The plan to solve Sydney’s housing crisis that had only one application

One of NSW Labor’s signature reforms to boost housing density around train stations netted only a single development application for an extra 16 apartments in 2024, prompting questions over whether the policy would help ease Sydney’s supply crunch.

The so-called “tier two” transport oriented development zones, which allow for greater housing density near 37 heavy rail and metro stations, form a key pillar of Chris Minns’ push to ease the housing supply shortage.

The Minns government’s signature plan to increase housing density has yet to spur new supply.Credit: Dominic Lorrimer

Despite 18 of the zones being in place since April in parts of Bayside, Cumberland and Ku-ring-gai in Sydney, as well as in Newcastle, Wollongong and Lake Macquarie, property developers are yet to buy in.

A Herald analysis shows that across all the density zones, only one council – Ku-ring-gai – received a development application seeking to use the new planning controls in the eight months since they came into effect.

The application sought to amend an existing approval for a five-storey, 22-unit building in Lindfield to increase it to seven storeys and 38 units. It is before the NSW Land and Environment Court.

The government says the slow take-up is to be expected, and the government’s projections of 170,000 new homes under the policy is spaced over 15 years. Planning Minister Paul Scully said reform to the housing market “normally takes a year or two to take root, particularly in infill areas” and he expected an increase in development applications in 2025.

The seven-storey apartment block in Lindfield was the first application lodged under the state government’s planning reforms.

“Potential proponents will often need to consolidate lots, develop designs and plans prior to their lodgement,” he said.

“This takes time, and given the time from when the first areas were declared, it is in line with expectations.”

Announced in late 2023, the TODs are broken into two tranches – eight larger “accelerated” precincts allowing for greater density within 800 metres of transport hubs, and 37 “tier two” zones allowing for six-storey development within 400 metres.

Seven of the eight “accelerated” precincts came into effect in November, with one, Bays West, yet to come online. In Crows Nest, a $209 million proposal to construct hundreds of build-to-rent apartments in a 43-storey tower was approved this month.

But the tier two TODs have been slower to bear fruit. In addition to the 18 sites gazetted in April, another five have been in place since July. But, other than Ku-ring-gai, none of the councils affected by the scheme said they had received any applications.

Tom Forrest, CEO of developer lobby Urban Taskforce, agreed with Scully that it was likely that some developers were tied up with pre-application work, and said the tier-two TODs were likely to be a “slow burn”. But he said the meagre uptake was “certainly not ideal” and pointed to a wider issue: they don’t go far enough.

While tough economic headwinds were making conditions challenging for the construction industry, he also said that for many developers the tier-two TODs were “too light on height and density to make them worthwhile”.

“If interest rates drop that could help, [but] many developers and their financiers are just waiting for now,” he said.

The view is shared by some local councils. While some TOD zonings were imposed earlier in the year, others were deferred to allow councils to develop their own plans to increase housing density.

In the inner west, where Marrickville, Dulwich Hill, Ashfield and Croydon (part of which falls into Burwood) are all tier-two TOD sites, the council was given until December to come up with its own plan. It missed the deadline, and had the tier-two TODs imposed on it in December.

But the council is not concerned. In designing a new local environment plan which seeks to spread density across the inner west rather than centre it on the four stations, the council says it has done a series of market appraisals and feasibility testing which “robustly demonstrate” that the TODs “lack feasibility”.

Darcy Byrne, the Labor mayor of the inner west, said while the council’s new local environment plan was not due to go on public exhibition in April, it was “unlikely we will receive many new development applications under the government’s rezonings until then”.

“It’s become very clear from our commercial viability analysis that, at least in the inner west, six-storey rezonings around transport hubs won’t be big enough to actually deliver new housing,” he said.

While a combination of high land values, small land parcels and diverse ownership meant the inner west had its own issues, Byrne said it was “likely that this problem won’t be unique”.

“With construction costs in Sydney spiralling completely out of control, it’s possible that many of these transport hubs in inner metropolitan areas will require taller and more dense development to secure finance for these projects,” he said.

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