NSW's low and mid-rise housing reforms promise 112,000 new homes, but feasibility constraints, local council resistance and affordable housing time limits mean the missing middle will deliver less than advertised.
The Sydney Times Desk is a contributing writer covering opinion and public affairs for The Sydney Times.
The NSW Government's Low and Mid-Rise Housing Policy is the most significant residential planning reform in the state in over 30 years. It is also, in its current form, unlikely to deliver the volume or affordability of housing that Sydney needs.
The policy, enshrined in Chapter 6 of the State Environmental Planning Policy (Housing) 2021, allows duplexes, terraces, manor houses and low-rise apartment buildings up to six storeys within 800 metres of transport hubs and town centres. The NSW Department of Planning estimates that the policy could unlock an estimated 112,000 new homes across Greater Sydney, the Hunter, the Central Coast and the Illawarra-Shoalhaven over a five-year horizon.
This trajectory is intrinsically tied to the state's obligations under the National Housing Accord, which mandates a target of 1.2 million homes by mid-2029. The policy targets land within 800 metres walking distance of specified train stations, Metro stations and town centres. Stage 1, which commenced on 1 July 2024, legalised dual occupancies and semi-detached dwellings across all R2 Low Density Residential zones. Stage 2, which came into effect on 28 February 2025, activated the mid-rise provisions, legalising terraces and apartment buildings up to six storeys.
The theory is compelling. Sydney is one of the least dense cities in the world, but fewer than half of councils allow for low and mid-rise residential buildings in areas zoned for such homes. The policy aims to reintroduce housing diversity into the market, increase capacity for more new homes, and rebalance growth around key town centres and train stations across NSW.
The gap between policy and delivery is feasibility. The NSW Government's own data shows that NSW was tracking about 40 percent behind the rate required to meet the National Housing Accord target of 377,000 homes by mid-2029 as of July 2026. The Bathla collapse earlier this year put in stark relief the difficulties facing the construction sector. Building density in locations where buyers will pay a premium is one way to avoid those pitfalls, but it does not address the underlying problem of construction costs, labour shortages and financing constraints.
Professor Chris Pettit from UNSW City Futures Research Centre told The Age that the scale of new housing earmarked under the planning scheme represented a significant step up from current densities in many inner and middle suburbs of Sydney. However, he also noted that the affordable housing mechanisms in the scheme, which require new builds to offer discounted rates for only 15 years rather than in perpetuity, may not present the long-term solutions required to ease Sydney's housing affordability woes. "This is likely to be less effective at delivering permanent affordable housing, and in fact, it may make matters worse," he said.
Ku-ring-gai Council has successfully lobbied the Department of Planning, Housing and Infrastructure to gazette a local minimum lot size of 1,015 square metres for dual occupancies on 31 October 2025, supported by a 0.5:1 FSR limit. This effectively renders the development of attached dwellings and terraces on standard 600-800 square metre suburban blocks illegal, bypassing the SEPP's intent.
The Ku-ring-gai DCP also leverages extreme deep soil and topographical mandates to suppress the financial viability of Part 4 residential flat buildings. The DCP demands expansive deep soil zones capable of supporting large canopy trees, ostensibly justified by the necessity to absorb increasing surface runoff and prevent downslope erosion. When these DCP requirements are stacked on top of the Apartment Design Guide's non-negotiable requirements for building separation, solar access and natural cross-ventilation, the permissible three-dimensional building envelope shrinks drastically.
The physical reality is that on standard 15-to-20-metre-wide suburban allotments, the geometric convergence of ADG separation distances and DCP side setbacks leaves an internal floor plate that is simply too narrow to efficiently accommodate underground ramping, lift cores and profitable apartment layouts. Consequently, while the SEPP theoretically permits dense mid-rise housing, the combined statutory weight of the ADG and local DCPs actively suppresses the financial viability of these projects.
Leichhardt Matters, a community action group in the Inner West, says that the Inner West Council's Our Fairer Future Plan and the state government's Low and Mid-Rise Housing Policy will double the suburb's population from 15,000 to 30,000 without corresponding investment in infrastructure. "Leichhardt is totally slammed; we have three different planning instruments coming at us," said Doodie Herman, a Leichhardt resident and member of Leichhardt Matters. "They are talking about mowing down a completely functioning suburb with heritage areas and strong character; it doesn't make any sense."
The group argues that the idea that private developers will deliver abundant, affordable housing is an oxymoron. Private developers are not going to build housing that does not stack up financially. The result is likely to be gentrification and displacement rather than affordable housing, as existing affordable stock is demolished and replaced with market-rate apartments.
The missing middle debate is really about three things. First, it is about whether the private market can deliver affordable housing without government intervention. The evidence from 30 years of market-led housing delivery in Australia is that it cannot. Second, it is about whether density without infrastructure is sustainable. Building 10,000 new homes in Leichhardt without upgrading schools, parks, public transport and community facilities is a recipe for congestion and community backlash. Third, it is about whether affordable housing requirements are meaningful if they expire after 15 years.
The NSW Government has taken steps in the right direction, but the reforms need to go further. Affordable housing requirements should be in perpetuity, not 15 years. The Housing Delivery Authority should have the power to compulsorily acquire land for public and affordable housing where the private market fails to deliver. Planning regulations should be simplified to reduce compliance costs and speed up approvals. And the NSW Government should invest directly in social housing rather than relying on the private market to deliver affordable homes through inclusionary zoning.
The missing middle is a good idea in principle. In practice, it is being undermined by local council resistance, feasibility constraints and affordable housing time limits that make the policy less effective than advertised. If the NSW Government is serious about delivering 377,000 homes by 2029, it needs to do more than change planning laws. It needs to invest in the construction system, the skills pipeline and the social housing stock that the market will never deliver on its own.
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