Draft Affordable Housing Contribution Policy

Under the current NSW planning framework, affordable housing contributions can only be charged in specific circumstances by either a scheme or a policy that meets the legislative requirements of Section 7.32 of the Environmental Planning and Assessment Act 1979.

Affordable housing contributions policies apply to proponent-led planning proposals (rezoning applications) and provide the basis for planning agreement negotiations. Their objective is to send a signal to the market of a council’s intention. The alternative mechanism, affordable housing contributions schemes, only apply to specific sites and are incorporated into a clause of the Bega Valley Local Environmental Plan 2013. The two mechanisms are complementary, in that any land included in a scheme is excluded from a policy.

Affordable housing contributions can only be applied when additional residential development capacity is created by rezoning or other amendments to planning controls, such as increased height of buildings limits or floor space ratios, in areas where there is an identified need for affordable housing, and it has been demonstrated that imposing the contribution is feasible. The State Environmental Planning Policy (Housing) 2021 identifies there is a need for affordable housing across all of NSW.

The Affordable Housing Feasibility Analysis prepared by Atlas Economics demonstrates that levying contributions via an affordable housing contributions policy can be undertaken without adversely affecting development feasibility in some situations and locations in the Bega Valley Shire. More specifically, these situations include increasing residential capacity in coastal locations, such as increasing the height of buildings limits or the floor space ratio and decreasing the minimum lot size (allowing for more subdivision potential) in any location.

A planning proposal (rezoning application) is a document and supporting information that explains the intended effect and justification of a proposed Local Environmental Plan (LEP) or amendment to an LEP. In NSW, a planning proposal (rezoning application) is the key document used to propose a rezoning or change to development standards.

The Draft Affordable Housing Contribution Policy provides the background for, and sets out, where and how much contributions toward affordable housing are required in circumstances of proponent-led planning proposals (rezoning applications).

Council acknowledges the importance of the not-for-profit community housing sector and the part they play in the delivery and management of purpose-designed and built affordable housing. The affordable housing provided through implementation of the draft policy will be rented to households on very low to moderate incomes and be located where there is access to public transport, services, shops and facilities.

Affordable housing contributions are required in addition to other statutory fees and charges, including local infrastructure contributions, state and regional infrastructure contributions (if applicable) and water and sewerage infrastructure charges.

The Draft Affordable Housing Contribution Policy applies to planning proposals (rezoning applications) that seek to amend the Bega Local Environmental Plan 2013 to increase the residential capacity of the land. In these circumstances, Council will seek a proportion of residential floorspace or a proportion of residential land (as is applicable), as a contribution to affordable housing. The contribution may also be provided as an equivalent monetary contribution. Types of amendments to which the draft policy may apply include:

• Change in land use zone
• Increase in residential density (including change to floor space ratio, height of buildings or minimum lot size controls)
• Insertion of additional permitted use.

The draft policy does not apply to land that is subject to an Affordable Housing Contribution Scheme or where there is a requirement for development to make an affordable housing contribution under other legislation. The draft policy does not apply to some types of residential development that may be enabled by a planning proposal such as social and affordable housing, including boarding houses, group homes or hostels.

The Draft Affordable Housing Contribution Policy details that Council will accept affordable housing contributions in the form of monetary contributions, completed dwellings or land, depending on the individual circumstances.

The method of contribution must be acceptable to Council and its nominated community housing provider. Completed dwellings or land dedicated under the draft policy must meet specified requirements and is also subject to Council’s discretion and approval in consultation with its nominated community housing provider.

A contribution rate (%) is the proportion of a residential development required as affordable housing. For example, if a contribution rate of 2% is required, that would mean a 100-lot residential subdivision would be required to contribute 2 serviced residential lots to affordable housing.

Feasibility modelling (using the Residual Land Value method) was undertaken to test the impact of an affordable housing contributions on project viability in the Bega Valley Shire. The purpose of the testing was to assess whether development was still viable if affordable housing contributions were applied at various rates.

The modelling found that a contribution rate of 2% was feasible for planning proposals (rezoning applications) to reduce the minimum lot size (allowing more subdivision), and a contribution rate of 1% was feasible for planning proposals to increase residential capacity via other means, such as increasing building height or floor space ratio, but only in coastal areas. These contribution rates are outlined in the table below.

Contribution Rate (%) by Location and Development Type on Full Implementation of the draft policy

Where the contribution is to be cash instead of land, the payment must equal the cost of the land required. This is called an equivalent contribution rate ($). For example, if 2 residential lots are required, the equivalent monetary contribution is the market value (or sale prices) of those lots.

The equivalent contribution rates ($) shown in the table below are based on the market value of the residential development type that would be enabled by the planning proposal (rezoning application). NDA means Net Developable Area, and GFA means Gross Floor Area. Both terms are commonly used in the development industry and are defined in the Draft Affordable Housing Contribution Policy.

Equivalent Contribtuin Rate ($) by Location and Development Type

Affordable housing contributions are executed via a planning agreement and are subject to the requirements of Council’s Voluntary Planning Agreements (VPA) Policy. The ordinary process of VPAs would apply, culminating in the planning agreement being registered on the land title. After the Local Environmental Plan amendment is finalised, contributions will be payable at the following stages of development:

• For planning proposals (rezoning applications) that reduce the minimum lot size – prior to the release of the subdivision certificate.
• For planning proposals (rezoning applications) that increase residential capacity (other than reducing the minimum lot size) – at the construction certificate stage.

The Draft Affordable Housing Contribution Policy proposes a phased introduction of contributions over a six-year period.

This approach assists with development feasibility because it allows:

• developers to factor-in the contribution requirement into their feasibility studies and negotiations with landowners, ensuring that an appropriate price is paid for a development site; and
• natural market growth results in a lift to revenue levels, helping to offset the additional cost of the contribution.

The table below outlines the phase-in period of contribution rates.

Phase in period of contribution rates