By Alan Weiss

Over recent months, we’ve seen a gold rush of developers scrambling to secure sites, with some paying prices that can only be described as highly speculative.

The NSW Government’s latest housing reforms — the Low- to Mid-Rise Housing Program and the 30% Affordable Housing Floor Space Bonus — are not theoretical planning ideas. They are hard numbers that determine:

• how many units you can build,
• how many you can sell,
• and how much the land beneath your feet is now worth.

Strip away the jargon and the Government’s objective is simple:

• Increase dwellings quickly in areas with entrenched undersupply.
• Make high-value areas like the Eastern Suburbs deliver more housing.

Below is the straight-talk explanation of what the reforms actually do, and how developers are using them to unlock value from R3 sites.

The Low- to Mid-Rise Program: Your New Base Density

The Low- to Mid-Rise Housing Program sets non-discretionary FSR and height standards in R3 and R4 zones located near centres, shops, and transport.

Density settings:

Example: 1,500 sqm site in Rose Bay (Inner Area)

• Base FSR: 2.2
• Base GFA: 1,500 × 2.2 = 3,300 sqm

If the project is dominated by 3-bedroom apartments (~150 sqm internally), the base yield is:

• 3,300 ÷ 150 ≈ 22 units

This is your starting point before applying any bonus.

The Affordable Housing Bonus: The 30% FSR Multiplier

To boost supply of discounted rental housing, the Government offers:

• 30% additional FSR
• 30% additional height
• In exchange for 15% of total GFA being provided as affordable rental housing for 15 years

Using the same site:

• Bonus FSR: 2.86:1
• Total GFA: 1,500 × 2.86 = 4,290 sqm
• Affordable GFA required: 4,290 × 15% = 643.5 sqm

The key insight

If the project is 3-bed heavy, you cannot allocate 150 sqm 3-bed plates to the affordable component — it destroys the feasibility.

Developers therefore allocate the affordable GFA into:

• 1-bed units: 55–60 sqm
• 2-bed units: 70–85 sqm

This produces roughly nine affordable units, preserving the bulk of the GFA for premium 3-bed stock.

Corrected yield under the bonus:

• Affordable: 9 × 1–2 bed units
• Market: ≈ 24 × 3-bed units
• Sellable market units: 24
• Base scheme market units: 22

Net gain: +2 sellable market units
Plus 9 long-term affordable rental units retained by the developer.

While the uplift seems modest, in premium suburbs even two extra 3-bed units can represent millions of dollars in additional profit.

This is why developers are aggressively pursuing R3 sites — especially those within 400 metres of centres.

The Real Cost: What Rent Does the Developer “Give Up”?

Affordable units must be rented at approximately 80% of market rent.

Using current Eastern Suburbs numbers:

• 1-bed with parking (market): ~$900 per week
• 2-bed with parking (market): ~$1,100 per week

Affordable rents:

• 1-bed: $720 pw
• 2-bed: $880 pw

Assume the affordable mix is:

• 5 × 1-beds
• 4 × 2-beds

Year 1 rental income

At full market rent: $462,800 per year
At affordable rent: $370,240 per year

Year 1 “discount”: ~$92,560

Over 15 years (2.5% CPI)

• Total market rent potential: ≈ $8.3m
• Total affordable rent received: ≈ $6.6m
• Cumulative discount: ≈ $1.66m

So the developer gives up around $1.6m in rent over 15 years.

But in exchange, the developer:

• Gains 30% more FSR
• Secures 2 additional sellable 3-bed units
• Retains 9 well-located units that are likely to experience strong long-term capital growth

From a feasibility perspective, the exchange often makes sense.

Holding Strategy: Where Do Developers Store the Affordable Units?

Because the affordable units:

• generate long-term income,
• carry a 15-year rental covenant, and
• are likely to appreciate substantially,

they are rarely held in an individual’s name.

Common structures include:

1. Special-Purpose Trusts

2. Company Owned by a Trust

3. SMSF (Self-Managed Super Fund)

Why This Matters for Landowners and Developers

These reforms will significantly reshape development patterns in the Eastern Suburbs.

For developers:

• The scheme provides a genuine mechanism to increase yield
• Even in tightly constrained suburbs traditionally capped by character and height controls

For landowners:

• Your site may now be substantially more valuable
• But only to developers who understand how to extract the bonus
• And only if the affordable component is efficiently designed

For the broader market:

• Expect more units, higher density, and more rental supply
• Expect flatter capital growth for older apartments as new stock enters the market

Whether you’re holding, selling, or developing, these changes are already reshaping the landscape.