The Productivity and Equality Commission’s recent report on NSW’s housing supply challenges and policy options mainly examines supply-side drivers of the current housing crisis – canvassing finance, labour and materials, regulation and design among others. 

While we don’t agree with everything in the Commission’s report, we recognise the value of thought leadership that brings forward bold ideas for reform.  

The Committee for Sydney has produced this statement as a response to the Commission’s report because, like the housing crisis, it’s complex and warrants a considered reflection.  

Some solutions proposed are great – and worth implementing immediately.  

There are recommendations in the Commission’s report that we agree with and are worth calling out. Among these: 

• Removing car parking minimums to reduce costs. The Committee for Sydney has had a long history of arguing for removing car parking minimums and introducing maximums instead – they are often are set higher than existing car ownership rates, and increase costs for development while unnecessarily increasing car dependency.  This is covered in detail in our Better Parking for Better Places report.  

• Maintaining infrastructure contributions and planning for them so developers price them into future developments. Doing density well requires we match increased infrastructure and amenity with increased density. This will cost money – even in the TOD locations, as these communities often have excellent transport infrastructure, but lack other types of infrastructure, including playgrounds, open space, sports facilities and social infrastructure. Maintaining the social licence for density – through delivering great places – is essential if we’re to continue to deliver growth for decades to come.  

• Using government-owned land strategically. Government’s land holdings are often tied up in accounting requirements for departments to recycle assets – forcing their valuation to be ‘highest’ rather than ‘best’ use. Being strategic means recognising that sometimes the best use of a piece of government owned land isn’t selling for top dollar, but using it to place a park or other infrastructure to support growth around it.  

• Speeding up recognition of skilled migrants to get them into the workforce sooner. Sydney has always been a town built by migrants – this is something to celebrate. Ensuring they can productively contribute to one of our major generational challenges – housing – is critical.  

• Supporting modern methods of construction to drive innovation in the sector. Clearly the potential of modular and prefabricated housing is huge. The challenge currently faced by the market is scale – if we can support this sector to grow to the scale seen in other countries like Japan, we will see construction costs go down, construction speed go up, increased flexibility in the workforce (including increased access for women in construction) and most houses built faster.  

Importantly, the Commission also clearly articulates why developer contributions do not need to impact on housing costs: 

“…when a government signals infrastructure contributions requirements clearly and in advance… developers adapt to them by reducing what they are willing to pay for developable land. This means contributions are effectively paid by landowners rather than developers or homebuyers.” 1  

This equally applies to affordable housing contributions or other social benefits introduced via regulation. Using the argument outlined by the Commission, if simple, certain, clear and introduced with enough notice, the cost of providing affordable housing would be factored into land price, rather than passed on to the home buyer. This is precisely what the Committee has long been advocating.  

Some solutions may help solve the housing crisis, but the cost outweighs the benefit.  

There were also recommendations that we do not agree with as they fail to fully understand the complexities of how a city like Sydney functions. Is the answer to our housing crisis as simple as switching off major infrastructure projects, or relaxing design standards? While this might deliver more housing more quickly, it doesn’t sound like doing density well, and given we need to deliver more housing for decades, not years, we must maintain the social licence that ‘density done well’ affords to our growth agenda.  

The Productivity and Equality Commission’s report adopts a simple methodology: What changes to what policy levers will unlock more housing supply?  But the world isn’t that straightforward. Yes, increasing the number of houses built is important but there are other elements of a well-functioning city that are equally important. 

The main shortcoming of this report is that all recommendations are framed as being of equal importance, and seen through the lens of housing alone. Because of this, there is no articulation of the costs and benefits of the report’s recommendations from the perspective of their impact on sectors outside of housing. To a hammer, everything is a nail, and, in this report, everything is a solution to housing supply, without due consideration to the impacts their implementation may have elsewhere in the system. 

In fairness, the report’s terms of reference direct the Commission to focus on challenges to delivering housing. For this response, we have also included an appraisal of the impacts of these recommendations beyond housing delivery, because a city is not simply a collection of houses.  

In responding to the Productivity and Equality Commission’s report, we ask that the government weighs each of its recommendations against the following: 

1. Will this increase the supply of quality housing in the right places? 
2. Will this have negative consequences in other areas? 
3. Does A outweigh B? If so, by how much? 

Using this method would better reflect which recommendations rise to the top and which don’t achieve a positive net community benefit.  

The Committee for Sydney has identified three substantive critiques of the Commission’s report that warrant a more nuanced examination. These points articulate the complexities of looking at this issue through a housing supply lens alone and the shortcomings of prioritising delivery at all costs over other – we would argue – equally important aspects such as people’s livelihoods, health, equity, climate and economic activity. 

1. Now is the time to strengthen design quality, not dilute it 

If a house cat or indoor plant wouldn’t be happy living in an apartment, why should we expect humans to be? Ask anyone who lives in apartment what they like, or would like more of, and it’s probably one of two things – sunlight and fresh air.  

• The Productivity Commissioner questioned why regulations should limit consumer choice on solar access, but without minimum standards, there would be far less choice. Apartment buyers rarely have a say in building design or solar access. This market failure is why regulation is needed. 

• The report also states, “shadier apartments can have benefits, like reducing the risk of melanoma and cooling costs in summer,”2 however, it fails to highlight scientific, peer-reviewed research that indicates how low levels of sunlight lead to poorer mental health and wellbeing.3  

• The issue with the ADG arises when assessors forget what the G stands for – it’s a guide. More clarity is needed on when deviations from the ADG make sense, but minimum solar standards are crucial for attracting people to apartment living and ensuring they enjoy healthy, happy lives. 

Sydney’s housing crisis hides a key fact: apartments remain relatively affordable. Since 2016, apartment prices have risen 12%, while house prices have jumped 60%.4 Using a supply and demand logic, we should be building more apartments that offer a similar experience to a house, not the opposite.  

• People are clearly willing to pay much more, and to move much further away to buy a house in Sydney. But with a growing population, and decreasing amount of remaining urban land, the number of houses we can build will run out.  

• If we are going to get people wanting to move into apartments, they should be more generous in their size, number of bedrooms available, outdoor private and communal spaces.  

• The report used flawed logic to indicate that it’s “unclear” whether there’s a shortage of family-friendly apartments, perhaps there is only 18% of families living in apartments because there is only 16% of three-bedroom apartments.5 If there’s no change in the supply of family friendly apartments, why would there be a change in the number of families living in them?  

• Excellent research from UNSW Cities Futures, Western Sydney Local Health District and others point to the common bugbears for families living in apartments – the constant need for more storage, bedrooms that can fit two single children’s bed, good communal spaces for play and parties, and the need for good sound insulation. Currently we have situations where families have to store prams in bathtubs due to lack of space.6 

• While the Productivity Commissioner’s report assumes, “Consumers are well-placed to decide which of these features they are willing to pay for” and that requirements for minimum balcony or storage sizes “should be removed” – purchasers, and particularly renters (second order customers) often don’t get a choice. Without regulation there may be nothing left that suits their needs to choose from at all.  

• There is a debate worth having on encouraging smaller apartments under the ADG, which already allows for apartments smaller than 50m2 (as long as they fit required furniture like a bed and lounge), we should also be concurrently encouraging much more, larger family-friendly apartments.  

2. It’s not as simple as infrastructure or housing construction  

It is not a case of either housing or infrastructure – it’s both. The Productivity and Equality Commission calls out the significant infrastructure investment made by the NSW Government as being one of the reasons that labour and material costs in the housing sector are so high and impacting feasibility. They call this ‘crowding out’. But it is a more complex argument than either housing or infrastructure. Urban development requires supporting infrastructure. While the Committee recognises there is need for a balance, we do not accept that infrastructure needs to be deprioritized in favour of housing. 

• Time and again, both in Sydney and across the world, the term ‘integrated land use planning’ has been used to define the need to plan both development and infrastructure together. 

• Sydney has been playing infrastructure catch up for the past 10 years. We spent the ‘90s and early 2000s releasing land for homes but not providing the infrastructure to support them. This led to road congestion, a reliance on private vehicles and reduced access to opportunities for jobs and study – particularly for women. Our infrastructure pipeline has been increased since 2009 precisely because we de-prioritised the co-delivery of housing and infrastructure. This cannot happen again or we will be having the same discussion in 30 years’ time. 

• The energy transition is not a nice to have. The NSW Government has committed to net zero aspirations that require a continual investment in renewable energy infrastructure. While this may come at a cost, both of labour and materials in the housing sector, the cost of not supporting this transition is infinitely higher.  

• A measured, long-term view of infrastructure spend is appropriate. We do agree that the recent spend on infrastructure is not sustainable, but we cannot go back to a time when we neglected this. It is important that we maintain a clear pipeline of city shaping and city enabling infrastructure – particularly around public and active transport, to support the continued growth of Sydney. Recent statements from the NSW Government on maintaining their infrastructure capital expenditure as a percentage of their budget makes sense.  

 3. Industrial land is critical to keep housing going and residents serviced and employed 

The role that industrial precincts play in urban economies is so often misunderstood, and the Productivity and Equality Commission’s report perpetuates these misunderstandings. But misunderstanding the value of something does not mean something has no value. Industrial land is an essential part of a well-functioning city and economy and the report fails to acknowledge this.  

We agree with the assertion that the current retain and manage policy is passive. We believe that the NSW Government takes a ‘Maintain and Plan for’ approach that takes a more proactive approach in articulating and planning the role that different industrial precincts play across Sydney.  

We believe that industrial land across Sydney should be preserved to support among other things the delivery of housing, the ongoing but often unseen activities that support local economies and to ensure sufficient space for future high value industries that require the flexible space industrial precincts provide. 

Our critique of the Commission’s report is as follows:  

• A narrow definition of value. The report conflates land value with economic value by assuming industrial precincts can be easily converted to residential, overlooking the high-value businesses they support. Focusing solely on price per square metre ignores the broader costs of relocating these industries, such as higher transport expenses, increased congestion, and supply chain delays. A 2020 SGS study found that the economic output of Eastern City’s industrial precincts was more than double that of Parramatta CBD, highlighting their crucial role in Sydney’s economy.7  

• A confusing use of ‘underutilised’. The report’s use of ‘underutilised’ to describe industrial lands is misleading. It seems to assess value solely through the lens of housing supply, but cities are more than just places to live. Industrial precincts play a critical role in urban functionality. Arguing that their lower floorspace capacity makes them less valuable is reductive. By that logic, well-located parks could also be considered ‘underutilised’ and better suited for housing, which oversimplifies the issue. 

• Building more homes means more building materials. If Sydney’s construction sector is to build 50,000 homes a year, this requires builders to have good access to materials, wholesale trade suppliers, etc. For example, we know there will need to be places to store at least 50,000 toilets.  These businesses are found in the city’s urban industrial precincts. Pushing these out to the city fringe will add to the cost of housing construction, not lessen it. 

High density communities need good access to urban industrial functions. The NSW Government’s TOD planning reforms will mean more people will be expecting their Amazon or Australia Post package delivered quickly to their doorstep in inner-urban areas. These higher densities will boost demand for online retail and last-mile logistics hubs, as well as self-storage facilities for residents in smaller units. Well-located industrial precincts are crucial for supporting this density effectively. 

• Co-location threatens viability and the jobs of the future: The report overlooks how industrial zoning supports business viability by preventing competition with higher-value residential uses. While suggesting that residential and industrial can coexist, it misses the impact on high-value industries like biotech and medical device companies in areas like Alexandria and Artarmon. These businesses rely on proximity to hospitals and transport and crowding them out with housing could harm job creation and future growth in critical sectors. 

[1] NSW Productivity and Equality Commission 2024, Review of housing supply challenges and policy options for New South Wales, p. 55

[2] See: NSW Productivity and Equality Commission 2024, Review of housing supply challenges and policy options for New South Wales, p. 60.

[3] See: Foster, S et. al. 2022, ‘Grand designs for design policy: Associations between apartment policy standards, perceptions of good design and mental wellbeing’, SSM – Population Health, Foster S, Maitland C, Hooper P, et al. 2019, ‘High Life Study protocol: a cross-sectional investigation of the influence of apartment building design policy on resident health and well-being’, BMJ Open.

[4] See: https://dcj.nsw.gov.au/about-us/families-and-communities-statistics/housing-rent-and-sales/rent-and-sales-report.html

[5] See: NSW Productivity and Equality Commission 2024, Review of housing supply challenges and policy options for New South Wales, p. 84.

[6] See: Healthy Higher Density Living for Families with Children: An Advocacy, Planning and Design Guide; Kerr SM; Easthope H; Sherry C, 2024, ‘The regulation of families with children in apartments’, Housing Studies, http://dx.doi.org/10.1080/02673037.2024.2313591; Kerr SM; Klocker N; Gibson C, 2021, ‘From backyards to balconies: cultural norms and parents’ experiences of home in higher-density housing’, Housing Studies, 36, pp. 421 – 443, http://dx.doi.org/10.1080/02673037.2019.1709625; Kerr SM; Gibson C; Klocker N, 2018, ‘Parenting and neighbouring in the consolidating city: The emotional geographies of sound in apartments’, Emotion, Space and Society, 26, pp. 1 – 8, http://dx.doi.org/10.1016/j.emospa.2017.11.002.

[7] SGS Economics and Planning’s submission to the Productivity Commission’s Green Paper, 2020, Accessed here