How are Developers Responding to the government’s incentives?

Developers are identifying parcels of real-estate with the most potential for profit in LMR areas. They approach owners and offer to buy their properties at prices above market rate. They then present plans to Council that cherry-pick the legislation for the fewest obligations, seeking exemptions from requirements that would reduce profit by flying a banner that says “we are providing affordable housing”. They know that the State’s legislation gives them a very good chance at getting their plans for super-sized buildings approved by the Land and Environment Court even if council does not pass their DAs.

Prime example – The Chimes Building, Potts Point

Plans were submitted to knock down the Chimes building and replace the 10-storey block’s 80 studio and one-bedroom apartments with a 9-storey tower containing about 34 luxury homes.

Up to 5 of the apartments (15%) would be set aside for 15 years as “affordable housing”, available at a sub-market rent to moderate-income earners.

In exchange for this, the LMR mechanism gives the developers a bonus allows them to boost the construction up to 13 storeys and add more luxury apartments.

That result is a loss of around 70 genuinely affordable homes delivered by a policy that purports to boost affordable housing. “At a time when we need more affordable housing, not less, property developers are having a laugh at Sydney’s housing crisis, and the government’s flawed LMR affordable housing policy is essentially making poor people homeless in favour of millionaires,” See SMH Aug 25, 2025 and AFR Oct 6 , 2025

LMR/SEPP submissions are for Luxury High-end buildings

Every submission that seeks special consideration under LMR/SEPP never includes studio or 1 bedroom apartments. All submissions that seek the extra height bonus say they are offering affordable housing by making around 10% – 15% of the building’s GFA available to a CHP to subsidise the rent for a minimum of 15 years, after which these apartments return to open market ownership. In some cases there are some 2 bedroom apartments and in some cases there are only 3 bedroom apartments. Ownership by a young people with moderate incomes trying to enter the housing market is not possible in these developments.

Does a developer-led building frenzy make housing more affordable?

Many LMR locations are in prime-suburbs. While the cost of construction is comparable to outer suburbs, the profit of the built apartments in prime-suburbs is enormous, even before the “bonus” is taken into account. These are luxury, top of the market apartments, not budget nor affordable homes, There is no way that anyone other than very affluent can own or rent these.

The lure of these developments will suck in more building resources (materials, tradesmen etc) so that projects for true affordable homes will be starved of resources. The cost of material and labour will rise as a direct result and the raise the costs of “budget development” making these less affordable than what they are now.

Given that new new developments are destroying existing homes in LMR in-fill areas, existing affordable housing becomes more scarce and therefore their rental and sales values increases. So it seems that replacing existing dwellings with new high-end apartments will raise other rents even further, beyond the unaffordable level they are at now!

Conclusion

The NSW legislation is unwittingly destroying affordable homes and raising the rental value of those homes that survive the wrecking balls and bulldozers.

But wait… what about the CHPs (Community Housing Providers)? Can the rental subsidies they provide help?

Read more here…