The failure of the ‘Housing Diversity Code’ to deliver housing diversity

Much was anticipated from the NSW Housing Diversity Code. The Code promised more affordable alternatives between the polarised choice of a house on a remote suburban lot, or a more centrally located high rise apartment; to fulfil Sydney’s ‘missing middle’. It also promised to cut approval periods for small housing projects; a welcome alternative to the draconian uncertain and bureaucratic DA approval process.

However, the implementation of the Code was fraught from the start with controversy that undermined its effectiveness and ironically compromised housing diversity. To understand why, requires an understanding of the Code, the possibilities for its application, politics and as always economics.

(Above – A typical ‘Big Cottage’ in Daceyville containing 4 dwellings each with a front door to the street)

Our office has been researching the Code and the potential for its application since NSW Planning published the draft in late 2016, up until present, including the 2 deferral periods since its inception in 2018 until the end of the final deferral period, 1 July 2020. The Code is now in full effect across all LGAs but remains largely ineffective and accordingly few projects have been approved via the Code.

The Code

The Low Rise Housing Diversity Code provides the opportunity to undertake duplexes, dual occupancies, row housing (terraces) and a housing type [rather ambiguously] referred to as a Manor House; essentially a triplex of fourplex apartment building. These housing types can all be approved via complying development or conventional DA.

Dual Occupancies are generally permitted in most R2 – Low Density Residential areas as well as R3 – Medium Density Residential areas. The opportunity for Dual Occupancies (via DA) remains unchanged since prior to the Code’s inception but the Code facilitated their approval via CDC – subject to compliance.

The possibility of row housing on the other hand is limited to sites with very broad frontages, more commonly available in greenfield or brownfield sites where subdivision of ‘superlots’ is possible. This opportunity also existed prior to the Code’s introduction via the ‘small lot’ Housing Code.

It is the Manor house, that championed the opportunity of redeveloping single suburban lots as triplexes or fourplexes for Sydney’s ‘missing middle’. Manor Houses bear some resemblance in idea to a ‘big house’ type that can be found in Daceyville, built around 1912 for the Housing Board (pictured above). These were progressive housing types encompassing a variety of three to four dwellings under a single roof, usually with individual front doors to the street. Subsequently more speculative projects were built in the 1940s; the Art Deco ‘4-packs’ that continue to pepper Sydney middle and inner ring suburbs like Randwick and Ashfield.

(Above – 1940’s 4-pack apartment building typical to Sydney’s middle and inner ring suburbs)

The Manor House offered the real opportunity not otherwise permissible between the narrow LEP standard definitions for ‘multi-dwelling housing’ and ‘residential flat building’; a building type that could be configured as either an apartment building or a conglomerate form that could include town houses types. The controls ensure good solar access and engagement with the street in a way that most town house developments (with their internally concealed entries and circulation systems) do not.

The potential for these housing types were the middle ring suburbs of Sydney where single lots are available with frontages of 15 metres (required by the Code) and where there is aspiration for pubic transport, proximity to amenities and the city at a more affordable ‘entry point’ to the free standing house.

However, through Councils’ intervention, opportunities for Manor Houses have been largely extinguished.

Opportunities and Limitations

There are several contributing factors to the limited application of Manor Houses and the Code:

• The predominant residential sites (with frontages of 15 metres) can support triplex Manor Houses (but not fourplexes which typically require a frontage of close to 18 metres, a corner site or rear lane which are rare). The limit of two (as duplexes) or three has economic implications (refer below).

• As a general rule, the closer to the city you get the better the economics for redevelopment under the Code, but inner and inner western suburbs do not typically have suitable sized lots, so it is the middle ring suburbs where the opportunities would potentially lie.

• The FSR (Floor space ratio) equivalent for a Manor House is typically about 0.45:1 to about 0.52:1. Accordingly any R3 zones with LEP permissible floor space ratios in excess of about 0.6:1 or 0.7:1 do not justify the limited yield of only 3 or 4 units. This is an issue in the Ku-ring-gai LGA, as its R3 zones permit significantly higher FSRs.

• Large swathes of Sydney’s middle ring (such as Campsie, Bexley and Kingsgrove) which would be well suited to ‘missing middle’ development do not have suitably sized lots, rendering their R3 zones ineffective without costly and more complex consolidation.

• Interrogating the context of the remaining opportunities (confined to the Canterbury Bankstown LGA – refer below) the simple equation $[value of completed project] > $[site purchase + build + development costs] does not ‘stack up’, and accordingly most sites are unviable.

The only significant LGA that retains broad site availability under the Low Rise Housing Diversity Code is Canterbury/Bankstown (as it has large areas that are suitably zoned, is well serviced and about as close to the city as any other potentially suitable LGAs with suitable lot sizes), but the economic factors of building only three apartments to replace a single home (as outlined above) are regrettably unviable except to builders who can sacrifice true profit for the builder’s margin attainable for their own developments.

Council Intervention

Since the Code’s inception, several Councils have amended their LEPs to limit application of the Code. This is true of the Lane Cove LGA, Hurstville LGA, and more recently Ryde LGA, with Sutherland signalling similar intentions to follow suit.

In the context of the above opportunities and limitations, sourcing suitable sites is next to impossible, but there is also an underlying problem which relates to Councils like Hurstville and Ryde, that actively extinguished the permissibility of ‘multi dwelling housing’ from their broad R2 zones because it further extinguished the opportunity for townhouses via conventional DAs.

While economics and site availability factors appear to have limited the practical application of the Code, the broader problem resulting from Councils’ ad-hoc LEP amendments to restrict its application is that housing diversity has been curtailed rather than diversified, further polarising choice between the remote suburban lot, and the high rise apartment.

Conclusion

The Code was designed to consolidate population closer to existing centres for environmental efficiency, as well as providing social and economic benefits to broader populations by improving affordability. It promised a genuine alternative to the polarised choice between ‘low rise’ house with a garden versus the high rise apartment.

The NIMBY protectionist policies of the LGAs that acted against the policy on behalf of their constituents not only undermined the effectiveness of the policy but engineered a reversal of its value and intent. What I don’t understand is why NSW Planning was complicit in these amendments following the significant work it had invested in preparing and establishing the Code.

However, my deepest concern is not limited to the Code but a broader despair which is that if we cannot implement sensible urban policies to enact social, economic and environmental reform for broad benefit then what chance do we have of addressing more significant challenges in the face of our existential environmental crisis?