The difficulty the City of Sydney has attracting and retaining people after working hours may have a lot to do with plans to turbocharge the number of people living within its city limits. By comparison, Sydney’s southern capital city counterpart, Melbourne, boasts three SA3 codes, with Sunday night now being purported to be busier than the first evening of the working week.

Sadly, this is not Sydney’s experience, and the drop in demand for non-premium office space in the CBD following covid, (vacancy rates currently about 14%) means fewer consumers – day or night – for surrounding businesses.

Arguably influenced by the success of Melbourne’s build-to-rent (BTR) initiatives, the City of Sydney appears to have suddenly decided it’s a winning model it can’t ignore.

As a result, the city has endorsed changes to planning and development rules to encourage more BTR housing which offers long-term accommodation for renters.

Melbourne is the flagbearer for BTR

A recently released Knight Frank report titled Breaking the Shackles revealed Melbourne as the flagbearer [for BTR] with 4,920 apartments under construction, and another 8,250 approved, followed by Brisbane with 1,743 under construction and another 2,567 approved.

To put Sydney’s undersupply of BTR accommodation in context, Knight Frank data ranks the harbour city only in third place with 1,529 under construction and 965 approved.

Shedding some light on the undersupply of BTR developments in Sydney, Macquarie University research fellow Alistair Sisson suggests Sydney’s housing market is probably not the most favourable [BTR] destination due to high prices and modest rental yields – with the real profits coming through capital gains when properties are sold.

However, the Property Council of Australia NSW executive director, Katie Stevenson, recently noted that the federal government’s halving of the Managed Investment Trust withholding tax for BTR to 15% earlier this year could lead to up 150, 000 new apartments over the next 10 years.

The Knight Frank report regards inner fringe locations as natural candidates for the first wave of BTR schemes, given their offer of amenity, close proximity to CBDs and a high proportion of potential tenants given their comparatively well-educated and young populations.

Sydney’s proposed changes

One of the biggest takeaways Sydney’s Lord Mayor Clover Moore can glean from Melbourne’s BTR developments is that – unlike many high-end developments – they rarely sit idle, with residents boosting the surrounding local economy.

Moore concedes that students are one of the groups that have been hit hardest by the rental crisis in Sydney, with lack of appropriate accommodation and affordability being major issues.

She expects proposed amendments to the Sydney Local Environment Plan 2012 to better balance the city’s need for additional housing and the workplaces of the future.

By offering these additional floor space incentives we hope landowners and developers will create more co-living accommodation in areas like Haymarket area, which has proved popular with students in Sydney.

Under the proposed changes outlined by Moore, developers would be:

  • Given between 20% and 75% more floor space for BTR development for both conversions and new builds, depending on the site location.
  •  This would apply to applications made within a five-year time frame from when the changes are formally approved.
  • Also be able to access 20% more floor space for co-living accommodation to encourage co-living developments to stimulate an increase in student and low-income worker accommodation.
  • Proposals also reduce the number of two-bedroom apartments permitted in a residential development while raising the minimum number of units with three-bedrooms or more.

“By offering these additional floor space incentives we hope landowners and developers will create more co-living accommodation in areas like Haymarket area, which has proved popular with students in Sydney,” said Moore.

“The proposed changes would see a minimum of 20% of dwellings in new residential developments made up of three-bedroom plus apartments to help provide more suitable accommodation for families, ideally located on the ground-floor or near to the building’s communal open space.”

 Image: Mirvac is a major player within Sydney’s BTR market, with the development of the 800-apartment, LIV Indigo development, albeit at Sydney’s Olympic Park and not in the CBD.