Labor wanted denser neighbourhoods. So far, it’s getting single-storey houses and wider garages

Land earmarked for major apartment developments under one of NSW Labor’s signature housing policies is instead being used to build garages, single-storey homes and studios, raising further doubts about whether it will help fix the state’s supply shortage.

The Sydney Morning Herald this week revealed that one of the government’s key plans to boost housing density around train stations netted only a single development application for an extra 16 apartments in 2024.

The seven-storey apartment block in Lindfield was the first and so far only application lodged under the state government’s TOD reforms.

The so-called “tier two” transport-oriented development (TOD) zones allow for greater housing density within 400 metres of 37 heavy rail and metro stations across Greater Sydney, the Hunter and the Illawarra and were an integral pillar of the government’s push to ease the housing crisis.

But in the context of soaring construction costs and prohibitively expensive land, developers largely ignored the policy; the lone development application, in Ku-ring-gai, came despite 18 of the “tier two” zones having been implemented eight months earlier.

Documents obtained via freedom of information show while development is occurring within 400 metres of the designated “tier two” zones, the vast majority of applications submitted to local councils were for minor works.

In Teralba, a suburb of Lake Macquarie, south of Newcastle, the documents show development applications were submitted for nine properties between May and December. Of those, seven were for standalone homes including one with an attached studio, and another was for the reconstruction of two dwellings in an existing townhouse.

The last, lodged in November, is for a 65-lot subdivision on a greenfield site – a far cry from the denser urban infill development the government said its transport-oriented development zones would encourage.

The pattern is repeated across the “tier two” locations. Proposed developments in the zones include plans to build a wider garage in Gordon and construction of granny flats in Banksia and Berala.

Of the 40 applications included in a spreadsheet tracking applications within the zones, only eight were for 10 or more apartments. Besides the Ku-ring-gai development, none used the new planning provisions.

In some cases, that was because the existing council zoning allowed for higher residential development than what was introduced under the transport-oriented development scheme, or because the application was for the modification of an already-approved development.

Planning Minister Paul Scully says he expects further take-up from developers in 2025, pointing to the time needed to consolidate land and prepare applications before developers officially lodge applications.

The government’s prediction that the zones would create 170,000 new homes was spread over 15 years for that reason.

In some places, that is borne out by activity in the market. In Ku-ring-gai, property giant Aqualand and other developers have been buying land within the “tier two” zones in Roseville, Killara and Lindfield which could deliver hundreds of new apartments.

Scully also took a shot at the Coalition’s failed attempt last year to overturn the legislation that created the zones, saying it created uncertainty in the market.

Opposition spokesman for planning Scott Farlow said the lack of take-up of the “tier two” zones was not surprising, agreeing broader reform of the planning system was necessary.

“While the government has been busy drawing circles on a map, in many places where there is no interest in building six-storey apartments, they’ve ignored key measures which will deliver more homes – feasibility and reform of the planning system,” he said.

Some industry figures agree, harbouring doubts about whether the policy will ever bear fruit outside inner Sydney.

In June, the Urban Development Institute of Australia released an analysis that found only locations in the inner west and north shore would probably be viable because buyers would pay a premium to live there.

Development further west in Sydney and in the Hunter and Illawarra were likely to be unfeasible, the UDIA found, even with incentives for developers. Stuart Ayres, the UDIA’s CEO in NSW, said other reforms such as low- and mid-rise changes as well as investment in greenfield infrastructure would be necessary to lift NSW’s lagging housing market.

“If the government puts all its eggs in the TOD basket it will keep missing its housing targets,” he said.

“Ignoring economic feasibility when implementing housing policy is a fast track to less homes.”

In some cases, local councils also warned that sites earmarked for the new zoning were unsuitable.

In Teralba, Lake Macquarie Council argued there was insufficient infrastructure to support high-density apartments, pointing out that the train station around which the zone is based was not long enough for many trains to stop at and received only one service an hour on weekdays.

Given the UDIA’s research, it was “no wonder that developers aren’t putting applications for new apartment buildings in places like Teralba”, Farlow said.

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