The NSW government’s proposed cap on the number of rooms for some new boarding houses could drastically reduce the number of these developments, while hiking up the prices of already approved sites, industry experts say.
The government is considering a limit of 12 rooms per boarding house site in areas zoned R2 for low-density residential use.
A spokesperson from the Department of Planning and Environment told Commercial Real Estate that the draft reforms applied to all sites in that zoning. This would mean that a 2000-square-metre site would be facing the same cap as a 300-square-metre site, for example.
“The proposed rule regarding the maximum number of rooms per site (12) relates to all dwellings within a residential R2 zone, regardless of size,” he said.
“This proposal has been made in response to concerns from the community and councils about the impact of some boarding house developments on the amenity and character in low-density residential zones.”
The spokesperson said the exhibition period for the policy would close on December 19 and that the community was encouraged to have their say before this date.
“Once submissions have been received they will be reviewed before a determination is made.”
Savills Australia’s Nick Tuxworth said the prices for sites already approved for boarding house development would rise if the limit became reality, but conversely sites without existing consent would be tougher to sell.
“I think that DA-approved boarding house sites in R2 (zoning) are obviously going to be in more demand – anything approved, it’s going to keep going up in value,” he said.
Mr Tuxworth said that it would also deter people from buying a house and obtaining a development approval for property investment.
“It will have an effect, because a lot of people are buying homes and getting DAs on them, that’s definitely going to slow things down as people aren’t going to get that uplift that you could get six months ago,” he said.
“There’s not going to be as many boarding houses, it’ll definitely put a halt to people trying to get DAs through on (low density-zoned homes).”
And a cooling residential market was helping the boarding house market, Mr Tuxworth said.
“The market’s never been stronger for boarding house (sites). I think a lot of developers are looking to get in safer options, like boarding houses, and steering clear of unit developments. That’s a less risky strategy for a lot of people,” he said.
The new proposal comes months after changes were brought in – in mid-2018 – which lifted the car parking quota for new boarding houses in NSW from 0.2 spaces per room to 0.5 spaces. Developers have argued that adding more car parking would make projects financially unfeasible.
Colliers International’s James Cowan said that the proposed new rules would deliver another blow to boarding-house development and said his clients had already raised concerns with him.
“These new rules may be the nail in the coffin for boarding house sites given the car parking quotas already introduced,” he said.
“Despite Sydney requiring circa 330,000 new residential dwellings by 2028 and a housing affordability crisis on our hands, fiscal measures have been created to slow down development and decrease supply, which in turn is likely to artificially increase house pricing – the opposite of what we are trying to achieve.”
Mr Cowan said that it would likely “dramatically decrease developer appetite” for boarding houses.
“Developers require scale to make these sites work and providing a room cap of 12 will limit activity,” he said.
The head of the property development lobby group The Urban Taskforce, Chris Johnson, said the new changes, if enforced, would “make boarding houses unfeasible in many areas of Sydney where more affordable housing is desperately needed”.