City of Sydney Pushes For Stricter Affordable Housing Definition

The City of Sydney wants its own, stricter definition of affordable housing applied to local developments taking advantage of state planning reforms. Councillors also want to go further, raising the affordable housing levy — already the highest in the country — paid by developers.

Planning reforms by the Minns Government have allowed developers to seek additional height and floor space in exchange for the provision of affordable units. However, a recently released discussion paper on the City’s housing policy argues that its own stipulations should apply, capping rent at 30 per cent of gross household income in perpetuity. Qualifying developments across New South Wales presently need only provide ‘affordable’ units at 20 per cent below the market rate, and for only 15 years.

According to the document, research indicates that delivering one “forever affordable” unit in the area has an equivalent cost to delivering five or six “time-limited” ones. “Further investigation is needed to explore how current state government policies can allow for this preferred approach.”

Greens councillor Sylvie Ellsmore said that the City supports “genuinely affordable” housing.

“It is rent capped and permanent, and based on no more than 30 per cent of a moderate to low income household. The City also advocates for the NSW Government to limit rent increase in state laws. The Greens go further — we want a rent freeze and stronger rent caps.”

Housing minister Rose Jackson said that the Government “is currently reviewing the guidelines for affordable housing.”

“We will have more to say on rent settings under the new Affordable Housing Policy shortly. We expect the new policy to be in place by mid-2026.”

Councillors back Greens bid for higher levy

Currently, developments in the city centre must contribute three per cent of residential floor space and one per cent of the remainder, or an equivalent sum, to affordable housing. A higher rate is sometimes captured in areas rezoned by the City. In 2024, Ellsmore secured the unanimous support of the council — including Labor, Greens and Liberal members as well as those aligned with Moore — to increase the levy on rezoned projects to 20 per cent. This would apply to new floor space, and the City would decide whether an in-lieu contribution should be paid instead.

“The City of Sydney has the highest levy of any council. But we have been asking, is the levy as high as it could be? Are we capturing as much of developers’ profits as we should, to deliver back to the community?”

“This would be Australia’s most ambitious levy scheme on developers for affordable housing. It was supported by strong modelling that showed developer profits would still be okay. It was even endorsed by the NSW Property Council!”

The plan went on exhibition last year. “While we wait for the final report so we can put the changes into law, we have heard that the property industry has since organised and has been campaigning strongly to kill the changes.”

Yet, Ellsmore noted, some developers have agreed to pay a sum equivalent to the increased levy on current projects, despite not having to.

She is “asked all the time” whether a higher levy will discourage housing construction.

“The inner city has some of the most expensive and valuable land, not just in Sydney, but in the world. When government or Council rezones it to allow more height, it creates a huge amount of additional profit.”

Meanwhile, neighbouring Woollahra Council is on track to adopt a compulsory affordable housing contribution of 2.5 to 10 per cent of residential floor space or an equivalent sum, itself an ambitious policy.