NSW introduces a planning pathway for build-to-rent housing

NSW has introduced build-to-rent (BTR) housing into its planning framework, with a number of reforms effective immediately. This is part of the NSW Government’s broader policy of encouraging BTR housing to promote housing diversity and affordability.

Snapshot

• BTR housing is purpose-built development where a single owner provides occupancy to tenants under residential tenancy agreements.
• Following tax reform for the BTR sector last year, BTR housing is now permissible in commercial core and some business and residential zones.
• These changes are part of a broader suite of reforms aimed at encouraging BTR developments and promoting housing diversity and affordability.

Background

BTR housing refers to a purpose-built residential development where a single owner owns all the units and leases them to tenants.

BTR housing can offer many benefits. For tenants, it usually provides more secure tenures and better facilities. For investors, it offers a form of investment that can provide a steady income stream. More broadly, it can contribute to housing supply and affordability.

BTR housing is not well established in Australia. To promote the growth of this sector, the NSW Government introduced a 50% land tax concession for BTR housing in July 2020. To further promote BTR housing, it introduced planning reforms on 12 February 2021 with immediate effect.

BTR developments are now permitted in commercial core and other zones

On 12 February 2021, the NSW Government made the State Environmental Planning Policy Amendment (Build-to-rent Housing) 2021 (NSW) (BTR Amendment).

The BTR Amendment has added an approval pathway for BTR housing to the State Environmental Planning Policy (Affordable Rental Housing) 2009 (NSW) (ARH SEPP). In particular, where:

• a development is for the purposes of multi-dwelling housing, residential flat buildings or shop top housing;
• the development contains at least 50 dwellings to be occupied by individuals under residential tenancy agreements; and
• all buildings containing the dwellings are on the same lot,

then it is permissible in any zone where residential flat buildings are permissible, or in a B3 Commercial Core, B4 Mixed Use or B8 Metropolitan Centre zone.

BTR development outside the City of Sydney with a capital investment value (CIV) over $50 million (or $100 million within Greater Sydney) has also been declared as State significant development, provided that the value of the tenanted component is at least 60% of the CIV of the development.

Safeguards to prevent exploitation of the BTR housing pathway

To ensure that the BTR housing pathway is not used to circumvent restrictions on other forms of residential flat buildings, a consent authority can only consent to BTR housing if it is satisfied that, for a period starting from the issuing of the occupation certificate and ending after 15 years (if outside a B3 zone) or continuing in perpetuity (if within a B3 zone):

• the tenanted component (if outside a B3 zone) or the whole (if within a B3 zone) of the building will not be subdivided; and
• the tenanted component of the building will be owned and controlled by one person and operated by one managing agent.

Further, within a B3 zone, the consent authority must be satisfied that the use of the building can reasonably be changed to commercial premises.

Development standards for BTR developments

The BTR Amendment also sets out development standards for BTR housing, including standards as to:

• building height, density/scale and parking;
• flexible application of the Apartment Design Guide; and
• street activation in business zones.

Next steps

The BTR Amendment forms part of the NSW Government’s broader policy of encouraging BTR housing and promoting housing diversity and affordability.

The BTR provisions will be consolidated with provisions on student housing and co-living into a new Housing Diversity State Environmental Planning Policy (Housing Diversity SEPP), which is expected to be finalised in the next few months.

We will monitor the progress of the Housing Diversity SEPP and provide an update once it has been made.

By Peter Briggs, Partner, Tom Dougherty, Senior Associate and Zhongwei Wang, Solicitor.

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