The NSW Housing and Productivity Contribution's Works-in-Kind Guideline: What developers must do differently

The NSW Government has released two documents that will be crucial in shaping the future of new development by influencing the infrastructure delivered to support new communities.

• The HPC Works-in-Kind Guideline, which set out how developers can deliver infrastructure directly rather than paying cash contributions; and
• Infrastructure Opportunities Plans for Greater Sydney, Central Coast, Illawarra Shoalhaven, and Lower Hunter and Greater Newcastle.

The release of the final Housing and Productivity Contribution (HPC) Works-in-Kind (WIK) Guideline represents a meaningful step forward in clarifying how developers can deliver state infrastructure and receive contribution offsets. The framework is more structured, transparent and aligned with broader housing delivery objectives than previous iterations.

However, it also introduces new constraints that will fundamentally change how developers approach infrastructure delivery proposals.

The message is clear: developer delivery is encouraged, but subject to priority, constrained by the WIK budget, and to be assessed competitively.

This creates both opportunity and risk. Developers who adapt early and prepare high-quality, evidence-based proposals will be well positioned. Those relying on informal or ad-hoc approaches may find fewer pathways available.

Our team has reviewed the new WIK guidelines, and we have set out the key changes.

Infrastructure Opportunities Plans (IOP) are now central to developer delivery

Key Takeaway:  
Infrastructure is only eligible for WIK offsets if it is on an IOP, or a Special Infrastructure Contribution (SIC) schedule. Conversely, if the government thinks infrastructure is eligible for WIK offsets, it must first be added to an IOP before an agreement can be finalised.

The Detail:
A foundational change is the formal integration of Infrastructure Opportunities Plans (IOPs) into the works-in-kind process. These plans identify the infrastructure required to support planned housing growth and form the basis for prioritising developer delivery proposals. 

IOPs for Greater Sydney, Central Coast, Illawarra Shoalhaven, and Lower Hunter and Greater Newcastle include a dedicated list of infrastructure that, alongside previously identified in the schedules of existing, draft and repealed Special Infrastructure Contributions (SICs), can theoretically be delivered as WIK.

This has several important implications.

First, the HPC system is explicitly designed to fund infrastructure required to support rezoned land and planned growth areas.

Infrastructure required for unplanned growth must now go through a more rigorous pathway, including assessment, endorsement, and formal inclusion in the IOP before offsets can be recognised.

Second, this formal linkage improves transparency and predictability. Developers now have a clear signal of which infrastructure projects are most likely to receive support.

Third, it also introduces constraints. Developer-led infrastructure proposals that do not align with IOP priorities will face significantly greater scrutiny and uncertainty.

Developers must now align infrastructure delivery strategies closely with government growth planning.

Annual budget caps introduce a new structural constraint

Key Takeaway: 
Proposals for WIK will be invited every six months. An annual budget allocation for works-in-kind, calculated as a portion of the forecast Housing and Productivity Contribution revenue, will be determined as part of the annual Half-Yearly Review and Budget process. However, the exact budget is not yet known.

The Detail:
A major structural reform is the introduction of an annual budget allocation for works-in-kind offsets, determined as part of the State budget process.

The HPC system is not designed to fully recover infrastructure costs and that developer delivery offsets must operate within broader government funding constraints. The government must balance the benefits of WIK against other priority projects that must be delivered within the budget period via state government agencies or grants to local governments.

This has several implications.

Most importantly, developer proposals will now compete against each other for a limited pool of offset capacity. This introduces an entirely new dynamic. Developer delivery proposals are no longer assessed in isolation, but relative to competing proposals and government priorities.

Encouragingly, the allocation is reviewed regularly as part of the budget and half-yearly review process. This creates the opportunity for budget allocations for the upcoming period to evolve in response to strong developer proposals received during the current period.

We will continue to monitor the upcoming budget papers to ascertain the exact WIK budget allocation. 

Developer delivery pathways are clearer and more structured

Key Takeaway: 
The guideline now provides clarity on the pathway to developer delivery depending on the type and stage of development. The roles for Works-in-Kind Agreements and Planning Agreements are also clarified.

The Detail:
One of the most positive changes in the final WIK guideline is the clearer definition of delivery pathways.

The guideline formally distinguishes between three types of developer delivery:

• Works-in-Kind Proposal - Works-in-kind Agreements (with no public notification requirements) for development projects already approved and where the infrastructure component is listed on an IOP
• Accelerated proposals - State Planning Agreements for infrastructure identified in the IOP, prior to the issuance of consent for a development project.  
• Innovative proposals - State Planning Agreements linked to rezonings or infrastructure not yet included in the IOP.

This is an important structural improvement compared to the exhibited draft WIK guideline.

It creates clearer pathways for developer-led infrastructure across the full planning lifecycle, from rezoning through to post-consent delivery. It also provides a pathway for infrastructure associated with unplanned growth, which previously lacked a clear framework.

However, these pathways introduce new procedural and evidentiary requirements. Developer delivery proposals must now progress through formal review, endorsement, and investment recommendation processes.

This represents a shift away from negotiated outcomes toward structured, merit-based evaluation.

Innovative proposals provide a pathway for major rezoning-linked infrastructure

Key Takeaway:
Innovative proposals can unlock rezoning-led growth through developer‑delivered infrastructure, but only with early planning, strong evidence, and formal inclusion in the IOP.

The Detail:
The guideline formalises the innovative proposal pathway for infrastructure associated with rezonings or unplanned growth.

This pathway allows developers to propose infrastructure delivery at rezoning stage, subject to detailed assessment, inclusion in the IOP, and formal Government endorsement.

This creates an important opportunity.

It enables developer-led infrastructure delivery to unlock major rezonings that may otherwise be constrained by infrastructure funding gaps.

However, innovative proposals face significantly higher evidentiary requirements. Developers must demonstrate infrastructure needs, delivery capability, cost effectiveness, staging, and value to Government.

This pathway will require careful strategic planning and early engagement.

Recognition of surplus offsets remains limited

Key Takeaway:
After a period of uncertainty, it is confirmed that surplus credits will be allowed in a limited capacity. Surplus credits may be recognised for accelerated and innovative proposals but are capped at 50% of the surplus offset value. No surplus credits are recognised under works-in-kind agreements. 

The Detail:
The guideline introduces a clearer framework for surplus offset recognition (surplus credits), where the value of the infrastructure is greater than the HPC obligation. It, however, retains significant limitations.

This creates several practical implications.

First, it limits the feasibility of developer delivery proposals that provide infrastructure well in advance of development contributions or at significantly lower cost than government delivery.

Second, it introduces an asymmetry between planning agreements and works-in-kind agreements. While planning agreements allow partial surplus recognition, works-in-kind agreements do not allow any surplus recognition.

This is a conservative approach that prioritises fiscal certainty but may discourage developer delivery of infrastructure that provides strong public benefit but exceeds contribution liabilities.

We recommend this policy setting be reviewed over time, particularly for projects that demonstrate clear cost savings and accelerate housing delivery.

Furthermore, we await more details on the geographical areas where surplus credits can be used and whether they can be traded between developers. 

Eligibility criteria reinforce focus on state and regional infrastructure

Key Takeaway: 
Only region-serving infrastructure is eligible for offsets, reinforcing the HPC’s role and requiring clear separation from developer and council-funded works.

The Detail:
The guideline clearly defines eligible infrastructure types, including state and regional roads, transport infrastructure, regional open space, and land for state infrastructure.
 
Local infrastructure, utilities, remediation required to make land fit for end use, and works required solely to service the development, remain ineligible.

This reinforces the intended role of the HPC system as a funding mechanism for regional infrastructure supporting housing growth.

It also means developers must carefully distinguish between infrastructure that is genuinely eligible for offsets and infrastructure that remains their responsibility.

This distinction will be critical when preparing infrastructure delivery strategies and negotiating agreements.

All Works-in-kind proposals will face more rigorous assessment

Key Takeaway:
The framing of WIK has shifted from a procedural assessment, to proposals for formal infrastructure investment assessment by government.

The Detail:
Developers must now demonstrate:

• Strategic alignment with Government housing and infrastructure priorities
• Cost effectiveness compared to Government delivery
• Accelerated delivery timelines
• Capability and readiness to deliver infrastructure
• Clear public benefit outcomes

The emphasis on cost-benefit analysis and public sector comparator testing reflects a more disciplined investment framework. WIK proposals must demonstrate their value compared with other government infrastructure obligations over the budget period. 

Security and financial requirements increase developer risk exposure

Key Takeaway:
The guideline confirms that developers may be required to provide security, including bank guarantees equal to the full value of infrastructure works.

The Detail:
Security obligations increase financial exposure associated with developer delivery.

While understandable from a risk management perspective, these requirements reduce some of the financial advantages of works-in-kind delivery compared to monetary contributions.
 
Furthermore, the amount of monetary security provided (cash or bank guarantees) must be balanced against other forms of security contained within the Works-in-Kind or Planning Agreement, such as:

•    Registration on title
•    Ability to acquire land in cases of default
•    Ability to withhold EP&A Act Part 6 (building and subdivision certification) certificates 
•    Applicability of EP&A Act Section 7.24 to the Planning Agreement

We recommend that the state government continues refining security requirements to ensure they balance risk protection with development feasibility.

What developers must now do differently

The guideline fundamentally changes how developers must approach works-in-kind delivery.

Developer delivery proposals must now be more detailed, strategic, evidence-based, and assessment-ready from the outset.

This includes:

• Aligning infrastructure proposals with Infrastructure Opportunities Plans

• Demonstrating strategic alignment with housing and growth priorities

• Preparing detailed cost estimates supported by quantity surveyors

• Providing land valuations prepared by qualified valuers

• Demonstrating delivery capability and project readiness

• Quantifying cost savings and delivery acceleration benefits

• Supporting proposals with a rapid cost-benefit analysis.

Looking forward

The HPC Works-in-Kind Guideline marks a transition toward a more structured, investment-based infrastructure delivery system.

Developer delivery remains a critical mechanism for accelerating infrastructure and unlocking housing supply.

However, success in this new framework will require a more strategic and evidence-driven approach.

Developers must now treat infrastructure delivery proposals as formal infrastructure investment propositions — clearly aligned with government priorities, supported by robust analysis, and structured to compete successfully within a constrained funding environment.

This represents both a challenge and an opportunity.

Those who adapt to this new framework will play a central role in shaping the next generation of housing-enabling infrastructure.

Reach out

Our Infrastructure Advisory team is working closely with clients to help them position for HPC WIK proposals. Please reach out to the team listed below if you would like to discuss the implications of the new WIK guidelines for your projects.