Developers must meet improved sustainability standards in NSW

Residential and non-residential development in NSW is subject to more stringent sustainability standards under the new State Environmental Planning Policy (Sustainable Buildings) 2022. This is expected to put sustainability at the forefront of development and contribute to the delivery of a net zero economy in NSW by 2050.  

Snapshot

• The State Environmental Planning Policy (Sustainable Buildings) 2022 (SB SEPP) commenced on 1 October 2023. The SB SEPP sets new sustainability standards for residential and non-residential buildings in NSW, which align with climate-related State policies including the Net Zero Plan and Climate Change Policy Framework.
• For non-residential development, new sustainability provisions apply to all new projects with a capital investment value (CIV) of over $5 million or alterations to existing buildings for non-residential use with a CIV of over $10 million.
• In particular, for large commercial development and certain State significant development (SSD), a consent authority must now consider whether the project will minimise the use of on-site fossil fuels, as part of the goal of achieving net zero emissions in NSW by 2050 (Net Zero Target).
• For residential development, increased Building Sustainability Index (BASIX) standards have been introduced for new homes as well as renovations that cost $50,000 or more, which align and complement the National Construction Code 2022.

The reform policy package

Sustainability reforms in NSW have been introduced through the following policy package:

• the SB SEPP, which commenced on 1 October 2023;
• amendments to the Environmental Planning and Assessment Regulation 2021 (EP&A Regulation); and
• amendments to the Environmental Planning and Assessment (Development Certification and Fire Safety) Regulation 2021.

The State Environmental Planning Policy (BASIX) 2004 has been incorporated into the SB SEPP and will be repealed.

Non-residential development must comply with new sustainability requirements

The reforms introduced the following five key components that are tailored to suit different non-residential development.

General requirements (all non-residential)

Under cl 3.2 of the SB SEPP, a consent authority must consider several sustainability measures when deciding whether to grant development consent under the Environmental Planning and Assessment Act 1979 (NSW) (EP&A Act) for non-residential development. This requires a consent authority to consider how a building will:

• minimise waste from demolition and construction;
• reduce in peak demand for electricity;
• generate and store renewable energy;
• reduce reliance on artificial lighting and mechanical heating/cooling;
• monitor energy consumption; and
• minimise the consumption of potable water.

Embodied emissions reporting (all non-residential)

All embodied emissions attributable to a development must be measured and reported. The SB SEPP defines “embodied emissions” as the greenhouse gas emissions resulting from the materials used to construct a building that forms part of the development, including emissions from:

• the extraction of raw materials that are used to construct the building;
• transporting materials to be manufactured; and
• the manufacture of the materials used to construct the building.

In particular, cl 3.2(2) of the SB SEPP states that a development consent is not to be granted unless the consent authority is satisfied that embodied emissions have been quantified.

Net Zero Statement (large commercial development and certain SSD only)

Large commercial development is defined in sch 4 of the SB SEPP as development that involves:

• erection of new prescribed office premises, being offices with a net lettable area of at least 1,000m²;
• erection of new prescribed hotels, motels and service apartments, being hotels, motels and apartments with at least 100 rooms; and
• alterations, enlargement or extension of prescribed office premises, prescribed hotel or motel accommodation or prescribed serviced apartments, if the development has a CIV of $10 million or more.

At the development application stage, the submission of a net zero statement is required for large commercial development to explain how the proposed building will be capable of operating without fossil fuels by 2035.

This requirement also applies to certain SSD, including cultural, recreation and tourist facilities, hospitals and educational establishments.

Energy performance and offsets (large commercial development only)

The development must effectively meet an NABERS energy performance standard within 24 months of an occupation certificate being issued or the day on which the building may be used or occupied if an occupation certificate is not required (relevant period).

It will be a condition of the development consent that the consent authority be provided with an NABERS energy use rating achieved by the development within the relevant period, as well as with any evidence of any required offsets that have been purchased or obtained.

Any gap between the operational performance and the prescribed standard will need to be offset. To secure the necessary offsets, Australian Carbon Credit Units or Climate Active certification may be obtained. Alternatively, a large-scale generation certificate may be registered with the Clean Energy Regulator.

Water performance (large commercial development only)

The development must meet a minimum 3-star NABERS water rating within the relevant period. An assessment of the NABERS water ratings achieved by the development will also need to be lodged with the consent authority within the relevant period.

Exceptions and extensions may apply

The SB SEPP does not apply to all non-residential development. In particular, it does not apply to exempt and complying development, the mining industries, residential care facilities, boarding houses, Port Botany, Port Kembla, the Port of Newcastle, and some land zoned rural, industrial, and conservation as well as land zoned waterways.

Further, the increased energy performance standards do not apply to large commercial development (except prescribed service apartments) on land to which the following local environmental plans apply:

• Sydney Local Environmental Plan 2012;
• Sydney Local Environmental Plan (Green Square Town Centre) 2013; and
• Local Environmental Plan (Green Square Town Centre—Stage 2) 2013.

It is also possible to apply for an extension of up to 12 months to the relevant period if the consent authority deems it reasonable in the circumstances. The EP&A Regulation sets out a number of factors that a consent authority must and may take into account in determining an application for an extension.

Residential development must also improve sustainability outcomes

General requirements

The NSW Government has also updated the BASIX standards and incorporated those changes into the SB SEPP. As a result, new residential development in NSW must operate against higher energy and thermal performance standards from 1 October 2023.

The embodied emissions reporting requirements also apply to the construction materials used for residential development.

Exceptions

The SB SEPP divides the State into “climate zones”. Homes in North Coast climate zones (numbers 9, 10, 11) and apartment buildings up to 5 storeys are exempt from the increased standards.

Further, the standards do not apply to BASIX developments where the contract to carry out the works was entered into on or before 30 September 2023. Until 30 June 2024, the previous BASIX standards can be used.

Time to achieve and maintain policy compliance

The commencement of the SB SEPP is a clear indication that more projects must start to incorporate more sustainable measures to work toward net zero by 2035.

The SB SEPP will not apply to development applications or modification applications that were submitted by 1 October 2023 but not yet determined. Further, retail premises generally do not fall within the requirements for large commercial development until at least after 2024.

Proponents of new projects should carefully review the new sustainability measures to ensure compliance with the new standards, including securing offsets as required.

The SB SEPP will be reviewed every three years to monitor the progression to low energy buildings.

If you would like to understand what this means for your project, please do not hesitate to get in touch.

By Peter Briggs, Partner, Tom Dougherty, Senior Associate, and James Donaldson, Solicitor. With thanks to Kevin Tanaya, Graduate.