NSW's new sustainability requirements for residential development about to begin

The State Environmental Planning Policy (Sustainable Buildings) 2022 (Sustainable Buildings SEPP) commences on 1 October 2023 and is a key policy step to NSW achieving net zero emissions by 2050.  Industry has had over 12 months to prepare for the transition as the policy was published in August 2022. With the commencement date fast approaching, we recap on the measures it will introduce and outline some of the changes that have been made with respect to its implementation.

This article will focus on the changes introduced for residential development specifically. For information on the requirements for non-residential development please see our separate article here.

The Sustainable Buildings SEPP changes at a glance

On 1 October 2023, the following legislative changes will commence:

• the State Environmental Planning Policy (Building Sustainability Index: BASIX) 2004 (former BASIX SEPP) which implements the current Building Sustainability Index (BASIX) standards for residential development will be repealed;
• the Sustainable Buildings SEPP will commence; and
• relevant changes will be made to the Environmental Planning and Assessment Regulation 2021 and Environmental Planning and Assessment (Development Certificate and Fire Safety) Regulation 2021 which will further implement the measures in the Sustainable Buildings SEPP.

Small changes have been made to the amending regulation giving effect to these regulation changes as outlined in the Environmental Planning and Assessment Amendment (Sustainable Buildings) Regulation 2023 made 22 September 2023.

The Sustainable Buildings SEPP applies to all of NSW and will broadly speaking:

• incorporate and update BASIX standards for residential development;
• introduce sustainability provisions for some non-residential development; and
• introduce a requirement for residential and some non-residential development forms to calculate and report on embodied emissions of key building materials.

The changes for residential development in the Sustainable Buildings SEPP have been designed to align with the energy efficiency updates to the National Construction Code which will also commence 1 October 2023.

Changes for residential development

The former BASIX SEPP was introduced on 1 July 2004 and applied BASIX standards to specific residential development mandating certain reductions in water consumption, energy consumption and greenhouse gas emissions along with thermal performance requirements.  Commitments to achieving those standards for proposed development are outlined in a BASIX Certificate which accompanies a development application.

Come October, the BASIX standards will be implemented through the Sustainable Buildings SEPP. The standards will apply to the same forms of residential development, including:

• the construction or change of use of BASIX buildings;
• the renovation of BASIX buildings where work is valued to be $50,000 or more; and
• certain swimming pool developments for single dwellings.

In short, it will apply to all new housing and housing renovations costing $50,000 or more.

The Sustainable Buildings SEPP will update the BASIX energy and thermal performance standards for residential development resulting in:

• an increase of the thermal performance standard from an average 5.5 to 6 stars to 7 stars NatHERS rating; and
• higher energy efficiency standards equivalent to a 7-11% increase in greenhouse gas emission reduction (depending on development type and size).

The updates in these standards apply to all relevant residential development except for:

• homes in certain climatic zones on the North Coast of NSW; and
• small apartment buildings up to 5 storeys.

These development types are excluded from the changes because the cost-benefit analysis modelling commissioned by the Department of Planning and Environment (DPE) revealed the energy savings achieved through their implementation did not cover the extra building costs.

The BASIX water standards for residential development will not change.

Calculating embodied emissions and reporting

The Sustainable Buildings SEPP will now require an applicant to quantify and report on embodied emissions which are greenhouse gas emissions resulting from the materials used to construct a building including emissions from extracting raw materials, transportation of materials for manufacture and the manufacture of those materials used to construct the building.

The method for calculating embodied emissions will differ from residential to non-residential development.

For residential development, a consent authority cannot grant consent to a proposed application to which the BASIX standards apply, unless the consent authority is satisfied that embodied emissions attributable to the development have been quantified.

For new dwellings, embodied emissions will be quantified via a BASIX material index as part of the BASIX online tool. An applicant will be asked to input data about the size of the development and the construction materials used for floors, walls, ceiling, roof and glazing. An emissions factor will then be applied to the volume of each construction material. Using this information, the index will calculate the embodied emissions of key buildings materials for the development within the BASIX Certificate.

DPE has released an Embodied Emissions Technical Note which provides further details of the emissions reporting requirement.

The new recording requirement is a first step to tackling embodied emissions from construction materials. Reducing emissions in this area is key to achieving the state's net zero target. According to the Green Building Council of Australia, embodied carbon from buildings materials in 2019 represented 16% of Australia's built environment emissions and are set to make up 85% of emissions from the building sector by 2050 if not addressed.

DPE has indicated that capturing this data may help inform an embodied emissions target in future revisions of the Sustainable Buildings SEPP.

Implementing the Sustainable Buildings SEPP: dates and transitional arrangements

The Sustainable Building SEPP applies from 1 October 2023. Some changes have been made to the implementation of the obligations since the release of the policy in August 2022.

Single dwellings

In August 2023 the Minister for Planning and Public Spaces, Paul Scully, announced a delayed start to the BASIX updates for new single dwellings due to cost pressures. New homes already under contract prior to 1 October 2023 will be exempt from the updated BASIX requirement until 30 June 2024, although homeowners could choose to comply with the higher standards. In effect, the announcement results in an additional 12 months for eligible applicants. A BASIX Certificate could be generated to meet the current BASIX requirements up until 30 June 2024, and because the Certificate is valid for 3 months, be used to accompany a development application or complying development certificate (CDC) application submitted in late September 2024.

DPE's Fact Sheet outlines the additional transitional arrangements that apply in this case.

Development applications and modification applications

The Sustainable Buildings SEPP contains transitional provisions which allow development applications and modification applications submitted before 1 October, but not finally determined, to be assessed as if the Policy does not apply. For residential development, that means the BASIX standards under the former BASIX SEPP would apply.

This week DPE has release a Planning Circular which provides further guidance about the transitional arrangements. It outlines that:

• development applications and CDCs submitted on or after 1 October 2023 apply the Sustainable Buildings SEPP;
• for residential development, a development application or CDC submitted after 1 October can use a BASIX Certificate created before 1 October 2023, so long as it is within its 3-month validity period. If this is the case, it will be acceptable that the development meets the standards in effect at the time the certificate was issued; and
• modification applications submitted prior to 1 October 2023 are not impacted by the Sustainable Buildings SEPP.