Wednesday 15th June 2024

BY NIGEL DICKSON

The Missing Middle

The Need is for Abundant Housing Now: Understanding the Problems and Solutions

Housing diversity is required for an increasingly diverse population. Change is required to R2 and R3 zones and housing selection around public transport is required. Priority should be given to design and solutions that seek to shape richer communities, with access to transport, open spaces, and retail, housing and good place-making. The problem is not just limited to all cities but affects regions in NSW.

Problem 1:

Capital Gains Tax discounts and rental deductions favour housing owners, with the richest 10% getting more than half of these benefits (2013: $13B). This incentivises speculators and tax avoiders rather than those needing housing. We need to move housing from being primarily a boutique commodity to one of abundant supply.

Problem 2:

Australia has an extraordinary singularity of housing types, with 74% being detached single-family housing. We are over-invested in space-intensive R2 low-density zoning.

Problem 3:

The vast majority of the NSW housing stock is approaching 50-60 years old, which is close to expiration. The houses reflect the value set of the post-war era and not always the new generation’s desires and wants. Single-person households are the fastest-growing type, and 56% of houses are homes to 1 or 2 people.

Problem 4:

This aged housing stock is spread out across the city, often distant from public transport, retail, and schools, and leads to excessive use of private vehicles. 75% of the 25 million cars registered in Australia are for private use, travelling more than 12,000 km/year. There is an obvious ingrained relationship between land use planning, house type, and how we live. This is exacerbated by the dilemma of employment being often in the east of the city leading to excessive time commuting. Access to employment, open space and, schools, healthcare and other social infrastructure has not always been the outcome in new development areas.

Problem 5:

Housing is too expensive, leading to rental stress, long commutes, and overcrowding, inequality, declining home ownership, slower family formation, misallocation of labour, increased carbon emissions, and social problems. Planning restrictions limit supply, driving up prices, and rents. Opponents of housing developments do not realise the harm they do. Relaxing zoning works.

Problem 6:

Climate change matters. 80% of NSW lives within 50kms of the coast. Low-lying areas of western Sydney are flood plains. Temperatures in western Sydney are much higher. Recent development has limited housing diversity. Development fails to consider the passive design. The landscape is minimal.

Problem 7:

The construction industry is struggling. Despite a 3.9% unemployment rate, 1,131 businesses, many in property and construction, went bust in March 2024 across Australia. There has been a marked increase in defaults in non-bank home loans. Increased labour rates, solvency issues, and skill shortages will affect housing.

Problem 8:

Housing for renters on low incomes is critical. The dynamic of new housing as new stock enabling the vacation of older stock, adding to the market is not occurring in Australia currently. A strong correlation exists between rents (determined by overall supply) and homelessness. Social housing provision is 4.4% of total dwellings.

NSW Government Transport Oriented Development (TOD) Planning Reforms:

On 28th April 2024, a TOD Program and legislation were introduced through the State Environmental Planning Policy (Housing) – Chapter 5 Transport Oriented Development (the Housing SEPP) with the aim of improving housing supply and promoting urban development that is place-based, coherent and well-designed.

The amended planning controls apply within 400m of 37 stations. The controls allow residential flat buildings (RFBs) in residential and local center zones, and shop top housing in local center and commercial zones. The maximum building height for RFBs is 22 meters, and 24 meters for buildings containing shop top housing. The floor space ratio (FSR) is 2.5:1, and the frontage is 20 meters.

At Dickson Rothschild, we believe that to achieve even better outcomes, the legislation and how it is adopted should consider the following strategies.

Strategy 1:

The TOD Program and legislation is a good start but needs to cast a larger net. The program could be applied more widely to include every metro and railway locality. Light rail stations should also be included in TOD. Localities with excellent opportunities would then also include Cheltenham, Denistone, Dulwich Hill, Como, Tempe, Croydon, Stanmore, and Warrawee, as well as Yagoona, Sefton, Carramar, Chester Hill, and Villawood. More R2 zones near transport infrastructure could also be converted to R3 zones. The Anzac Parade Corridor close to PoW hospital, UNSW, Bondi Junction, Sydney Airport Kyeemagh, Turrella, Banksia, Rockdale, and St Leonards, Crows Nest, and Artarmon RNS are particularly relevant.

At Dickson Rothschild, we believe that to achieve even better outcomes, the legislation and how it is adopted should consider the following strategies.

Strategy 2:

Well-designed, place based precinct planning and urban design includes improving retail, schools, community facilities, cycleways, kiss and ride facilities, lighting, active street frontages, convenience stores, restaurants, and links to waterfronts around all stations. It also means prioritising Build-to-rent near stations, and affordable housing could be included as a bonus provision. Permissibility should be broadened within 800m of stations and possibly further to enable a diversity of building types, such as attached dwellings, dual occupancies, manor houses, co-living and boarding houses, as well as fonziflats. This will provide greater flexibility in height limits, FSR and frontage to accommodate the varying locations more effectively.

Strategy 3:

We have always and continue to encourage more flexible and consistent allowance for medium density housing. Smaller residential flat buildings, town houses, dual occupancies, boarding houses, co-living should not be seen by the community as problems, but with a true role in different housing needs. Lower minimum lot sizes and/or more inclusive strata subdivision provisions should be allowed more consistently across NSW. All provide more housing supply, meet varied market needs and contribute to a more diverse community and interesting pattern of building typologies across Sydney.

Strategy 4:

Focus on regional NSW. There is a chronic housing shortage across regional areas, particularly coastal areas. Cost-effective modular integrated housing is urgently needed in towns close to employment, airports, and hospitals up and down the coast. 95-110 sq. m modular housing on 400 m lots may be built sub $400-500k. To address these problems, we need to expand and lead place-based urban design to make coherent, well-designed outcomes. The new TOD planning controls will apply within 400m of 17 regional stations.

The need for abundant housing now is evident, and various deep routed problems need to be addressed now and well-considered housing and community solutions by the industry are required if we want to ensure that everyone has access to safe, affordable, and diverse housing options.

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