Two recent Land and Environment Court cases have considered if Councils can, by condition of development consent, require the imposition of a covenant on land to ensure compliance with the aims of State Environmental Planning Policy (Affordable Rental Housing) 2009 (ARH SEPP).

The decisions confirm that the ARH SEPP does not require a boarding house to be used for the purposes of affordable housing, and any conditions of consent that purport to restrict a boarding house development in such a way, will be contrary to the ARH SEPP.

In Lizard Apple Pty Ltd v Inner West Council [2019] NSWLEC 1146 (Lizard Apple), the Council sought to impose a condition requiring the creation of a positive covenant that would ensure:

  1. the occupants of a boarding house would only be people with a household income equal or less than 120 percent of the Median Equivalised Total Household Income (Weekly) for Ashfield, and
  2. the rent the boarding house operator will charge will not exceed 30% of that income.

The Council argued that imposing this covenant would ensure that the proposed boarding house provided housing for the groups intended by the ARH SEPP.

Affordable housing

‘Affordable housing’ is defined in the Environmental Planning and Assessment Act 1979 as:

‘housing for very low income households, low income households or moderate income households, being such households as are prescribed by the regulations or as are provided for in an environmental planning instrument.’

For the purposes of the ARH SEPP, a household is taken to be a very low income household, low income household or moderate income household if the household:

‘(a) has a gross income that is less than 120 per cent of the median household income for the time being for the Greater Sydney (Greater Capital City Statistical Area) (according to the Australian Bureau of Statistics) and pays no more than 30 per cent of that gross income in rent, …’

Construction of the ARH SEPP

The Council submitted that the intention of the ARH SEPP was to assist in the delivery of affordable housing. This was clear from the aims of the Policy provided at clause 3. It argued that given the ARH SEPP relaxes local planning controls and allows for bonus floor space and larger buildings, this should be in exchange for the provision of dedicated housing for lower income persons.

The Applicant submitted there was insufficient evidence to show an existing problem that warranted the suggested condition.

Commissioner Walsh agreed with the Applicant. He acknowledged that the bonuses available to boarding house development should be used to address housing affordability problems, however there was insufficient evidence before the Court to support the inclusion of the condition.

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In Micro Nest No 1 Pty Ltd on behalf of Micro Nest Ashfield Trust v Inner West Council [2019] NSWLEC 1320, the Applicant sought, via a modification application, to delete a condition that required the registration of a positive covenant in similar terms to the covenant proposed in Lizard Apple.

The Council opposed the removal of the condition. It argued that its removal would materially change the development, such that it would not be substantially the same. Similar to Lizard Apple, the Council argued that:

  • the ARH SEPP requires mechanisms to ensure that the development it facilitates, is reserved for lower income residents,
  • this occurs via clauses 3 and 6 of the ARH SEPP, which require consideration of whether the Policy’s aims will be achieved via proposed development,
  • removing the condition would have negative impacts for social inclusion, and the public interest required its retention.

In response, the Applicant argued the condition was not one contemplated by the ARH SEPP. It submitted that clause 6 of the ARH SEPP was not directed to boarding house development. It stated that unlike in-fill affordable housing or residential flat buildings provided by social housing providers, public authorities and joint ventures, the ARH SEPP does not require a boarding house to be used for the purposes of affordable housing for 10 years (see cl 17 and 38 of the ARH SEPP).

Must boarding houses provide affordable housing?

Commissioner Gray found that the Council’s arguments were contrary to the terms of the ARH SEPP.

The Commissioner determined there was nothing in the ARH SEPP’s controls or the definition of ‘boarding house’ in the Ashfield Local Environmental Plan 2013, that required a boarding house to only provide housing for very low income households, low income households or moderate income households.

To restrict boarding house accommodation in the manner suggested by the Council, would constrain the ARH SEPP in a way not intended by the draftsperson.

Without a provision that gave operative effect to ARH SEPP’s aims, they were not a mandatory consideration and could not command a particular outcome. It was not appropriate for the Court to apply the ARH SEPP in a particular way, to address alleged shortcomings.

Read the two cases here:

  • Micro Nest No 1 Pty Ltd on behalf of Micro Nest Ashfield Trust v Inner West Council [2019] NSWLEC 1320
  • Lizard Apple Pty Ltd v Inner West Council [2019] NSWLEC 1146