New South Wales Planning Quarterly

The proposed new housing and productivity contributions regime

The newly elected NSW Government has introduced the Environmental Planning and Assessment Amendment (Housing and Productivity Contributions) Bill 2023 (Bill) to Parliament. The Bill proposes significant changes to the existing State Infrastructure Contributions (SIC) system in New South Wales.

Outline of the Bill

The overarching purpose of the Bill is to establish a Housing and Productivity Contribution Scheme (HAP Scheme) which introduces a broad charge across Greater Sydney, Illawarra-Shoalhaven, Lower Hunter and Central Coast regions, replacing the existing SIC system which was implemented on a more localised level. The object of the changes are to facilitate the provision of regional infrastructure that supports and promotes housing, by enabling the housing and productivity contribution (HAP Contribution).¹

’Regional Infrastructure’ is defined in the Bill to include public amenities, affordable housing, transport infrastructure, regional or state roads, and measures to conserve or enhance the natural environment (Regional Infrastructure).²

The HAP Scheme is intended to begin from 1 October 2023, however this is dependent upon the Bill passing through Parliament.³

According to Minister Scully’s second reading speech (available here), the Bill is underpinned by principles of the Productivity Commissioner's recommendations with regard to developers contributing to the provision of state infrastructure.⁴

The HAP Scheme will require developers across the subject regions to contribute to the funding of Regional Infrastructure that supports and promotes housing and economic activity.⁵

The HAP Scheme is expected to raise around $700 million each year for the provision of Regional Infrastructure.⁶ Significantly, a contribution made to the HAP Scheme will be used to facilitate the provision of ’Regional Infrastructure’ in the region within which that contribution was made, except for measures to conserve or enhance the natural environment, which by their nature, including biodiversity offset schemes, may be required to take place in areas outside that region.⁷

The Bill also provides for the establishment of the HAP Fund to be administered by the Treasury Secretary. The HAP Fund will provide a source of funding for Regional Infrastructure in the region that, among other things, will facilitate planning priorities identified in a relevant strategic plan.⁸

Who will need to pay contributions?

The Bill provides that a Ministerial planning order may require a HAP Contribution towards the provision of Regional Infrastructure. The Ministerial planning order must include the details of the level and nature of the HAP, the classes of development to which the HAP Contribution will apply and the timing as to when the HAP Contribution is required. Such an order may also specify the conditions that must be imposed by a consent authority or certifier as a condition of development consent, including the terms of those conditions.⁹

The Department of Planning and Environment (Department) states in its publication titled “Housing and Productivity Contribution” (available here) that the HAP Scheme will apply to:

• Residential development which intensifies land use where new dwellings are created such as houses, apartments, terraces and dual occupancies;
• Commercial and retail developments such as shops and commercial office buildings where new floor space is created; and
• Industrial developments such as warehouses where new floor space is created.

Importantly, the Department has indicated that the HAP Scheme will not apply to the replacement of existing buildings such as knock down/rebuild projects, and may also not apply to affordable housing and secondary dwellings carried out under the State Environmental Planning Policy (Housing) 2021 and public and seniors housing developments (within the meaning of the Standard Local Environmental Plan).¹⁰

How much will need to be paid?

HAP Contributions will vary depending upon the location of the proposed development and the type of development that is proposed, be it residential, commercial, retail or industrial.

For example, the Department states that in the Greater Sydney Region contribution amounts will be as follows:¹¹

The Department has indicated that the above rates will be phased in with a 50% discount from 1 October 2023 until June 2024, and a 25% discount until June 2025 at which time the full contribution will come into effect.¹²

Importantly, the Department has also indicated that the majority of the existing SICs will transition to the HAP Scheme from 1 October 2023, except for the Western Sydney Growth Areas and Western Sydney Aerotropolis SICs which are intended to be transitioned on 1 July 2026.¹³

The Minister has said the new scheme will not impact the local infrastructure contributions paid to local councils. Instead, developers will be required to pay HAP Contributions as well as local infrastructure contributions required by councils.¹⁴

A copy of the Bill is available here.

NSW Employment Zones reforms

On 26 April 2023, zoning changes to 135 Local Environmental Plans came into effect.

This followed a recommendation in the NSW Productivity Commission’s 2021 White Paper on Rebooting the Economy to consolidate employment zones to support economic growth and productivity. The former ‘Business’ and ‘Industrial’ zones have now been replaced by five new ‘Employment’ zones and four new ‘Supporting’ zones.

According to the Department’s ‘Employment Zones Reform Implementation: Explanation of Intended Effect’ (available here), the primary objective of the new Employment zones is “to promote employment-generating activities”. It includes the following new zones:

• E1 – Local Centre;
• E2 – Commercial Centre;
• E3 – Productivity Support;
• E4 – General Industry; and
• E5 – Heavy Industry.

Supporting zones are intended to “accommodate land uses in existing Business or Industrial zones that are not primarily productivity related” and include:

• MU1 – Mixed Use;
• W4 – Working Waterfront;
• SP4 – Enterprise; and
• SP5 – Metropolitan Centre.

In most circumstances, these changes appear to provide greater flexibility with an increased number of permissible uses in the new zones, and ensure previously permissible land uses continue to be permissible in the relevant zones.

Savings and transitional provisions mean that development which was permitted with consent under a former zone immediately before 26 April 2023 will continue to be permissible with consent until 26 April 2025. Further transitional arrangements are also in place for a select number of Local Environmental Plans where business and industrial zones will continue to apply to all or some specified land. Those affected Local Environmental Plans and the land affected are listed in clause 6 of Schedule 3, Part 2 of the Standard Instrument (Local Environmental Plans) Amendment (Land Use Zones) Order 2022.

Further information can be found here.

Standard notice of determination form

As mentioned in our last Issue of the Planning Quarterly, amendments to notice requirements under the Environmental Planning and Assessment Act Regulation 2021 will commence shortly.

The changes require councils and planning panels to use notices of determination in a standard form on the NSW Planning Portal, and allows councils to select which standard conditions to include in the notice of determination and upload their own bespoke conditions if required. The changes aim to ensure consistency in notices of determination across NSW so that applicants can clearly understand their obligations.

The amendments were made in September 2022 but commencement was delayed until 30 June 2023 to enable councils and planning panels time to familiarise themselves with the new requirements: see Environmental Planning and Assessment Amendment (Miscellaneous) Regulation (No 2) 2022.

To assist decision-makers to comply with these new requirements, the Department has released a range of useful resources, including:

• Council toolkit for standard conditions of consent to assist councils to upload and maintain their own bespoke conditions and include standard conditions in the standard notice of determination;
• The standard residential development conditions available on the NSW Planning Portal which were released in May 2021 and available to use from September 2022; and
• An updated guide to writing conditions of consent as revised in August 2022 for the preparation of bespoke conditions.

Further information can be found here.