A Sydney council study concluded developers are exploiting the NSW government's affordable housing incentives

Close to public transport. Photo: Peter Parks/AFP/Getty Images

Announcing a $4.5 billion budget surplus yesterday, the NSW government bragged about housing affordability measures.

But a study by Randwick City Council, in Sydney’s east, found that the government’s planning incentives to build boarding houses for Sydney’s lower income residents are instead being exploited by developers who still charge full market rates on rentals.

The report looked at more than 500 rooms approved by the council since the State Environmental Planning Policy for Affordable Rental Housing (AHSEPP) was introduced in 2009 and while rooms in older-style boarding houses cost around $200-$250 a week, the price for rooms in the newer developments doubled to between $390 and $500.

The policy offers incentives such as bonus floor space and permission to build units as small as 12sqm, almost three times smaller than the minimum size for studio apartments.

Last financial year there a massive jump in approvals for boarding house accommodation, with 177 rooms given the tick, more than double the 73 in 2014-15 and smashing the previous peak of 121 rooms in 2010-11, the year after the policy was introduced.

Development approvals in Randwick. Source: Randwick City Council

The report says boarding house developments are “by far the most popular form of development uptake” under the policy, and “also the most contentious with the community”.

But it adds “they are not providing affordable accommodation to those in need and/or as the AHSEPP promotes” and “key aspects within the policy which aim to promote boarding house developments such as the density bonus are questionable”.

The problem for the councils, the report argues is that they can’t amend and/or override the policy and is called for the NSW Department of Planning and Environment to conduct an urgent review.

Randwick mayor Noel D’Souza said the policy was “well-intentioned” and helped deliver more housing stock, but the policy doesn’t control rental rates

“There’s nothing wrong with providing more housing for students, but what we’re seeing is developers taking advantage of generous incentives to get bigger developments built in residential areas under the guise of helping the community and yet they’re charging market rates which are way out of reach for those most in need,” he said.

“New controls are needed that not just encourage housing stock but control the rent to ensure it’s affordable for those it’s built for.”

The report contains an example 40-room boarding house in Avoca Street, Randwick, pictured below, advertised as “designer studios” for $500.

Source: Randwick City Council

The median market rent for a one bedroom unit in the Randwick LGA in the Dec 2016 quarter was $520 per week. For housing to be considered affordable, it should be priced between $244 and $390 a week.

Mayor D’Souza said the existing policy is “pushing out those who can’t afford to pay $500 a week for a 12 square metre lodging”.

“I’d like to see the density bonuses removed, or to be tied to a developer obligation to lease out a certain proportion of the rooms at affordable rents,” he said.

The Department says it is currently looking into the issue as part of a broader review of its policies.

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