Future battlelines for town planning will increasingly being waged on economic criteria.  In a blog critique to Thomas Piketty’s Book, Capital in the Twenty-First Century, Matthew Rognlie, a 26-year-old graduate student at the Massachusetts Institute of Technology, made headlines in the Economist for his arguments that it is homeownership that leads to rising inequality.

One response to this from policymakers is to reduce planning restrictions which inhibit new construction, or increase the expense of new construction, as it is this restrictiveness which (on this argument) has cemented the substantial returns on home assets and therefore increasing inequality.

Happy homes

At the same time, space, orientation, and internal amenity all matter to the lives of Australians, and there is a legitimate question around what basic controls should exist. How small is too small?  Should we let the market dictate these standards, or should the Government prescribe minimum standards?

In NSW, the State Environmental Planning Policy No 65 (Design Quality of Residential Flat Development) (SEPP 65) is an important environmental planning instrument balancing these competing priorities of design quality and housing supply.  It does this by, among other things, providing certain minimum standards above which Councils cannot refuse to grant consent to a development application.

The above debate serves as a useful segue to the case of Botany Bay City Council v Botany Development Pty Ltd (No 2) (Botany Bay), which has received much media attention over the last few weeks. The decision reinforces that SEPP’s primary aim which is to ensure design quality of residential flat buildings.

Botany Bay Council v Botany Bay Development

The case involved Botany Bay Development lodging a development application for 158 apartments with one bedroom units between 50.7 square metres and 67.5 square metres, two bedroom units between 78.1 and 93.8 square metres, and three bedroom units between 98.1 and 98.9 square metres. These unit sizes were considered too small by the Council.

In the first instance decision in the Land and Environment Court, Commissioner Brown approved the development.

Council appealed the Commissioner’s decision, arguing that:

  1. The unit sizes did not meet the minimum sizes specified in its Development Control Plan 2013 (DCP). The Commissioner had erred in failing to apply the minimum sizes in DCP.
  2. The Commissioner had both misapplied clause 30A(1)(b) of SEPP 65, and the Residential Flat Design Code.

Room for dispute

The interesting part of this case turns on the Court’s application and interpretation of Residential Flat Design Code. Relevantly, clause 30A(1) of the SEPP provides:

1. A consent authority must not refuse consent to a development application for the carrying out of residential flat development on any of the following grounds:

(b)  Apartment area: if the proposed area for each apartment is equal to, or greater than, the recommended internal area and external area for the relevant apartment type set out in Part 3 of the Residential Flat Design Code [emphasis added].

However, the Residential Flat Design Code refers to two different sets of minimum unit sizes:

  • the first is contained in a table which specifies minimum internal and external areas for nine different apartment types (the Table) the second is set out under the ‘Rules of Thumb’ which provides suggestions made by the Affordable Housing Service for the minimum areas of one, two and three bedroom apartments.
  • The minimum areas specified in the Table were significantly higher than those contained in the Rules of Thumb.

All the apartments proposed by Botany Development exceeded the areas identified in the Rules of Thumb, but only 63 percent meet those in the Table. Botany Development argued that the Rules of Thumb contained the recommended minimum areas referred to by clause 30A(1)(b), whereas the Council disagreed, submitting that the Table contained the applicable minimum areas.

The Commissioner at first instance agreed with Botany Development, finding that under clause 30A(1)(b) of the SEPP the development could not be refused on the basis of unit size.

As a result the Council appealed under s56A of the Land and Environment Court Act 1979, arguing the Commissioner had erred with this finding.

Who’s the boss – the Table or the Rules of Thumb?

On appeal, the Court overturned the Commissioner’s interpretation. The Court considered that clause 30A(1)(b) of the SEPP contemplated there being both recommended internal areas and external areas for the prescribed unit types (hence the emphasis in the quotation of the clause above). As the Rules of Thumb did not distinguish between internal and external areas, whereas the Table did, the Court found that on its proper construction and context, clause 30A(1)(b) could only have referred to the Table.

As the proposed unit sizes did not satisfy the Residential Flat Design Code’s minimum area requirements in the Table, clause 30A(1)(b) of the SEPP was therefore held not to apply. In circumstances where this clause was held not to be engaged, Commissioner Brown should have instead considered the DCP. Accordingly, the proceedings were remitted to Commissioner Brown again for determination in light of Justice Sheahan’s reasoning.

The Court also made some interesting comments in support of the above interpretation which relate back to the debate mentioned at the start of this blog. In this regard, the Court considered that Botany Bay Development’s interpretation would be contrary to the aims of the SEPP. This was because if Botany Development were successful in its argument, it would mean that affordable housing standards would be broadly applicable to all new units, whether or not they were intended as affordable housing. His Honour found that this would be contrary to the SEPPs aim “to provide quality design outcomes for residential flat buildings across the board”.

Now size really matters

Developers will therefore need to bear in mind this decision when designing residential flat buildings and determining unit sizes.  They should also consider potential future amendments to SEPP 65 which have been proposed by the Department of Planning in 2014. These changes would involve amendments to SEPP 65 that replace the current Residential Flat Design Code with a new ‘Apartment Design Guide’. The standards in this proposed new code are more in line with the Rules of Thumb.

For Councils, JBA reports that there are “only a handful of councils around Sydney where the local policy specifies minimum apartment sizes greater than those in the ‘Rules of Thumb’”. Accordingly, the majority of local government areas have minimum sizes consistent with the less stringent ‘Rules of Thumb’. However, as JBA notes, the decision could trigger a shift by Councils towards the more stringent requirements in the Table being used as the basis for standards in DCPs.

For the NSW Government, the decision by Sheahan J highlights some of the drafting problems in the Residential Flat Design Code, which should be rectified in any of the amendments to the SEPP and ‘Apartment Design Guide’ discussed above.