The NSW government’s strata reforms as they stand will create uncertainty for apartment owners, lead to gentrification of some areas, and may not improve housing affordability or availability, a new report from the City Futures Research Centre has found.

Renewing the Compact City: Economically viable and socially sustainable approaches to urban redevelopment was launched today (Wednesday) by NSW Fair Trading Commissioner Rod Stowe.

It found that without changes to the new strata legislation, and associated legislation and policies, the renewal process and outcomes will not be equitable for strata owners, tenants or the broader community.

The report was conducted to explore “equitable and viable solutions” regarding how to redevelop old multi-unit strata apartments to accommodate population growth “without exacerbating social inequalities and collateral social disruption”.

The main focus of the report is how the change in approval to terminate a strata scheme (down from 100 per cent to 75 per cent of owners) will affect redevelopment needed to accommodate population growth and reduce urban sprawl.

The changes to strata law have been considered necessary, as old, unused industrial sites previously used for urban regeneration have become scarce, and the focus has shifted to existing low-density residential areas. The NSW government is hoping its changes will lead to increased density in popular areas and for older, run-down apartments to be rebuilt. Without the changes, single owners can prevent the redevelopment of entire apartment blocks.

Professor Bill Randolph, director of City Futures, said the strata changes represented a fundamental shift to the rights and responsibilities of strata owners, and meant that apartment ownership was now less secure than home ownership.

He warned that the changes could affect housing affordability, as newer strata buildings were likely to replace older and more affordable housing stock, and thus the protection of the vulnerable was paramount.

“Strata residents represent a diverse cross section of the Sydney community with 52 per cent having been born outside Australia, and many residents are elderly or have low-fixed incomes,” he said.

The report found that low-rise blocks in expensive areas, such as the harbour, North Shore and Eastern Suburbs, would likely be replaced by more expensive low-rise blocks, however not necessarily with higher density – a process otherwise known as gentrification.

In middle-rung suburbs, however, it was expected that low-rise blocks could make way for more densification, with new high-rise up to 10 storeys. Little was expected to change for the outer city.

Whether increased supply would improve affordability was unclear.

“[R]enewal is likely to target lower value housing stock in a particular area,” the report said. “So while supply may increase, affordability outcomes may still be reduced because renewal results in a reduction of the more affordable housing stock.”

Concern over housing quality and amenity

In interviews with key stakeholders, as well as more than 1200 strata residents, there was broad understanding for the need for urban renewal, however many respondents, including professionals, were sceptical that replaced apartments would be of a higher standard than the demolished apartments, or that service and amenity increases (such as open space) would be provided to cater for increased densities.

“It was suggested by some interviewees and community workshop members that public opposition to higher density development in Sydney is well founded, based on the expectation of a lower standard of replacement building quality and the negative impacts on local infrastructure provision, especially in terms of overdevelopment and the lack of reciprocal provision of open space,” the report said.

Test case

The same patterns of urban renewal are being seen in cities across the world, so the report authors see NSW’s strata laws as an important test case, particularly as other states have or are hoping to enact similar legislation.

“Finding the appropriate balance between the publicly sanctioned benefits of urban renewal in key target locations and the important role that existing older buildings play as a source of more affordable housing in what are often accessible places must be central to the understanding and implementation of strategies to make residential strata termination and renewal easier,” the report said.

The report added that planning professionals needed to respond to the issues raised by the report if creating a more compact urban form is to be beneficial to anyone other than the wealthy.

Key recommendations from the report include:

  • introducing a tiered voting threshold for termination based on scheme size, starting at a minimum of 80 per cent
  • ensuring government supports the involvement of not?for?profit housing providers in strata renewal to facilitate the provision of affordable housing for rent and sale
  • having NSW Department of Planning and Environment review the NSW Affordable Rental Housing State Environmental Planning Policy to include the loss of affordable rental accommodation in terminated strata schemes
  • having NSW Department of Planning and Environment implement a new Strata Renewal State Environmental Planning Policy to ensure that the planning framework addresses the service, infrastructure, housing supply and affordability considerations of strata renewal at both the strategic and local levels
  • having government strengthen oversight of residential building and certification processes to foster greater public confidence in the quality of new multi?unit residential buildings

See the full report and recommendations