NSW Low and Mid-Rise Housing Policy to Unlock 112,000 Homes in Five Years

The NSW Labor Government has announced a significant planning reform that will unlock 112,000 homes across New South Wales (NSW) over the next five years.

The Low and Mid-Rise Housing Policy, set to take effect on 28 February 2025, aims to increase housing supply, improve affordability and provide greater housing diversity in Sydney, the Central Coast, Illawarra-Shoalhaven and Hunter regions.

By reforming zoning regulations, the policy will allow dual-occupancies, terraces, townhouses and residential flat buildings within 800 metres (a 10-minute walk) of 171 town centres and train stations.

This strategy seeks to fill the "missing middle" in NSW housing – a segment that has been effectively banned from low-density residential areas in recent decades.

📊 According to the NSW Department of Planning, only two of 33 councils in Greater Sydney currently allow terraces and townhouses in low-density (R2) zones, while residential flat buildings are prohibited in 60% of medium-density (R3) zones.

What the Low and Mid-Rise Housing Policy Changes Mean

1. Expanded Housing Options in Key Locations 🏘

✔ New Permissibility for Housing Types – The reforms allow:

• Terraces, townhouses, and residential flat buildings on R1 and R2-zoned land.

• Medium-rise residential flat buildings on R3 and R4-zoned land.

✔ Focus on Transport-Oriented Development – The changes apply within 800 metres of transport hubs, ensuring access to essential services and infrastructure.

✔ Better Use of Existing Infrastructure – The policy prioritises development near established amenities rather than expanding urban sprawl.

📊 Studies show that increasing housing supply near public transport can improve affordability by up to 20% over a decade (Urban Development Institute of Australia, 2024).

2. Addressing NSW's Housing Shortage & Affordability Crisis 💰

Without these reforms, NSW risks further worsening housing affordability.

The median house price in Sydney exceeded $1.5 million in 2024, pricing out first-home buyers and key workers.

✔ Increasing Supply – Aims to counteract rising housing prices by delivering more homes where demand is highest.

✔ More Affordable Options – Allows for smaller, multi-unit dwellings that are more accessible to buyers and renters.

✔ Supports Population Growth – Meets the needs of a growing population without excessive land expansion.

📊 In Sydney, rental prices increased by 11.6% in 2023, with vacancy rates falling below 1% (NSW Housing Report, 2024).

3. Why These Housing Types Were Previously Banned ❌

In recent decades, council zoning laws have restricted diverse housing options, leading to a reliance on high-rise apartments and greenfield developments.

🔹 Current Restrictions in Greater Sydney:

• Terraces & Townhouses: Banned in 31 out of 33 councils in R2 low-density zones.

• Residential Flat Buildings: Prohibited in 60% of R3 zones.

🔹 Key Changes Under the New Policy:

• Zoning restrictions lifted to allow more medium-density housing.

• Local councils retain control over development conditions such as parking, light access, and frontages.

📊 Urban planning experts state that the "missing middle" housing options have been effectively erased from Sydney's housing market, leading to a lack of diverse housing supply for growing families and downsizers.

Site Selection Criteria for New Housing Areas 📍

The NSW Government carefully selected areas for low and mid-rise housing expansion based on the following factors:

✔ Proximity to Essential Goods & Services 🏪

✔ Public Transport Frequency & Travel Times 🚆

✔ Existing Infrastructure Capacity 🏗

✔ Local Housing Targets & Growth Rebalancing 📈

📊 Urban planning studies indicate that well-connected medium-density developments can reduce car dependency by up to 35%, supporting more sustainable cities.

Exemptions & Special Considerations 🚨

1. Bushfire & Flood Hazard Areas

Due to significant bushfire and flood risks, the following Local Government Areas (LGAs) are excluded from the reforms:

✔ Blue Mountains

✔ Hawkesbury

✔ Wollondilly

2. Heritage Conservation Areas 🏛

✔ Heritage-listed buildings are protected under this policy.

✔ Developments in conservation areas will still require council assessment and approval.

📊 Preserving heritage sites while enabling housing growth remains a key objective of the NSW Planning Strategy.

Aligning with the NSW Pattern Book for Housing Designs 📖

The Low and Mid-Rise Housing Policy aligns with the NSW Pattern Book, which provides architecturally designed, pre-approved housing templates to:

✔ Streamline planning approvals ⏳

✔ Ensure high-quality, aesthetically cohesive designs 🏡

✔ Improve sustainability & energy efficiency 🌱

📊 The NSW Government states that using Pattern Book designs can reduce DA processing times by up to 40%, helping homeowners and developers build faster.

Commentary on the Reforms 🗣

Premier of NSW on the Housing Reforms

🗨 “These types of homes have played a really important part in delivering homes over the last century, but recently councils have effectively banned them. This reform changes that.”

🗨 “Housing is the single largest cost of living pressure people are facing, and these changes will deliver more homes for young people, families, and workers.”

Minister for Planning and Public Spaces, Paul Scully

🗨 “This policy fills a gap in new housing supply. Allowing low and mid-rise housing in more locations will help increase the number of homes in our state, improve affordability for renters and buyers, and give people a choice on the type of home they want to live in.”

🗨 “Housing choice and diversity is at the heart of the Minns Government’s planning reforms – a choice of where they want to live, what kind of home they want to live in, and when they want to make that move.”

📊 According to the NSW Planning Department, these reforms will enable faster approvals for low and mid-rise developments, potentially cutting approval times by 3–6 months compared to traditional DAs.

Final Thoughts: What These Reforms Mean for NSW Homeowners & Buyers

🏡 For First-Home Buyers: More affordable housing options close to transport and jobs.

🏗 For Developers: Faster approvals and a wider range of housing types permitted.

📈 For Investors: More opportunities to develop medium-density housing in high-demand areas.

🏘 For Existing Homeowners: Potential higher land values and greater flexibility for home renovations or secondary dwellings.

📊 The NSW Government estimates that these changes will deliver 112,000 new homes within five years, significantly contributing to the state’s housing needs.

When Will These Changes Take Effect?

📅 Policy Implementation Date: 28 February 2025

🏛 More Information: Visit the Low and Mid-Rise Housing Policy page on the NSW Government website for full details.