By Aaron Gadiel, Partner 

The NSW Government has finally taken action on a major flaw in the statutory regime governing Sydney-wide strategic land use planning.

At long last, it is returning to the idea of setting local housing targets itself, rather than agreeing on them with local councils.

Background

Housing targets for each local government area have been accepted as crucial to Sydney’s land use strategic planning since the 2005 City of Cities metropolitan strategy.

For example, the NSW Government’s 2008 draft subregional plan for the Inner West not only identified the need for 30,000 extra dwellings for the subregion to 2031 — but also apportioned those dwellings between different local government areas.

It was widely accepted that such dwelling targets were needed to ensure that subsequent plans prepared by local councils could be objectively evaluated (so as to be sure that each local council was planning for its fair share of Sydney’s anticipated housing needs).

This approach was taken forward (at least in theory) by subsequent metropolitan plans.

The Metropolitan Plan for Sydney 2036 (released in 2010) promised that the NSW Government would finalise subregional strategies that would include updated local government area dwelling targets.  These subregional strategies were never finalised.

In 2014, the NSW Government released A Plan for Growing Sydney.  This new metropolitan strategy said that the government would use its ‘subregional planning process’ to set five-year local housing targets that ‘maximise the opportunities to growing housing supply’ through new ‘enabling planning controls’.  The government said that it was going to ‘accelerate housing supply and local housing choices’ by directing the Greater Sydney Commission to facilitate five yearly updates of the local council housing targets.

No subregional plans were ever released under the 2014 A Plan for Growing Sydney.

Instead the NSW Government released the current metropolitan plan in March 2018:  The Greater Sydney Region Plan: A Metropolis of Three Cities.

Unlike the 2014 A Plan for Growing Sydney, the 2018 (current) A Metropolis of Three Cities does not anticipate any changes to planning controls to add to housing supply in the initial 2016-2021 planning period.  Targets were set for this period, but these simply reflected the ‘existing development pipeline’.

A Metropolis of Three Cities did anticipate that changes to planning controls will be required for new housing supply to be made available in the second planning period: 2021 to 2026.  This required:

• the preparation of ‘housing strategies’; and
• the development of 6–10 year local government area housing targets.

(2016 is the base year; hence these are targets for 2021 to 2026.)

Unlike past plans, the local government area-specific housing targets were not to be set unilaterally by the state government. Instead, A Metropolis of Three Cities and its associated district plans merely said that these targets were to be ‘agreed’ between each local council and the Greater Sydney Commission.

As result, local housing targets were unlikely to concern local councils. Each council has been able to simply veto a housing target that was politically unacceptable to it.

This current scheme has been criticised by industry figures. They argue that the lack of state-led target-setting was always likely to deliver housing targets that fall short (of what population growth and demographic change requires).

The reform

On 13 April 2022, the Greater Cities Commission Act 2022 commenced.

As part of this new Act, the Environmental Planning and Assessment Act 1979 (the EP&A Act) has been amended.

Going forward, when the Greater Cities Commission (the renamed Greater Sydney Commission) prepares new district plans, it now must include dwelling targets for each local government area.

The dwelling targets will be specified for periods of five, 10 and 20 years after the making of the plan. They will specify targets for net additional dwellings approved under development consents.

Good or bad?

This is a significant improvement. Once again a state government agency (the Greater Cities Commission) will have the right to unilaterally determine housing targets for each local government area. This removes the veto presently enjoyed by local councils over targets.

Some industry figures will praise the fact that the targets are linked to net additional dwellings authorised by development consents (rather than just notional capacity made available from changes in planning controls).

In the past, much of the dwelling capacity notionally created (by planning control changes) was never acted upon by developers. This was often because:

• the location of the anticipated housing was not in a commercially appropriate place or density; or
• re-development for housing to the extent permitted under the applicable controls) did not represent the highest and best use of land.

However, other industry figures may point out that merely obtaining a development consent does not mean that approved dwellings will actually be built. Development consents may come with insufficient density or burdensome conditions that prevent commercially viable development. On this view, it would have been better for the targets to have focused on net additional dwelling completions.

In any event, it will likely be years before the benefit of this reform will be apparent (if it survives long enough).

This is because the targets will not be introduced until the existing district plans are reviewed and replaced. Until then, the existing ‘agreed’ targets will apparently remain in place.

Even once the new targets are introduced, the first target to be met will be a five-year target. It would be likely that several years would need to pass before it is clear which local councils are meeting the independently-set targets and which are not.

Of course, it would also then be up to the state government-of-the-day to decide what (if anything) it would do about a failure by local councils to meet their targets.