The Sydney suburbs failing to meet housing targets

3 months ago 28

The NSW government’s push to encourage more intensive residential development near train stations has failed to deliver a swift uptick in fresh applications for major housing projects, according to industry analysis that shows Sydney and surrounds are falling more than 30,000 homes behind its five-year target.

The shortfall was driven by 65 per cent of councils tracking behind the level of development activity needed to meet their housing targets for the next five years.

Ku-ring-gai, Burwood, Strathfield, North Sydney, Hornsby and the City of Sydney were among the worst performers, the report published by the Urban Development Institute of Australia developer lobby group on Friday showed. NSW is required to deliver 322,000 new dwellings by mid-2029 under the National Housing Accord.

NSW is falling behind its National Housing Accord target to deliver 377,000 new homes by mid-2029.

NSW Opposition Leader Mark Speakman said the figures suggested Labor’s key planning reforms had been “a complete failure” in many Sydney areas, but Planning Minister Paul Scully countered: “We have undertaken the largest reforms to planning in NSW history, and they will take time to have full impact.”

The UDIA report coincided with the release of Australian Bureau of Statistics’ monthly building approval data, which showed a 16 per cent jump in new dwelling approvals in NSW in 2024-25 – the first year of the accord – compared to the previous year, against a national increase of 13.9 per cent.

Despite the bump, the July housing accord progress report showed the Greater Sydney “mega-region” – which includes areas north of Newcastle and the Hunter Valley – was 30,777 development application (DA) approvals behind what was required by this stage to reach the state’s supply goal.

The report noted there was reason for “cautious optimism” as the gap between the target and delivery figures had not widened significantly since the shortfall of 30,035 dwellings in March.

However, it said the market stability suggested by those figures had largely been driven by modifications to previously determined development applications that sought approval for more dwellings rather than an increase in the number of new applications in the system.

The report found “genuinely” new development applications in areas that were covered by the government’s transport-oriented development (TOD) scheme, and its low and mid-rise housing reforms to encourage small unit blocks and duplexes, accounted for only 3500 dwellings in 2024-25.

The government has said it wants to deliver 138,000 new homes through the TOD scheme over 15 years, and 112,000 homes in areas covered by its low and mid-rise housing reforms over five years.

UDIA chief executive Stuart Ayres, a former Liberal minister, said the government’s focus on increasing density in urban areas had not yet triggered the uptake it needed to meet its targets.

“These policies were implemented with the objective of being high-yielding and geographically dispersed. Uptake to date has shown that they are predominantly low-yielding and only work in limited geographic locations where feasibility works, leaving existing planning controls to continue to carry the bulk of new housing,” Ayres said.

The report said the cost of land acquisition and site consolidation remained significant barriers to development, meaning the ability to leverage the reforms was limited to existing landowners.

“Despite the wide-reaching nature of these policies … development has been highly concentrated to feasible high-end markets.”

According to the analysis, the transport-oriented development (TOD) policy had led to 1700 dwellings submitted via local development applications, and 2300 dwellings via state significant development applications – mostly in areas with “favourable market conditions, like Ku-ring-gai”.

The NSW government has flagged further reforms to help combat the housing supply and affordability crisis.

Previous analysis from the UDIA suggested the TOD scheme was most feasible in locations such as the north shore, where buyers would pay a premium given that ballooning construction costs and government levies meant units could not be built for a price buyers were willing to pay in many of the sites.

Speakman said the TOD scheme was being taken up only “in wealthy areas where first home buyers cannot afford to buy. Everywhere else, it’s been a complete failure.

“These figures show that you can draw all the circles on a map that you like, but if it’s not feasible to build, then nothing will be done.”

Scully said the report “seems to have glossed over the positive sentiment in the industry about what’s happening on the ground as a result of the government’s reforms”. He said the government was contemplating further reforms.

“There has been over $1 billion in land sales in low and mid-rise areas. Assessment timeframes are down. Development application lodgements are up. ABS figures show NSW is now leading the country in dwelling approvals, with the majority of those approvals being apartments.”

Ayres said: “A more favourable time will come when these policies deliver real housing outcomes – but to meet Housing Accord targets, we need to see a significant uplift in development application activity in the government’s key housing policies within the next 24 months.”

The report said the councils furthest behind their housing targets were in urban areas where planning complexity, construction costs and community opposition “may be slowing the potential for new housing development”. However, Ryde and Randwick were ahead of their dwellings goals. The Blue Mountains, Hawkesbury and Mosman were among the best performers, albeit with relatively low targets, while Blacktown, Campbelltown, The Hills and Camden were also lagging their targets.

Property Council NSW executive director Katie Stevenson said the ABS data showing 49,519 dwellings were approved in 2024-25, compared to 42,695 in the previous year, signalled growing industry confidence in the planning reforms to date, but said the state had a long way to go.

“Without urgent action to address both feasibility and productivity – taxes and levies, planning delays and construction costs – there’s a real risk the green shoots of recovery we’re seeing could be short-lived. We need to double down on delivery in the next 12 months,” Stevenson said.

Housing Industry Association senior economist Tom Devitt said despite the modest improvement in conditions in the past 18 months, Australia had approved only 187,330 new homes in 2024-25, which suggested starting construction on 240,000 homes per year was “a distant goal”.

Devitt said commencement rates for apartment block, duplex and townhouse developments would need to double to meet the housing targets, which was “unlikely to occur under current policies”.

“Labour and land shortages, obstructionist regulations and punitive surcharges on institutional investors have pushed improving sentiment away from apartments back into the detached housing sector.”

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