New South Wales Planning Quarterly

The new Housing and Productivity Contribution Scheme

“Following on from our overview of the Environmental Planning and Assessment Amendment (Housing and Productivity Contributions) Bill 2023 in our previous Issue (available here), the Environmental Planning and Assessment Amendment (Housing and Productivity Contributions) Act 2023 (the Act) commenced on 1 October 2023 amending the Environment and Planning Assessment Act 1979 (NSW).

The Act, accompanying the Environmental Planning and Assessment Legislation Amendment (Housing and Productivity Contributions) Regulation 2023 and importantly the Environmental Planning and Assessment (Housing and Productivity Contribution) Order 2023 (the HPC Order), introduced significant changes to the contributions system in New South Wales, effectively replacing the previous Special Infrastructure Contributions scheme. 

The effect of the Act is, in part, to allow the Minister to issue the HPC Order which may require a housing and productivity contribution (HPC) towards the provision of regional infrastructure.

The HPC Order applies to land in the Greater Sydney, Central Coast, Illawarra-Shoalhaven and Lower-Hunter area. It provides that an HPC is required for certain residential development, commercial development or industrial development (generally identified as HPC classes of development). Each of these classes is specifically defined but, for example, commercial development includes a long list of uses including business premises, offices premises and retail premises. The HPC may also apply to complying development and for sites for which development consent to a concept development application is granted.

The amount of the HPC is calculated in accordance with a table set out in the HPC Order and varies depending on the location of the site. For example, in the Greater Sydney Area (excluding the Western Sydney Growth Areas SCA which is not covered by the HPC Order), residential subdivision will attract an HPC of $12,000 per new dwelling unit and commercial development, will have require an HPC of $30 per square metre of new gross floor area. The HPC Order also provides for 2 additional components over and above the base amount including a strategic biodiversity component (not required at the date of commencement) and a transport project component. As at 1 October 2023, the transport project component was only required for certain land in Pyrmont.

The new scheme is subject to certain exclusions and exemptions. For example, an exclusion applies for existing lots in a residential subdivision and certain exemptions apply for specific development such as affordable housing and seniors housing (other than a group of ILUs).

Generally speaking, the HPC Order provides that the HPC must be paid before the issue of the first construction certificate, unless otherwise specified. For development that consists of only residential subdivision, the HPC is to be paid before the issue of the first subdivision certificate. The HPC Order provides for other timing requirements for different types of development.

The requirement for an HPC will be imposed by way of condition of consent and must be imposed for HPC development, being any development within an HPC class of development.

The text of the HPC Order as amended is available here.”

Social and affordable housing reforms

The NSW Government has announced a series of measures which aim to boost the supply of affordable and social housing in the state.

As part of these measures, a new state significant development pathway is proposed for projects with a capital investment value above $75 million which include a minimum 15 per cent of the total gross floor area as affordable housing.

Amendments are also proposed to existing in-fill affordable housing provisions in the State Environmental Planning Policy (Housing) 2021 to introduce a new floor space bonus of 30 per cent and a height bonus of 30 per cent for residential development with at least 15 per cent affordable housing.

Further reforms are proposed to enable state housing agencies to deliver affordable housing projects more quickly and include:

• A new state significant development pathway will be available for the Land and Housing Corporation (LAHC) and the Aboriginal Housing Office (AHO) to deliver residential development of over 75 homes (equivalent to a CIV of approximately $30 million). This pathway will also be available to Landcom in certain circumstances, which now has been given a broader mandate to develop and deliver housing in the state.
• For social and affordable developments of up to 75 homes, the LAHC and the AHO will be able to self-assess developments, including residential flat buildings over three storeys where these are permissible¹.
• The minimum lot size for dual occupancies will be reduced to 400m² under the Low Rise Housing Diversity Code where developments are being delivered as complying development by the LAHC, AHO and other community housing providers including Aboriginal Community Housing Providers.
• Social and affordable housing projects will be exempt from state infrastructure contributions as consistent with the Environmental Planning and Assessment Amendment (Housing and Productivity Contributions) Act 2023 discussed below.

More information on the proposed changes can be found here.

Environmental Planning and Assessment Amendment (Housing and Productivity Contributions) Act 2023

Following on from our overview of the Environmental Planning and Assessment Amendment (Housing and Productivity Contributions) Bill 2023 in our previous Issue (available here), the Environmental Planning and Assessment Amendment (Housing and Productivity Contributions) Act 2023 (the Act) commenced on 1 October 2023 amending the Environment and Planning Assessment Act 1979 (NSW).

The Act, accompanying Environmental Planning and Assessment Legislation Amendment (Housing and Productivity Contributions) Regulation 2023 and importantly the Environmental Planning and Assessment (Housing and Productivity Contribution) Order 2023 (the HPC Order), introduces significant changes to the existing State Infrastructure Contributions system in New South Wales.

The effect of the Act is, in part, to allow the Minister to issue the HPC Order which may require a housing and productivity contribution (HPC) towards the provision of regional infrastructure.

The HPC Order applies to land in the Greater Sydney, Central Coast, Illawarra-Shoalhaven and Lower-Hunter area. It provides that an HPC is required for development residential development, commercial development or industrial development (generally identified as HPC classes of development). Each of these classes is specifically defined but, for example, commercial development includes a long list of uses including business premises, offices premises and retail premises. The HPC may also apply to complying development and for sites for which development consent to a concept development application is granted.

The amount of the HPC is calculated in accordance with a table set out in the HPC Order and varies depending on the location of the site. For example, in the Greater Sydney Area (excluding the Western Sydney Growth Areas SCA which is not covered by the HPC Order), residential subdivision will attract an HPC of $12,000 per new dwelling unit, commercial development, will have an HPC of $30 per square metre of new gross floor area. The HPC Order also provides for 2 additional components over and above the base amount including a strategic biodiversity component (not required at the date of commencement) and a transport project component. As at 1 October 2023, the transport project component was only required for certain land in Pyrmont.

The new scheme is subject to certain exclusions and exemptions. For example, an exclusion applies for existing lots in a residential subdivision and certain exemptions apply for specific development such as public and affordable housing and seniors housing (other than a group of ILUs).

Generally speaking, the HPC Order provides that the HPC must be paid before the issue of the first construction certificate, unless otherwise specified. For development that consists of only residential subdivision, the HPC is to be paid before the issue of the first subdivision certificate. The HPC Order provides for other timing requirements for different types of development.

The requirement for an HPC will be imposed by way of condition of consent and must be imposed for HPC development, being any development within an HPC class of development.

The text of the HPC Order as amended is available here.

Statutory reviews of biodiversity and native vegetation laws

On 24 August 2023, the findings of the independent review of the Biodiversity Conservation Act 2016 (BC Act) and the statutory review of the native vegetation provisions of the Local Land Services Act 2013 (LLS Act) were tabled by the Minister for the Environment and the Minister for Agriculture respectively.

These reviews were conducted separately but at the same time under the mandated five-year statutory review periods under s 14.11 of the BC Act and s 212 of the LLS Act.

We set out some of the key findings of each review below.

Key findings of the Independent Review of the Biodiversity Conservation Act 2016 (the BC Act Review)

The BC Act Review examined the effectiveness of the current architecture of the BC Act and considered the impacts of other legislation on achieving the stated objectives of the BC Act.

In summary, the BC Act Review found that the present legislation “is not meeting its primary purpose of maintaining a healthy, productive and resilient environment and is never likely to do so”.²

The BC Act Review went even further to indicate that the operative provisions of the BC Act are deficient for a number of reasons, including that its objectives are undermined by other legislation. The regulatory provisions of the Act were also labelled “complex and uncertain, with high compliance costs”.³ The third major finding of the BC Act Review was a finding that the Act was essentially out of date and that biodiversity legislation globally was now focussed on “nature positive” as opposed to conservation.

Against a backdrop of these 3 key findings, a total of 58 recommendations were made, including to:

• Develop a ‘Nature Positive Strategy’ including processes for its regular review, monitoring, reporting and updating;⁴
• Improve spatial tools to identify areas of high biodiversity value and ‘no-go’ areas;⁵
• Incorporate traditional Aboriginal culture and knowledge into the development and maintenance of the proposed Nature Positive Strategy and spatial tools;⁶
• Amend legislative objectives and credit obligations under the Biodiversity Offset Scheme (in the LLS Act?];⁷
• Expand threatened species programs and ecosystem recovery systems;⁸
• Leverage private investment opportunities, including the review of incentives for private sector investment and further explore the role government might play in driving the development of natural capital markets;⁹ and
• Consider reforms to better align the BC Act with other relevant Acts.¹⁰

The full report and its recommendations can be found here.

Key findings of the Statutory Review of the native vegetation provisions (Part 5A and Schedule 5A and Schedule 5B) of the Local Land Services Act 2013 (the LLS Act Review)

The LLS Act Review centred on the operation of land management and biodiversity conservation reforms which were introduced into the LLS Act in 2017 as Part 5A and Schedules 5A and 5B. These reforms established a Land Management Framework, a system for investment in private land conservation, the Biodiversity Offsets Scheme and improved frameworks to manage native plants and animals.¹¹

The LLS Act Review found that the policy objectives of the LLS Act “remain valid” and the “terms of the provisions of the LLS Act are appropriate for achieving these objectives”.¹² However, to ensure the objectives continue to be achieved and to further improve the outcomes of the native vegetation provisions, the LLS Act Review made recommendations to better manage environmental risks, reduce unallocated clearing, support and incentivise landholders, and improve transparency and awareness of the Land Management Framework.¹³

A total of 13 recommendations were made, including reforms to:

• Strengthen protections for Critically Endangered Ecological Communities (CEEC) including by improved mapping and amendments to the Land Management (Native Vegetation) Code;¹⁴
• Assist landholders to better identify categories of vegetation on properties, including establishing an independent body or expert panel to review and advise on processes, as well as the staged release of the draft Native Vegetation Regulatory Map;¹⁵
• Expand the delivery of incentives to landholders, including through nature capital funding, development of on-farm and regional natural capital accounts, and a whole-farm planning landscape stewardship initiative;¹⁶ and
• Establish monitoring and annual report processes for woody vegetation loss and regrowth and revegetation on rural regulated land.¹⁷

The full report and recommendations made can be found here.

Next steps

The NSW Government will now consider both reviews, in consultation with key stakeholders, while developing a whole of government response.¹⁸

We will continue to watch this space and provide updates on the implementation of any of these recommendations accordingly.