Over 75,000 approved homes yet to commence construction

About 75,000 homes with approved development applications across Greater Sydney have not commenced construction, underscoring the state government’s struggle to tackle the housing crisis in the face of tough economic conditions.

Weeks after NSW Labor revealed its latest major planning reform, a three-person development authority to expedite approval times, Planning Minister Paul Scully conceded the success of any regulatory change was dependent on economic pressures subsiding.

“We acknowledge that macroeconomic conditions are tough at the moment, but the need for more housing is too urgent, and when economic conditions shift, the planning system needs to be at its most effective and efficient,” Scully said.

Premier Chris Minns wants to fast-track higher-density development in Sydney. Economic headwinds are undermining his reforms.Credit:

The scale of the housing challenge confronting NSW has only intensified since Premier Chris Minns took government in March last year. After committing to build 263,000 homes across Greater Sydney by July 2029, departmental forecasts now expect only 151,670 will be constructed in that time.

NSW needs to build 75,000 homes a year for the next five years to meet its commitments under the National Housing Accord.

Last month, the Herald revealed only 45 per cent of 895 approved development applications for large-scale housing projects – builds with at least 19 new dwellings – had obtained construction certificates by March this year, according to an analysis by University of Sydney Emeritus Professor Peter Phibbs, reflecting the broad economic challenges faced by the development industry.

The stalled applications represented 47,536 dwellings, more than double the net completions in the previous year to June.

But further figures obtained by this masthead under freedom of information laws highlight how economic headwinds are not just affecting projects with large capital costs, but all types of housing, showing proponents with approved development applications of all sizes were delaying or jettisoning construction plans.

In NSW, 13,687 development applications were approved since 2021-22 but had not begun construction as of March 10, data from the Department of Planning, Housing and Infrastructure shows. The stalled projects would provide 75,205 dwellings.

University of NSW City Futures Research Centre director Professor Bill Randolph said the sheer number of approved development applications demonstrated the problem with fixating reform on the planning system, saying there was a greater counter-cyclical role for government to play in delivering affordable housing.

“It’s the market, not the planning system, that determines the rate of which stuff gets built. That’s becoming more and more evident,” he said, adding that the current downturn in the economic cycle had been exacerbated by the pandemic, migration, and then inflation.

“We’re just chasing our tails if we think reforming the planning system is going to solve this.”

The department’s data, updated in late October, showed net completions over the preceding 12 months to June had plunged to just above 21,000, 18 per cent below the previous five financial years’ average.

In a bright spot for the government, October experienced the highest number of approvals since May 2023, nearly 35 per cent more than the preceding month.

Last month, Minns said that dealing with construction feasibility across Greater Sydney was a “complex issue”, but he noted that access to finance and capital was “harder to get today than it has been for decades”.

Scully said the government was doing everything in our remit to “streamline the planning system”, smoothing out kinks in the development pipeline that were slowing down housing delivery.

“Of course we want building commencements to align with housing approvals, but this comes down to development feasibility, labour costs, interest rates, building material costs and sometimes consent conditions,” he said.

Shadow planning minister Scott Farlow said the problem appeared to be especially affecting Sydney, noting the number of development application approvals not commenced had increased by 18 per cent over the last year while falling in other capital cities.

He criticised the government’s imposition of a housing and productivity tax on developments last year, saying it had exacerbated the city’s feasibility crisis as increases in the cost of construction and land outpace apartment prices.

Property Council NSW executive director Katie Stevenson said getting shovels in the ground was proving difficult across Greater Sydney, blaming high government taxes and charges, as well as “delays in post-approval decision-making”, such as when acquiring additional approvals and licences from agencies such as Sydney Water.

“Without government action to make it economically viable for the property sector to build more homes, the housing crisis is only going to get worse,” she said.

“The NSW government can’t control all the costs preventing housing delivery, but one lever they can pull is to put a temporary pause on newly introduced additional taxes and charges on development during the National Housing Accord period to kickstart the housing delivery communities need.”

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