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New In-Fill Affordable Housing Scheme - what you need to know

In response to demands for more new homes and improved housing affordability, the NSW Government has amended the State Environmental Planning Policy (Housing) 2021 (Housing SEPP) to encourage developers to build affordable homes.

The amendments primarily concern f loor space ratio (FSR) and height of building bonuses for residential developments.

Types of developments 

The amendments apply to ‘residential developments’, as defined in section 15B of the Housing SEPP. They include:

  • attached dwellings 

  • dual occupancies 

  • dwelling houses 

  • manor houses 

  • multi dwelling housing 

  • multi dwelling housing (terraces) 

  • residential flat buildings 

  • semi-detached dwellings 

  • shop top housing 

  • build to rent zones pursuant to Chapter 3, Part 4 of the Housing SEPP. 

Location of developments 

With the exception of Shoalhaven, the home must be sited within the Six Cities Region, comprising the Lower Hunter and Greater Newcastle City, Central Coast City, Illawarra-Shoalhaven City, Western Parkland City, Central River City and Eastern Harbour City. It must also be within an accessible area, defined as a site that is:

  • within 800m walking distance of a railway, metro or light rail station, or wharf which a Sydney Ferries service operates; or 

  • within 400m walking distance of a bus stop regularly serviced by at least one bus an hour, 6am-9pm Monday to Friday, and 8am-6pm on weekends.

Any site outside the Six Cities Region or within Shoalhaven must be within 800m walking distance of one of the following zones: 

  • E1, Local Centre 

  • MU1, Mixed Use 

  • B1, Neighbourhood Centre 

  • B2, Local Centre 

  • B4, Mixed Use. 

Certain parts of the City of Sydney are excluded.

The "bonus" provisions - FSR 

The amendments allow residential development projects to apply for a FSR bonus of up to 30%, and a height of building bonus of up to 30%, where at least 10% of the gross f loor area is dedicated as affordable housing.

The additional floor space is afforded at a rate double the affordable housing component. For example, if a development offers 10% of the gross floor area as affordable housing, it may apply for up to 20% additional FSR. If it offers 15%, it may apply for up to 30% additional FSR (maximum additional FSR available).

The FSR bonus applies to the whole of the development, not just the residential component.

The bonus also applies in commercial zones, even if residential accommodation is prohibited. The idea is to allow build to rent developments to benefit from the incentives.

The "bonus" provisions - height 

The height bonus only applies to residential flat buildings and shoptop housing.

The additional height of building is calculated in the same way as additional FSR. 

The former FSR bonus for registered community housing providers

The former FSR bonus still applies for developments carried out by or on behalf of Land and Housing Corporation, the Aboriginal Housing Office, Landcom or registered community housing providers. This bonus is available for development on land with a maximum permissible FSR of 2:1 or less.

Under the former FSR bonus, if the affordable housing component is at least 50% of the development, the potential additional FSR is 0.5:1. If the affordable housing component is between 20% and 50%, it will apply on a sliding scale. For example, if 30% of the development is affordable housing the development may apply for additional FSR of 0.30:1.

The amendments mean these agencies can now apply for either of the two formulas for the FSR bonus: either the amended FSR “bonus” provisions under section 16 of the Housing SEPP, or the former FSR bonus under section 17 of the Housing SEPP. 

New State Significant Development

A new State Significant Development (SSD) has also been created. It is defined as a residential development component with a capital investment value of $75m in the Greater Sydney Region (as defined in the Housing SEPP), or more than $30m across the rest of NSW.

SSD applications will require an environmental impact statement, rather than a statement of environmental effects, which must be submitted to the Department of Planning and Environment rather than local council.

If the SSD assessment determines that the full 130% bonus cannot be accommodated on the site, for the development application to be determined under the SSD pathway it must still provide at least 10% of total gross floor area as affordable housing. If a developer does not wish to do this because the additional bonuses cannot be afforded, it must withdraw the SSD application and lodge a development application with local council.

‘Affordable housing' 

The affordable housing proportion of the development must be managed by a registered community housing provider for a minimum of 15 years.

Amendments to the EP&A Regulation 2021 mean consent conditions must require evidence of section 88E instruments that ensure the affordable housing component is managed by a registered community housing provider. In addition, evidence of an agreement with a registered community housing provider must be provided. These amendments do not apply to developments carried out by or on behalf of Land and Housing Corporation or the Aboriginal Housing Office.

Any local requirements for affordable housing, such as those under other instruments or planning agreements, will not count towards the criteria needed to access the additional FSR and/or height of building.

Relationship with other bonuses 

Other FSR bonuses available in the Housing SEPP are capped at 130%.

However, site-specific or project specific FSR and/or height of building bonuses available under other Environmental Planning Instruments may still apply as well. The maximum permissible FSR achievable under another Environmental Planning Instrument should be determined first, and these bonus provisions then applied in addition. 

Relationship with other Environmental Planning Instruments

The amendments do not override any provisions in Local Environment Plans or Environmental Planning Instruments.

However, Development Control Plan provisions do not apply to SSD applications. Development Control Plan provisions also do not apply when there is a conflict between them and the new Design Competition Guidelines SEPP. 

Non-discretionary standards

Clause 19 of the Housing SEPP provides non-discretionary development standards which, if complied with, prevent the consent authority from requiring more onerous standards. This provision prevents consent authorities from doing any of the following:

  • taking the non-discretionary development standard into further consideration in determining the development application 

  • refusing the development application on the grounds that the development does not comply with that standard 

  • imposing a condition of consent that has the same effect but is more onerous than the standard.

Repeal SEPP 65 and new SEPP Amendment (Design Competition Guidelines) 2023

The State Environmental Planning Policy No 65 – Design Quality of Residential Apartment Development (SEPP 65) has been repealed and replaced with a new Chapter 4 of the Housing SEPP, which requires consideration of design quality principles including residential amenity.

Under Chapter 4, the consent authority must consider the new State Environmental Planning Policy Amendment (Design Competition Guidelines) 2023 (Design Competition Guidelines SEPP), published on 15 December 2023 with immediate effect.

The new Design Competition Guidelines SEPP do not require full compliance with the design criteria specified in the guidelines. It also amends 14 Local Environment Plans and 3 SEPPs to allow the Department of Planning and Environment to waive the rights for an architectural design competition. 

Summary - effect of the new scheme on consent authorities

The amendments are considered “bonus” provisions; however, there is no automatic entitlement to the additional FSR or height of building provisions.

The amendments do not affect a consent authority’s responsibility to consider the requirements of relevant Environmental Planning Instruments. Consent authorities must still consider site constraints and local impacts including the acceptability of the height of building, massing, likely impacts and suitability of the site, in the context of the permitted and additional FSR and height of building provisions. A consent authority must also consider the character of the local area and its desired future character.

Site-specific factors may mean the full extent of the additional bonus provisions cannot be granted in some circumstances.

However, the NSW Government has released a planning circular “designed to encourage consent authorities to consider the flexible application of the Housing SEPP controls in light of the public benefit relating to the delivery of affordable housing”.

It and the practice note encourage consent authorities to balance Local Environment Plans and Environmental Planning Instrument standards flexibly against the need for more affordable housing.

Juggling the desire for flexible application of controls against the need for compliance remains a difficult task when assessing applications relating to these amendments.

We will continue to report on further amendments.

Authors: Dennis Loether & Monique Lewis

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