Maximising your site’s development potential-using the rules to your best advantage By Robert Furolo

Robert Furolo is the Principal of Strategic Housing Solutions which specialises in assisting the development industry work with Councils to deliver affordable housing outcomes. Robert has extensive experience in many levels of government, having served on Council for 12 years, including nearly 8 years as Mayor and also served as a Member of the NSW Parliament.

Robert has a strong understanding of the planning system in NSW and has been approved by the Department of Planning to serve as an Independent Expert on the newly formed Local Planning Panels. He is also an Advisory Board Member of the South Western Sydney Institute – a non-political think tank focused on South Western Sydney.

With recent Federal and State Government changes to rules for foreign investors, many developers are finding the sale prices for units in projects that are currently in the planning phase are under pressure. For this reason, smart developers are looking for an edge to help them maximise the yield for their projects.

There are a few options within the NSW Planning system that can be used to obtain legitimate bonuses over and above the yield permissible under existing planning controls. One of these options is especially beneficial for developers that are able to retain ownership of completed dwellings as part of a ‘build and hold’ strategy.

Government focus on affordability

At the State and Federal government level, the issue of housing affordability has become significant. Governments are looking at ways to assist working families on moderate incomes to be able to afford to buy or rent suitable housing. One of these ways is the Affordable Rental Housing State Environmental Planning Policy (ARH SEPP). The ARH SEPP provides a density bonus to the developer where a proportion of the completed project is made available as affordable housing.

What is Affordable Rental Housing?

Affordable Rental Housing is housing that is rented to eligible people at 20% below the market price. For a renter to be eligible, there are annual income limits that apply, and they range from $45,000 for a single person up to $109,000 for a couple with 3 children. These limits demonstrate that the program is targeted at low to moderate income working families and individuals. This type of housing is also known as ‘ Housing’ as it is also designed to help workers in the health, education and emergency services sectors, such as teachers, nurses and police.

How does the ARH SEPP Work?

The rules of the ARH SEPP provide a density bonus for any project that has an existing FSR of up to 2.5:1. The SEPP also mandates the proportion of the GFA that is to be retained as Affordable Housing, and the length of time it has to be retained. For sites with an existing FSR of more than 2.5:1, a sliding scale of bonus and retention exists.

Voluntary Planning Agreements

Another method of seeking a bonus over the permissible density controls is through direct negotiation with the consent authority (council) as part of a Voluntary Planning Agreement (VPA) process. Using this process, the developer can negotiate a bonus for their project in return for sharing some of the benefit of that bonus back to the council. For example, a council may enable a project to receive a bonus of 8 extra dwellings for a site that would usually only be approved for 30 units. Under a VPA scheme, the developer would now build 38 units but would have to give 2 units to the council without charge*[1]. The council could then make their units available for affordable housing.

With VPAs, different councils have different requirements and priorities. Some councils are happier to negotiate a bonus in return for a contribution to open space improvements or acquisitions. Others will accept contributions for affordable housing or land dedications for recreation or car parking. The key to maximising the outcome through this process is by having a strong understanding of the council and a knowledge of their needs and priorities.

The strategies outline above – either the bonus for Affordable Rental Housing or direct negotiation with the consent authority – are based on the notion that the developer is providing a public benefit. In return for providing that public benefit, whether it is affordable housing or dedicating land to the council, the developer and community are sharing the benefit. For the community and the council, the benefit is they receive something without any direct cost. For the developer, they are conferred a bonus and share some of that benefit with the community.

Improving the Perception of Developers and Development

These strategies are an effective way that developers can be seen to be playing a positive leadership role in the community and providing a benefit through their developments. With the community attitudes towards developers and development being a major community and political issue, it can be an effective way for developers to deliver a positive benefit to the community.

Expert Advice

When a developer wants to design a building, they engage the services of an architect. When they need a Statement of Environmental Effects, they engage a planner. When a developer wants to negotiate with the government or council about affordable housing and bonuses, they should engage an expert in the field. Working with consultants who understand these issues and the council you are working with can be an effective way of maximising the benefit and reducing the processing time for your application.

[1] This is an example only. Different councils have different rules and this example may not be relevant to any other council.