A recent judgment of the Land and Environment Court of NSW in Freecity Alpha Development Pty Ltd v The Council of the City of Sydney [2025] NSWLEC 1694 confirms that affordable housing contribution requirements are not automatic, but subject to statutory discretion and capable of challenge on appeal.
The Environmental Planning and Assessment Act 1979 (NSW) (‘the Act’) confers statutory power on a consent authority to impose a condition requiring either a monetary contribution or the dedication of land for affordable housing where a State environmental planning policy identifies a need in the area. Under the Act, such a condition may only be imposed if it complies with relevant policy requirements (s 7.32(3)(a)), is authorised by an environmental planning instrument, is consistent with an applicable scheme (s 7.32(3)(b)) and is reasonable in the circumstances (s 7.32(3)(c)). In addition, s 7.32(4) requires the consent authority to consider any prior affordable housing contributions made by the applicant.
In this case, the Council of the City of Sydney (‘Council’) proposed to attach a condition of consent requiring an affordable housing contribution to a co-living development intended for use as student accommodation near Sydney University. The Developer challenged the condition under s 7.32(3)(c), arguing that it was unreasonable to require an affordable housing contribution for a development that would operate as student accommodation, which itself provides affordable housing.
Although the State Environmental Planning Policy (Housing) 2021 classifies co-living housing as “Diverse Housing” rather than “Affordable Housing”, when operating as student accommodation it may nevertheless house residents within low-income brackets. As such, the Court held that requiring an additional affordable housing contribution was indeed unnecessary, as the development itself already advances affordable housing objectives.
Ultimately, this judgment does not create a general exemption from affordable housing contributions for co-living developments. However, it reinforces that the reasonableness requirement under s 7.32(3)(c) of the Act is substantive, and that the Court may exercise its discretion to decline to impose such conditions where they operate unreasonably.