Great Divide: State, Council Disconnect Stunts NSW Housing Development

Bringing new supply to market is the number one problem for Sydney developers right now. And with the NSW Government committed to a 52,680 annual new home target over the next five-years for Metropolitan Sydney, the heat is on. But whether it be assessment times, misaligned planning policy changes or onerous developer contributions, a major hurdle is the fundamental disconnect between NSW Government and the state’s councils. According to Brendan Woolley, director at property industry analysts Charter Keck Cramer: “We’re experiencing extremely difficult development circumstances right now and success is becoming very project-specific.” “The overwhelming feedback I’ve had speaking to developers is that with one hand the state government is producing all of these planning changes, and enabling more potential supply but with councils on the other hand, they’re not speaking to each other.” Misalignment between tiers Of the more than 50,000 new homes required, 82 per cent of this new metro supply is proposed to be provided as infill housing, moving away from greenfield, an historic shift in focus. But this means that 35,000 new apartments will need to be built each year, according to Charter Keck Cramer. And the future is not looking too bright for apartments. In a report released this week it said the Sydney apartment development market remained subdued with only 7800 completions and 4800 apartments launched, a 37 per cent reduction on the same period in 2023. And apartment supply in particular is anticipated to fall short of the NSW five-year targets, suggesting a misalignment with what is being promised by state and federal government and what can be realistically delivered by developers and councils. ▲ Brendan Woolley, director at property industry analysts Charter Keck Cramer. “There just hasn’t been that cohesion between different levels of government,” Woolley says. “The National Housing Accord has set these significant targets and the NSW Government has jumped on it, delivering, as far as I can see, the most significant suite of concurrent planning changes in at least the 25 years I’ve been operating in Sydney.” These have included transport-oriented development areas (TODs), infill affordable housing policy changes , and low and midrise housing reforms, which came into effect in July across 124 NSW local government areas. “Then there are councils, who feel a bit hard done by, because these changes are being thrust upon them without consultation, and it varies between them,” Woolley says. “For the TOD SEPP locations currently on exhibition, some of them are just extensions of what councils are already doing, and the NSW Government has either pushed height limits and so on in a different direction, while the low to midrise policy is not fully transparent yet. So a lot of councils have not been too happy.” While the policies will provide “notably higher development capacity” across Sydney, they do not address market fundamentals and therefore many developers continue to keep projects on hold “as they attempt to filter through the confusion surrounding policy interaction and a range of uncertainties,” according to Charter Keck Cramer’s report. “And without that alignment it’s hard for developers on the ground to bring things effectively to market.” Inconsistencies rampant Another example of this misalignment is development assessment times. The NSW Government launched an interactive dashboard ranking councils by assessment times, exposing a number of councils in various reports based on the data. According to the database, for the year to June 2024, North Sydney, Sutherland and Georges River were the worst performers in the Sydney region, with Georges River taking 285 days from submission to determination, North Sydney coming in at just over 270 days, and 263 days for Sutherland. The best were Woollondilly at 61.5 days, Blacktown with 79.5 and Camden with 81 days. Fastest turnarounds Delete As the Property Council of Australia pointed out with their own data earlier this year, regional councils have much lower assessment times— Narrandera , in the Riverina between Griffith and Wagga Wagga, has the fastest average determination time with 20 days. Given that it only had 48 development applications in that period, it’s not surprising. But what this shows is a huge disparity between councils in their ability, capacity and desire to push through much-needed residential development. “This poses a real opportunity, where there’s more capacity for additional funding and town planning resources within local councils and enabling local councils to handle heavier workloads,” Woolley says. “The residential development market is really struggling with the number of approvals down, the number of applications declining. Theoretically with fewer applications, projects should be approved faster. “So there will be a lot more pressure when the market picks up.” Approvals for new housing across Australia rose 10.4 per cent in July to 14,797–still 5.1 per cent below the five-year average, according to the Property Council of Australia. But in NSW, according to the Australian Bureau of Statistics this week, the number of houses approved declined 1.3 per cent and the number of total dwelling units rose only 0.5 per cent, the lowest of the five biggest states. Consistency and transparency Another major issue directly impacting feasibilities is the increase in infrastructure and other levies and contributions, which lack consistency at local as well as state level. “In some locations, local contributions have increased from $20,000 per dwelling to $70,000 per dwelling, and there are a lot of state government levies with new ones being introduced all the time, which is limiting opps and counteracting opportunities,” Woolley says. Slowest turnarounds Delete “Once levies are in place, government is not keen to remove them. “But councils are doing different things and there is inconsistency and a lack of understanding on certain numbers, which is something that needs to be looked into.” There are some relatively quick and effective changes that can be introduced, says Woolley. “And enabling local councils and gearing them up to have more transparency and consistency and looking at the way contributions are levied, that market understanding is a key one. “Another aspect is looking at contributions, the way affordable housing contributions are levied are quite different and you can potentially have affordable housing contributions at three levels of government.” Developers spoke about inconsistency with timing and transparency, he says, and these are some fundamental issues which the NSW Government and councils can deal with. “The market dynamics are in such contrast where we have a huge demand for new supply, but bringing that supply to market is so difficult. It’s ongoing and aggregating undersupply,” Woolley says. “There needs to be assistance from particularly government in this instance to remove or adjust some of these hurdles in place, making bringing projects to market really difficult. “From a market and feasibility standpoint, the challenges aren’t going to resolve by themselves.” You are currently experiencing The Urban Developer Plus (TUD+), our premium membership for property professionals. Click here to learn more.

Great Divide: State, Council Disconnect Stunts NSW Housing Development

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