7 Sep 2021

The incorporation of the current SEPP (Housing for Seniors or People with a Disability) into the draft NSW Housing SEPP will significantly impact the aged care and retirement sector. 

5-second summary:

  • The Housing for Seniors or People with a Disability SEPP is to be repealed and replaced with a broader Housing SEPP.
  • The future development of Independent Living Units will not be allowed in R2 Low Density Residential zones.
  • The proposed bonus provisions have limitations in incentivising development in suitable locations.

The modifications will clarify permissible zones for where seniors housing may be developed, provide certainty and enable reduced assessment timeframes.

While there are improvements, we are concerned that some of the new provisions reduce capacity for development in the right places and ultimately limit increased opportunity for new developments that promote ‘ageing in place’ and affordability.

What’s new?

  1. Permissible in Prescribed Zones, with limitations
  2. ILUs have a new definition; not allowed in R2 zone
  3. New non-discretionary development standards
  4. Changes to vertical villages site size and bonus
  5. New SSD approval pathway

Zone restrictions create uncertainty

Senior’s housing will be permissible in all zones (except industrial and rural zones) with some limitations. Of significance:

  • Independent Living Units (ILU) will not be allowed in R2 low density Residential zones.

This will significantly limit the opportunity for new low-rise development and housing diversity. Moreover, it will force existing projects in the zone to rely upon existing use rights or rezoning to undertake any upgrades or expansion.

  • Development on sites that are registered clubs in RE2 Private recreation zones must have at least 50% of the site adjacent to residential land.

Clubs may often be located adjacent to non-residential land (such as other open space areas or commercial land) yet are still ideally located to provide seniors housing opportunity proximate to services and within desirable settings.

  • The definition of Environmentally Sensitive land, where development is not allowed, introduces new restrictions.

One new area where seniors housing will not be allowed includes any land identified in Council LEPs as a flood planning area.

Reduced sites for ILUs

One of the aims of the new Housing SEPP is to ensure an adequate supply of diverse housing types to meet the changing needs of people. 

Under current provisions, ILUs are permissible and commonly developed in R2 zones. The proposal to prohibit them will reduce a significant opportunity for downsizing and ageing in place, as well as for co-locating with residential care facilities (which will be permissible in an R2 zone). 

Relying on ‘Existing use Rights’

Many existing ILU ‘retirement villages’ are in R2 zones, and many are approaching an age requiring upgrade or replacement. Any future ILUs will rely on existing use rights and old planning controls.

The proposal to prohibit them (ILUs) will reduce a significant opportunity for downsizing and ageing in place.

Existing use rights allow lawful uses to continue even where the planning rules no longer allow that use. These rights are intended to be a safety valve for isolated one-off issues, rather than for many ILU projects all over NSW.

Development consent is required for any enlargement, expansion, alteration, or to rebuild. There is no ability to add new land to expand the development. As a result, the opportunity of renewal of hundreds of ILUs could be jeopardised.

Bonus Incentives may be ineffective

It can be difficult for seniors housing to compete against conventional residential development. Therefore, the provision of zoning flexibility and an effective bonus system is critical to allow the availability of sites in highly accessible locations. 

The proposed bonus FSR and height provisions only apply in zones where RFBs are permissible. Many local councils do not permit RFBs in B3, and B4 zones, usually town centre or high-density areas with good access to transport and services. Therefore, the bonus provisions are not available in these zones- arguably the locations where vertical and denser formats are most appropriately located.

A vertically integrated seniors housing building is no different to ‘shop-top housing’ – which is a land-use permitted in many B4 zones. However, this type of seniors housing will not benefit from any bonus provisions to compete against conventional shop-top housing.

This form of seniors housing does not ‘lock up’ the commercial core associated with B3 zones as they often remain owned within a single entity. Like built-to-rent housing, the integrated form provides a land-use mix that addresses immediate needs from both a commercial and residential perspective, but also allows longer term adaption.

The proposed methodology to calculate FSR bonuses also limits meaningful incentives, compared to what us currently available, especially on sites with lower base FSRs.

Our analysis shows that the advantage is only achieved (over existing provisions) for:

  • ILUs with an FSR of 4:1
  • RCFs with an FSR of 3.0:1
  • Integrated ILU / RCF with a FSR of 2.5: 1

Applying the bonus incentives to both B3 and B4 zone would foster greater site opportunities and feasibility for seniors housing, resulting in more accessible location and affordability.

Unless incentives options are readily available, there will be an inherent feasibility issue for seniors housing developers to compete with the conventional residential developers, affecting supply of seniors housing in the most populated area of Sydney with the greater access to public services and facilities.

A lost opportunity in the ‘Inner Ring’

The minimum 2000 sqm site area threshold for vertical village bonuses presents significant constraints for site availability near and within town centre locations within inner urban locations. Coupled with the methodology for providing floorspace incentives, the two provisions together limit real advantage of encouraging seniors housing development.

Given the average lot sizes within these areas, amalgamation of sites would need to occur to achieve the bonus. This situation will also have an effect of driving up land prices, impacting affordability.

State Significant Development Pathway

It is encouraging to note that a state significant development (SSD) pathway is available for residential care facilities with a CIV of at least $30 million. This provides better agency coordination, certainty and approval timeframes.

This situation will also have an effect of driving up land prices, impacting affordability.

However, to be eligible for this pathway, the value of the residential care component (if part of an integrated facility) also needs to be (at least) 60% of the total CIV.  This 60% value threshold is an unnecessary limitation to SSD eligibility and does not reflect the ratios of value between residential care and ILUs in an integrated model.

Given the significant advantages integrated seniors housing projects will play in meeting the needs of our ageing population, it is critical that an appropriate SSD pathway be available and reflect the integrated models within the marketplace.

What’s next?

With the exhibition of the draft SEPP having concluded in late August, the NSW Government is working towards a swift implementation expected in October or early November. Still to come are guidelines which are currently in development. Our Urbis experts can assist you with understanding the impacts and implications of the proposed changes.

Peter Strudwick View Profile
Sophy Purton View Profile
Belinda Thomas View Profile

Photo by Eduardo Barrios on Unsplash