Sydney Councils Mandate 15% Affordable Housing in All New Developments

Sydney's inner west councils passed a binding affordable housing policy on Wednesday that will require developers to include 15 per cent affordable units in new residential projects over five storeys. The vote, taken across four local government areas including Marrickville, Newtown and parts of Ashfield, marks the first coordinated regional approach to housing affordability in Sydney outside the state government's voluntary planning agreements.

The councils acted after pressure from tenant advocates and community groups citing the city's rental crisis. Median rent for a two-bedroom apartment in the inner west now sits at $2,080 per month, according to rental data published by the Real Estate Institute of New South Wales in June. That figure has risen 34 per cent since 2020. The policy applies to developments expected to deliver approximately 8,500 new dwellings across the four council areas over the next decade.

What the new rules require

Under the new planning requirements, developers must either construct affordable units within their projects or contribute to an affordable housing fund managed by the councils. The affordable units will be locked at 80 per cent of median rent for 15 years. For a two-bedroom in the inner west, that translates to approximately $1,664 per month, based on current median figures.

The policy exempts developments under five storeys and commercial projects, meaning single-family homes and small apartment blocks remain unaffected. Developers can apply for exemptions on grounds of financial viability, though councils must justify any waivers in writing. The rules took effect immediately upon council approval and will apply to any development approval issued after 9 July.

Sydney's experience differs markedly from comparable cities managing similar housing pressures. Melbourne councils have experimented with voluntary developer contributions rather than mandatory quotas. Brisbane's council implemented a 15 per cent target in 2022 but limited it to council-owned land, affecting far fewer projects. The inner west decision makes Sydney one of Australia's few cities with mandatory affordable housing requirements applied across private development broadly.

Implications for Sydney renters and property owners

Local real estate agents say the requirement will add costs to projects, potentially raising prices for market-rate apartments. Property Council of Australia economists estimate mandatory affordable housing targets increase development costs by 2 to 5 per cent depending on land values. In the inner west, where land costs are already elevated, developers may pass some costs to buyers of market-rate units or delay projects pending feasibility reviews.

For renters, the policy is expected to place approximately 1,275 affordable apartments into the rental market over the decade in the four affected councils, based on the 15 per cent requirement applied to projected development yields. Local tenant unions say even this number addresses only a fraction of the estimated 15,000 households in the inner west paying more than 30 per cent of income on rent.

The councils plan to establish a shared affordable housing fund by September 2026. They have not yet committed public funding to the scheme. Marrickville, Newtown and Ashfield councils said they will seek state government grants and philanthropic support to capitalise the fund, though no formal commitments have been secured. The state government has not announced whether it will match council contributions or integrate the local scheme into its own affordable housing programs.

Other Sydney councils including Strathfield, Canada Bay and Ryde have indicated they are reviewing the inner west model and may pursue similar policies. A formal decision is expected from these councils by October 2026. The NSW planning minister has stated the government will not mandate affordable housing targets statewide but will not prevent councils from introducing their own requirements.