Draft NSW Housing State Environmental Planning Policy (Housing) 2021 released - Environmental Law

The NSW Government has released a draft version of the State Environmental Planning Policy (Housing) 2021 (Housing SEPP) as part of a package of proposed amendments that seek to reform planning policies related to housing.

The Housing SEPP developed by the Department of Planning, Industry and Environment (Department) proposes to consolidate all significant housing-related policies into a one-stop instrument, incorporating each of:

State Environmental Planning Policy (Affordable Rental Housing) 2009 (ARH SEPP);
State Environmental Planning Policy (Housing for Seniors and People with a Disability) 2004 (Seniors SEPP);
State Environmental Planning Policy No 70 - Affordable Housing (Revised Schemes) (SEPP 70); and
SEPPs 21 and 36, concerning caravan parks and manufactured home estates, respectively.

It is also anticipated that the earlier tranche of housing policy reform that introduced planning controls for build-to-rent (BTR) developments will be incorporated into the Housing SEPP.

The key apartment design related SEPP, State Environmental Planning Policy No 65 - Design Quality of Residential Apartment Development (SEPP 65), will not be consolidated into the Housing SEPP, as it forms part of the previously announced Design and Place State Environmental Planning Policy (DP SEPP) along with other design-focused instruments.

In addition to a new SEPP, the reform package includes a draft Environmental Planning and Assessment Amendment (Housing) Regulation 2021 (Amending Regulation) and Standard Instrument (Local Environmental Plans) Amendment (Miscellaneous) Order 2021 (Standard Instrument Order).

Key takeways

The proposed Housing SEPP, as well as consolidating housing development instruments into a single policy, will introduce new development controls for various types of housing;
Significant changes to policy concerning boarding houses will require them to be used for affordable housing and managed by a registered community housing provider, which is expected to lead to a decline in this type of development;
Boarding houses will no longer be mandated in Zone R2, and will only be permissible in this zone if they are located close enough to public transport or to regional town centres;
A new 'co-living' development type will be established as a 'diverse' housing type, but will also be prohibited in Zone R2, forcing these developments to compete in higher density zones giving rise to a concern that larger developments are likely to be generally more viable;
At least 50 per cent of the site of proposed seniors housing developments in Zones RE2 or SP1 must now adjoin a residential zone, reducing current flexibilities to develop this housing type, but also clarifying present uncertainties as to when this housing type is available in certain circumstances; and
A new monetary contribution may be imposed on development that proposes to alter or reduce existing affordable housing in Sydney, Newcastle and Wollongong.

Affordable housing

The Housing SEPP is separated into two broad categories of housing: affordable housing (covered by Chapter 2) and diverse housing (covered by Chapter 3). While the diverse housing provisions are intended to facilitate more varied and adapted types of housing depending on market and geographical needs, the affordable housing controls are squarely directed at addressing housing inequality and affordability.

Chapter 2 of the Housing SEPP splits affordable housing into a number of sub categories:

in-fill affordable housing;
boarding houses (with a further subset relating to boarding houses managed by the Land and Housing Corporation (LAHC));
supportive accommodation; and
residential flat buildings (where dwellings are managed by social housing providers, public authorities or certain joint ventures).

The following table sets out the different controls and conditions that apply to each of these types of affordable housing:

Housing type	Key controls	Affordable housing conditions
In-fill housing	Remains subject to SEPP 65; Cannot be located on heritage land; At least 20 per cent of the gross floor area must be used for affordable housing; Must be located within 800m of a railway station or Sydney Ferries wharf, or 400m of a light rail station or platform or bus stop (for development in Greater Sydney or the regions of Newcastle and Wollongong) (Accessible Area); and Must be located within 400m of a B1, B2 or B4 zone (for development in all other parts of NSW).	Any affordable housing component of the development must be used for affordable housing for at least 15 years. Additional floor space ratio (FSR) allowances apply to in-fill development for affordable housing depending on the zone.
Boarding houses (non-LAHC operated)	Only permissible where boarding house development is permitted under another environmental planning instrument; and Not permitted in Zone R2 unless within an Accessible Area (for development in Greater Sydney or the regions of Newcastle and Wollongong) or within 400m of a B2 or B4 zone (for development in all other parts of NSW).	Must be used for affordable housing and managed by a registered community housing provider in perpetuity and must not be subdivided. Additional FSR of up to 25 per cent of maximum permissible FSR for boarding house use.
Boarding houses (LAHC operated)	As above for non-LAHC operated boarding houses.	Additional FSR of up to 25 per cent of maximum permissible FSR for boarding house use. May be carried out by or on behalf of LAHC without development consent if all key controls are adhered to, the building has a height of less than 8.5m, and has fewer than 12 boarding rooms if it is located in Zone R2.
Residential flat buildings	Remain subject to SEPP 65; May only be developed on land within Greater Sydney located within 800m of a railway station or light rail station or platform, or to land within 400m of Zone B3 or B4 in a range of regional areas including Albury, Dubbo, Newcastle, Tamworth, and Wollongong on which residential flat building is otherwise prohibited; May only be developed by or on behalf of a public authority or social housing provider, or in a joint venture with LAHC; Require a 'site compatibility certificate' to be issued by the Planning Secretary.	At least 50 per cent of the dwellings in a development must be used for affordable housing and managed by a registered community housing provider for at least 10 years, unless the development is on LAHC-owned land or on behalf of a public authority.

The Housing SEPP contains only limited information on 'supportive accommodation'. This category of affordable housing involves the use of an existing residential flat building or boarding house to provide long-term accommodation, in a separate dwelling or boarding room, for a person requiring supervision and support services on-site, and to provide these supervision and support services.

Development for the purpose of supportive accommodation may be carried out without development consent, provided it does not involve the erection or alteration of, or addition to, a building.

Retention of existing affordable rental housing

The Housing SEPP also puts in place protections for affordable housing constructed and operational under previous regulatory schemes.

Under Part 3 of Chapter 2 of the Housing SEPP, buildings within the Greater Sydney region or the local government areas of Newcastle or Wollongong which have been used as boarding houses or for the purpose of below market rental housing in the preceding five years, are classed as 'low-rental residential buildings'. Buildings owned or managed by social housing providers or buildings approved for subdivision under the Strata Schemes Development Act 2015 (NSW) are excluded from this classification.

The Housing SEPP proposes to apply additional protections for low-rental residential buildings, requiring development consent for any demolition, internal or external alterations or additions, or change of use. The SEPP establishes a set of criteria which must be considered by the consent authority before consent for any of these purposes is given. The matters that must be taken into account include:

the 'Guidelines for the Retention of Existing Affordable Rental Housing';
whether there is likely to be a reduction in affordable housing on the land;
the extent to which the development contributes to any cumulative loss of affordable housing in the local government area; and
whether the payment of an affordable housing monetary contribution would adequately mitigate the reduction in affordable housing resulting from the development.

Diverse housing

In addition to its focus on affordable housing, the Housing SEPP contains a range of provisions aimed at facilitating the development of 'diverse housing' as a further direct response to the changing housing needs of people in NSW.

The Housing SEPP complements the complying development regime under State Environmental Planning Policy (Exempt and Complying Development Codes) 2008 (Codes SEPP) by providing complying development pathways for a broader range of housing types.

The category of diverse housing includes the following:

Housing type	Description	Key development standards
Secondary dwellings	A self-contained dwelling that is: established in conjunction with a 'principal dwelling'; on the same lot of land as the principal dwelling, and located within, is attached to or is separate from the principal dwelling.	Total floor area of less than 60m² unless a greater area is permitted under another instrument (such as a council's local environmental plan (LEP); minimum site area of 450m²; and no additional on-site parking. There are additional standards for secondary dwellings approved as complying development, including a prohibition on future subdivision.
Group homes	A dwelling that is: occupied by persons as a single household with or without paid supervision or care and whether or not those persons are related or payment for board and lodging is required; and used to provide permanent household accommodation for people with a disability or people who are socially disadvantaged.	Assessable as complying development provided that: no more than 10 bedrooms will be located in group homes on the site; the site is not in a draft heritage conservation area; and any requirements under the Codes SEPP are satisfied. Group homes must also satisfy additional conditions under Schedule 3 of the Housing SEPP, including setbacks and landscaping requirements, in order to take advantage of the complying development pathway.
Co-living housing	A building or place that: has at least six private rooms; permits occupation for at least three months; and has shared facilities managed by a 24-hour management service, but which is not backpackers' accommodation, a boarding house, a group home, hotel or motel accommodation, seniors housing or a serviced apartment. Co-living housing will also not be permissible in the R2 zone.	Minimum private room size of 12m² for single-occupant rooms and 16m² for dual-occupant rooms; provision of a workspace for the building manager; and complies with the Apartment Design Guide requirements for building separation, if higher than three storeys.
Seniors housing	Housing for persons over the age of 60 in independent living units or residential care. Seniors housing is the most significant housing type of the 'diverse housing' category and is currently regulated under the long-standing Seniors SEPP.	The changes to development controls for seniors housing under the Housing SEPP are considered in further detail below.

Seniors Housing

The existing Seniors SEPP is proposed to be remade as Part 4 of Chapter 3 of the Housing SEPP. While the Housing SEPP will maintain much of the original structure of the Seniors SEPP, it also makes a number of important amendments.

Land to which seniors housing applies

The Seniors SEPP currently applies to two broad categories of land:

land used for the purposes of an existing registered club; and
land zoned primarily for urban purposes or adjoining such land (but only where certain land uses are permissible).

Rather than relying on the ambiguous phrase 'zoned primarily for urban purposes', the Department has specified the actual zones to which the provisions for seniors housing will apply. These are:

Land use zones
Rural	RU5 Village
Residential	R1 General Residential R2 Low Density Residential R3 Medium Density Residential R4 High Density Residential
Business	B1 Neighbourhood Centre B2 Local Centre B3 Commercial Core B4 Mixed Use B5 Business Development B6 Enterprise Corridor B7 Business Park B8 Metropolitan Centre
Special Purpose	SP1 Special Purposes SP2 Infrastructure
Recreation	RE2 Private Recreation

Land to which seniors housing does not apply

The existing Seniors SEPP does not apply to various parts of the State, including land which meets the definition of 'environmentally sensitive'. In addition, the Seniors SEPP does not apply to land within the Greater Sydney Region which is identified as being within a heritage conservation area or land identified on the metropolitan rural areas exclusion map (Exclusion Area). This is unless the relevant development application is subject to narrow grandfathering provisions concerning the dates on which the development application and the 'site compatibility certificate' (SCC)application were lodged.

The Housing SEPP generally retains these exclusions and provisions, but has tightened the exemption for land within the Exclusion Area so that only land within a business or residential zone can benefit from the grandfathering provisions. This is significantly at odds with the Department's FAQ for the changes, which suggests that seniors housing provisions will instead be expanded to apply to zones R1-R4 and B1-B7 within the Exclusion Area on an ongoing basis.

As foreshadowed by the Explanation of Intended Effect (EIE) for the Housing SEPP released in July 2020, the definition of 'environmentally sensitive' land has been updated to better align with the current legislation and planning conditions.

Under the current Seniors SEPP, environmentally sensitive land is land which is described in an environmental planning instrument by any of a prescribed list of words or expressions, including 'coastal protection', 'floodway' and 'critical habitat'.

The Housing SEPP proposes a more simplified definition of environmentally sensitive land which is generally determined by reference to specific instruments and maps. The proposed Schedule 4 to the Housing SEPP defines the following as environmentally sensitive land, any land:

shown cross-hatched on the bush fire evacuation risk map;
identified as coastal wetlands and littoral rainforests area, or coastal vulnerability area, within the meaning of State Environmental Planning Policy (Coastal Management) 2018;
declared as an area of outstanding biodiversity value under the Biodiversity Conservation Act 2016;
identified on the Map within the meaning of the Biodiversity Conservation Regulation 2017; and
identified in another environmental planning instrument as flood planning, open space, natural wetland, or by a similar description.

Site Compatibility Certificates

By simplifying the types of land to which seniors housing provisions apply, the need for a pre-development application assessment of the proposal in the form of an SCC has been removed. SCCs will no longer be required for any application for seniors housing under the Housing SEPP, although it is anticipated that transitional arrangements will be put in place to retain the scheme for applications initiated before the Housing SEPP commences.

Development standards

The Housing SEPP introduces a number of new development standards for seniors housing development within specific zones to limit the context in which that development may take place. The new standards are summarised below:

Zone	Requirement
RE2 Private Recreation	the development must be carried out on land used for the purposes of an existing registered club; and at least 50 per cent of the site must adjoin a residential zone.
SP1 Special Purpose	development for the purposes of a place of public worship, an educational establishment, a hospital or seniors housing is permitted; and at least 50 per cent of the site must adjoin a residential zone.
RU5 Village	the development is carried out on land within 50km of a 24-hour health service facility; and the land is serviced by reticulated water and sewerage.
R2 Low Density Residential	the development is carried out only for the purposes of a residential care facility.

Furthermore, the Housing SEPP will introduce two new general development standards relating to the height of seniors housing:

for development on land in a residential zone where residential flat buildings are not permitted, the maximum permissible building height has been increased from 8 metres to 9 metres;
where servicing equipment is fully integrated into the design of the roof, and is limited to no more than 20 per cent of the surface area of the roof, the maximum building height has been increased to 11.5 metres.

Other changes

The current provisions of the Seniors SEPP will also be subject to a range of miscellaneous changes when consolidated under the Housing SEPP, including:

the addition of a State-significant development pathway for seniors housing with a capital investment value (CIV) of greater than $30 million (or greater than $20 million outside Greater Sydney) where the residential care facility accounts for at least 60 per cent of the CIV;
changing the access requirements for independent living units and residential care facilities so that passenger services, such as taxi or ride-share vehicles, will no longer satisfy the accessibility requirements;
reducing the landscaped area requirements for hostels and residential care facilities from 25sqm to 15sqm per bed; and
doubling the requirement for accessible car parking spaces in hostels and independent living units to 10 per cent of total parking spaces.

Amendments to other instruments and miscellaneous changes

EPA Regulation and Standard Instrument changes

The changes proposed under the Amending Regulation and Standard Instrument Order will complement the broader reform under the Housing SEPP, and are generally administrative in nature.

These instruments propose housekeeping amendments to the Environmental Planning and Assessment Regulation 2000 and to the Standard Instrument under the Standard Instrument (Local Environmental Plans) Order 2006, which affects the provisions contained in councils' local environmental plans, to support the Housing SEPP.

These amendments include:

inserting new land use definitions introduced by the Housing SEPP into local environmental plans;
enabling any condition requiring payment of a monetary affordable housing contribution to be satisfied by electronic funds transfer of the amount to the relevant consent authority;
updating references to instruments repealed by the Housing SEPP; and
prescribing new mandatory conditions of development consent of applications concerning certain boarding houses, co-living houses or seniors housing.

Certain housing types omitted from draft instruments

The Department has noted that the draft instruments do not currently contain provisions for group homes, caravan parks, camping grounds and manufactured home estates, but that existing provisions under current instruments will largely be retained. A further review of these provisions will be conducted later this year.

What's next?

Public consultation is open until 29 August 2021. The Department has indicated that it intends to have the Housing SEPP and supporting instruments finalised by October 2021, ahead of other key planning reforms such as the DP SEPP and new Contributions Framework, which are due to commence by the end of 2021 and by mid-2022, respectively.

A copy of the draft instruments, along with an FAQ and the public submission portal, is available on the Planning Portal.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.


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Australia: Draft NSW Housing State Environmental Planning Policy (Housing) 2021 released