18 Aug 2021

New initiatives across Australia have revived an old debate: Is the response to housing challenges more investment in the private sector or direct government intervention?

The NSW Housing State Environmental Planning Policy (SEPP) exhibition is the latest chapter in a series of policy changes and spending initiatives across Australia in the past 18 months. Catalysed by the impact of COVID-19, state governments have had varied approaches to economic stimulus, housing affordability and diversity challenges caused by the pandemic.

Direct investment in Victoria, Queensland, and Western Australia

Victoria and Queensland have responded to these challenges with their biggest investments in social and affordable housing to date. Victoria’s $5.3 billion investment in social and affordable housing, coined the Big Housing Build, is expected to bring more than 12,000 homes to the State. Queensland’s $2.9 billion investment over the next four years will fulfil the State’s Housing Strategy Action Plan by funding 7,400 new social and affordable homes. Western Australia’s Housing Strategy 2020-2030 will commit to an increase in social housing supply of 6%, with 2,600 homes expected to be delivered in 10 years. 

Stimulating supply in NSW

The NSW Government’s response aims to use the construction and development sectors to increase supply and diversity. The draft Housing SEPP is based on the directions outlined in the NSW Housing Strategy, finalised in May 2021. The SEPP is set to consolidate 5 existing housing policies and includes recently endorsed provisions for short-term rental accommodation, social housing, and build-to-rent. It also introduces new land use definitions, changes development standards, revises floor space and other planning incentives, and integrates support for new asset classes.

Backing build-to-rent

As discussed here, the NSW Government recently passed provisions that installed build-to-rent as a formal housing typology within the NSW planning system, enabled in large commercial centres and in residential zones where apartment buildings are allowed. The draft Housing SEPP includes these provisions, as part of its broad focus on diversity and supply.

Boarding houses version 3.0

Boarding houses traditionally offer small rooms with shared kitchens and bathrooms aimed at low-income earners. In 2009, the Affordable Rental Housing SEPP introduced ‘new generation boarding houses’ (NGBH) to NSW. This SEPP, among other things, is intended to stimulate supply and increase the quality of boarding houses, with NGBHs having private kitchens and bathrooms. Effectively operating as micro-apartments, NGBHs currently target a much larger clientele.

The draft Housing SEPP distinguishes traditional boarding houses from their new-generation counterparts. It requires that boarding houses are affordable and managed by a community housing provider and gives considerable floor space bonuses of up to 25%. It also establishes a new definition of small-scale housing, separate from boarding houses.

Enter co-living

The draft Housing SEPP presents ‘co-living’, essentially a re-branded NGBH, which includes off-campus student housing. This move confirms the rise of co-living developments as a new asset class, targeting students and middle-income earners willing to trade smaller homes for a better location, higher-quality design, centralised management and/or building-wide social activities.

Co-living is proposed in low-density residential zones and in locations where residential flat buildings or shop top housing are allowed, giving it a broader location footprint than the now more narrowly-defined boarding houses. To smooth the transition from NGBH and off-campus student housing to co-living, the SEPP offers a time-limited floor space bonus of 10%.

Splitting seniors housing

Although co-living is typically more attractive to younger people, the draft Housing SEPP also modifies the housing requirements for older people. It makes the applicable zones much clearer and eliminates the requirement for site compatibility certificates (an additional step in an already complex process). However, extra development standards have been introduced.

The proposed changes also distinguish between two types of housing for older people (residential aged care and independent living), each with separate controls and arrangements. ‘ILUs’ is now prohibited in low-density zones, while ‘vertical villages’ are proposed to be incentivised, but only in zones where residential flat buildings are allowed. There are already rumours the industry is concerned about these matters.

Next steps in the evolving experiment

The SEPP is neither concise nor straightforward and includes provisions for different types of housing and tenure, from large-scale build-to-rent to secondary housing. There will be winners and losers in the new provisions, with close attention to the fine print required by all housing players.

The proposed Housing SEPP is on public exhibition until 29 August 2021 and is expected to be finalised by October 2021. The success of NSW’s policies aimed at stimulating housing supply, improving affordability, and increasing diversity will be compared with the results of direct housing investment in other states. The coming years will provide fertile ground for researchers and policymakers, as well as direct impacts on housing markets across Australia.

For further information on the new NSW Housing SEPP and how the policy could affect your project, please contact our team of housing experts.

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