 20% and remove boarding house developments from R2 Low Density Residential zones at a state level;
• Amend the existing provisions of the ARH SEPP by:
  • introducing an exempt and/or complying development pathway to change an existing dwelling to a group home;
  • expanding the ability for Councils to levy monetary contributions on certain developments to offset the loss of low-rental dwellings posed by that development; and
  • allowing councils to set the maximum size of secondary dwelling developments in rural zones.
• Amend the existing provisions of the Seniors SEPP to:
  • extend the validity of a Site Compatibility Certificate (SCC) from 2 years to 5 years, on the condition that a development application is lodged within 12 months of the SCC issue;
  • amend the "location and access to facilities" provisions and update definitions;
  • update Schedule 1 which identifies the "environmentally sensitive land" where the Seniors SEPP provisions do not apply;
  • clarify provisions regarding existing registered clubs; and
  • confirm that development standards in a Local Environmental Plan (LEP) prevail over the state provisions.
• Introduce provisions which will promote the delivery of social housing by NSW Land and Housing Corporation, on government land, including in partnership with the private sector and community housing providers.

Below we have discussed in greater detail the changes specifically to boarding house developments and the introduction of new housing typologies.

Affordability and Boarding House Development

The proposed changes will introduce an affordability requirement to boarding house developments, currently assessed and approved under the ARH SEPP. The ARH SEPP was introduced in 2009 to facilitate growth in affordable rental housing stock. It covers a range of housing typologies, but perhaps the most popular is the boarding house model. The ARH SEPP incentivised the construction of boarding houses through providing an FSR bonus to developers and ensuring that consent authorities could not refuse developments on certain grounds if specific standards were met. There has been a proliferation of new generation boarding house developments as a result but no commensurate growth in affordable housing. It was assumed that the smaller habitable rooms within boarding house developments would be rented out at affordable rates. Instead developers have been able to attract market rents for "micro apartments" in attractive locations, close to the city and public transport. Councils are concerned that these developments don’t meet the demand for low-cost housing but instead provide accommodation for young professionals and students, with no affordability obligation.

DPIE intends to introduce an affordability component by changing the definition of "boarding house." A boarding house will be required to be managed by a registered not-for-profit community housing provider. These providers offer housing for people on very low, low or moderate incomes or to people with additional needs. In order to maintain their registration they must follow national standards for community housing. DPIE is seeking feedback on this proposed definition. Alternatively DPIE has asked for feedback on whether requiring boarding houses be rented out at affordable rents for a ten year period, after which they can revert to market rents, is a more appropriate control.

Another key change proposed for boarding house developments concerns the FSR incentive. Boarding house developments proposed on land where residential flat buildings are permitted and which do not contain a heritage item or certain heritage protections attract an FSR bonus. The FSR control which applies to those developments is the maximum FSR for any form of residential accommodation on that land plus an extra 0.5:1 FSR where the existing maximum FSR is 2.5:1 or less, or an extra 20% of the existing maximum FSR if the FSR control is over 2.5:1. For smaller developments the bonus FSR can be substantial, in some cases nearly doubling the FSR that can be ordinarily applied for residential accommodation in the applicable zone. The proposed controls will scale back the bonus FSR available to a standard 20% uplift.

Implications

Existing boarding house provisions have facilitated substantial development since the introduction of the ARH SEPP. There has always been a tension between the incentives provided to developers and concerns about affordability and amenity for occupants. The proposed reforms seek to reset the balance.

Developers will need to look at the proposed development standards for each of the typologies closely. The size of apartments, communal living spaces and private open space are greater for co-living developments compared with existing and proposed boarding house developments. It appears the minimum car parking requirement is the main or only development incentive for these new typologies, compared with the current FSR bonus and development standards in the ARH SEPP. Developers should review the proposed provisions carefully as feedback from the private sector on the viability of proposed standards will be crucial to ensuring that new housing types are delivered.

Related Insights

• Build-to-Rent: the start of something new
• Unshackling the chains of build-to-rent developments in New South Wales