Blanc Black Projects Pty Limited v Willoughby City Council

Legislative context

1. Having regard to the Appeal Decision and the parties' submissions, the relevant provisions to which I must have regard are ss 4.17 and 7.32 of the EPA Act, cl 10 and Sch 2 of State Environmental Planning Policy No 70 - Affordable Housing (Revised Schemes) (SEPP 70) and cl 6.8 of the LEP.
2. Sections 4.17 and 7.32 of the EP&A Act relevantly provide: 4.17 Imposition of conditions (1) Conditions - generally A condition of development consent may be imposed if - … (h) it is authorised to be imposed under section 4.16(3) or (5), subsections (5)-(9) of this section or section 7.11, 7.12, 7.24 or 7.32. … 7.32 Conditions requiring land or contributions for affordable housing (1) This section applies with respect to a development application for consent to carry out development within an area if a State environmental planning policy identifies that there is a need for affordable housing within the area and: (a) the consent authority is satisfied that the proposed development will or is likely to reduce the availability of affordable housing within the area, or (b) the consent authority is satisfied that the proposed development will create a need for affordable housing within the area, or (c) the proposed development is allowed only because of the initial zoning of a site, or the rezoning of a site, or (d) the regulations provide for this section to apply to the application. (2) Subject to subsection (3), the consent authority may grant consent to a development application to which this section applies subject to a condition requiring: (a) the dedication of part of the land, or other land of the applicant, free of cost to be used for the purpose of providing affordable housing, or (b) the payment of a monetary contribution to be used for the purpose of providing affordable housing, or both. (3) A condition may be imposed under this section only if: (a) the condition complies with all relevant requirements made by a State environmental planning policy with respect to the imposition of conditions under this section, and (b) the condition is authorised to be imposed by a local environmental plan, and is in accordance with a scheme for dedications or contributions set out in or adopted by such a plan, and (c) the condition requires a reasonable dedication or contribution, having regard to the following - (i) the extent of the need in the area for affordable housing, (ii) the scale of the proposed development, (iii) any other dedication or contribution required to be made by the applicant under this section or section 7.11. …
3. SEPP 70 (as at 28 February 2019 to 25 November 2021) relevantly provided: … 3 Aims of Policy (1) (Repealed) (2) This Policy: (a) identifies that there is a need for affordable housing across the whole of the State, and … (c) makes a requirement with respect to the imposition of conditions relating to the provision of affordable housing. … 6 Land to which Policy applies This Policy applies to the whole of the State. 7 Relationship to other environmental planning instruments (1) If any other environmental planning instrument, whether made before or after this Policy, contains provisions that are inconsistent with this Policy, this Policy prevails to the extent of the inconsistency, subject to section 3.28(4) of the Act. (2) (Repealed) 8 Definition of "affordable housing" For the purposes of the definition of affordable housing in section 1.4(1) of the Act, very low income households, low income households and moderate income households are those whose gross incomes fall within the following ranges of percentages of the median household income for the time being for the Greater Sydney (Greater Capital City Statistical Area) or the Rest of NSW (Greater Capital City Statistical Area) according to the Australian Bureau of Statistics: Very low income household less than 50% Low income household 50 or more but less than 80% Moderate income household 80-120% 9 Identification of need for affordable housing For the purposes of section 7.32(1) of the Act, this Policy identifies that there is a need for affordable housing within each area of the State. 10 Requirement for imposition of section 7.32 conditions Pursuant to section 7.32(3)(a) of the Act, the following requirement is prescribed with respect to the imposition of conditions under section 7.32 of the Act on development consents: A consent authority is to have regard to the affordable housing principles set out in Schedule 2 before imposing such a condition. Schedule 1 (Repealed) Schedule 2 Affordable housing principles (Clause 10) 1 Where any of the circumstances described in section 7.32(1)(a), (b), (c) or (d) of the Act occur, and a State environmental planning policy or local environmental plan authorises an affordable housing condition to be imposed, such a condition should be imposed so that mixed and balanced communities are created. …
4. As explained in par [11] below, cl 6.8 of the LEP (as it applies to the DA) is as follows: 6.8 Affordable housing (1) For the purposes of this clause, the Willoughby Affordable Housing Principles are as follows - (a) affordable housing must be provided and managed in Willoughby so that accommodation for a diverse residential population representative of all income groups is available in Willoughby, and (b) affordable housing must be rented to tenants whose gross household incomes fall within the following ranges of percentages 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 - Very low income household less than 50% Low income household 50% or more, but less than 80% Moderate income household 80-120% and at rents that do not exceed a benchmark of 30% of their actual household income, and (c) dwellings provided for affordable housing must be managed so as to maintain their continued use for affordable housing, and (d) rental from affordable housing received by or on behalf of the Council, after deduction of normal landlord's expenses (including management and maintenance costs and all rates and taxes payable in connection with the dwellings), and money from the disposal of affordable housing received by or on behalf of the Council must be used for the purpose of improving or replacing affordable housing or for providing additional affordable housing in Willoughby, and (e) affordable housing must consist of dwellings constructed to a standard that, in the opinion of the consent authority, is consistent with the same type of dwellings within the development to which the development application relates, especially in terms of internal fittings and finishes, solar access and privacy. (2) Development consent must not be granted to the erection of residential accommodation on land identified as "Area 3" or "Area 9" on the Special Provisions Area Map unless the consent authority has taken the following into consideration - (a) the Willoughby Affordable Housing Principles, (b) the impact the development would have on the existing mix and likely future mix of residential housing stock in Willoughby, (c) whether one of the affordable housing conditions should be imposed on the consent for the purpose of providing affordable housing in accordance with the Willoughby Affordable Housing Principles. … (3) The following are the affordable housing conditions - … (b) a condition requiring the payment of a monetary contribution to the consent authority by the applicant that is the value, calculated in accordance with subclause (4), of 4% of the accountable total floor space, … (4) The amount of the contribution to be paid under a condition imposed under subclause (2)(c) is the value of the gross floor area concerned calculated by reference to the market value of dwellings of a similar size to those proposed by the development application. … (7) In this clause - accountable total floor space means the following - (a) for development on land identified as "Area 3" on the Special Provisions Area Map - the gross floor area of the residential component of the development, excluding the residential floor space of the development that is used for affordable housing. …
5. As my previous decision in relation to Condition 27 has been set aside, I am required to determine whether the proposed condition can, and should, be imposed on the basis of facts and law as they exist at the present time. In this regard, cl 6.8 of the LEP was the subject of substantial amendment made by the Willoughby Local Environmental Plan 2012 (Amendment No 34) which was made on 30 June 2023 (Amendment 34). I note, however, that by virtue of cl 1.8A(2) of the LEP, as it now stands, the amendments made by Amendment 34 do not apply to a development application made, but not finally determined, before the commencement of that plan. My decision must therefore be made having regard to the provisions of cl 6.8 as they were in force immediately prior to the commencement of Amendment 34. They are the provisions of cl 6.8 set out above.

Expert evidence

1. The expert evidence on the affordable housing contribution was summarised in my earlier judgment at paragraphs [139] to [145]. For convenience, I have repeated those paragraphs below: "[139] The Council's planning expert, Mr Bolduan, prepared an expert report addressing the proposed condition which was filed on 22 December 2021 (Ex 9). His evidence is that cl 6.8(2)(a) of the LEP requires consideration of the Willoughby Affordable Housing Principles but that the DA "does nothing to provide affordable housing or to promote, advance, and achieve the Principles unless the Applicant pays a monetary contribution (as set out in draft Condition 27), because the Applicant seeks to develop a site within Area 3 but does not propose to include any affordable housing at all as part of the proposed development" (Ex 9, par (15)). The payment of a monetary contribution would, on Mr Bolduan's evidence, help promote, advance and achieve the purposes of the Principles by contributing money that would be used by the Council for the purpose of providing, improving or replacing affordable housing within its area. In this regard, there is no dispute between the parties that various studies have identified an existing need for affordable housing within the Willoughby local government area, a need which dates back to well before the commencement of the LEP in 2013. [140] Mr Bolduan says that cl 6.8(3)(b) of the LEP provides that an affordable housing condition may include a condition requiring the payment of a monetary contribution that is the value of 4% of the accountable total floor space. He says that contributions of this amount have been applied within the Willoughby local government area since 1999 and have been imposed on several approvals for residential development given under the LEP. In oral evidence, Mr Bolduan agreed that the Proposed Development would have no impact on the existing mix of housing stock but insists that the Proposed Development will have an impact on the future mix as, without a monetary contribution, it will reduce the funds available to the Council to provide affordable housing in its area. [141] The Applicant relies on an expert report prepared by its planning expert, Stephen Gouge, filed on 28 January 2022 (Ex G). Mr Gouge does not dispute that there is an identified need for affordable rental housing in the Willoughby local government area but says that this need already exists and does not relate to, and has no apparent nexus with, the Proposed Development. His evidence (Ex G, par (11)) is that the Willoughby City Housing Strategy (Housing Strategy), using 2016 census data, identifies a total of 29,993 dwellings in the local government area comprising 13,356 dwelling houses, 4,210 medium density dwellings, 12,261 high density dwellings and a small number of other dwelling types. The Proposed Development will replace two existing dwelling houses with 11 new apartments which, he says, will result in a negligible change in the existing mix of residential housing in the area. [142] The Housing Strategy also indicates that between 1999 and 2005 a total of 10 affordable housing units were provided and, to May 2020, and 35 affordable housing units had been provided for key workers (Ex G, p 401). The Housing Strategy also states that the Council is committed to increasing the number of Council provided affordable housing properties from 22 to 50 by 2023 and to 70 by 2026. [143] In relation to the affordable housing contributions imposed on other development consents, Mr Gouge says that these were either proposed (or not objected to) by the proponents of those developments or were paid in exchange for additional floor space under the LEP. [144] Mr Bolduan prepared a further export report in reply which was filed on 18 February 2022 (Ex 10). His evidence (Ex 10, par 6) is that, whether or not the Proposed Development contributes to the need for affordable housing (he says that it does but does not explain how), "it is undeniable that, in the absence of any monetary contribution being paid by the developer: a. the application does nothing to promote, advance and achieve the Principles; b. the application does nothing to provide any affordable housing to the existing mix of residential housing stock in Willoughby; and c. the application is likely to reduce the provision of affordable housing in the future mix of residential housing stock in Willoughby, because it would result in the development of two rezoned sites without the provision of any affordable housing, which necessarily means that there are two fewer sites in the future which could possibly provide affordable housing in the Willoughby LGA." [145] Mr Bolduan's evidence is that cl 6.8 of the LEP is intended to address the existing deficiency in the availability of affordable rental housing and that all residential development in Area 3 should make a contribution equivalent to 4% of the accountable total floor space regardless of the impact the carrying out of the development has on the availability of affordable housing."
2. The Council drew the Court's attention to other evidence it says is relevant to the Court's consideration of the proposed affordable housing contribution and I have also had regard to that evidence. This comprises: 1. The Applicant's Statement of Environmental Effects (Ex A, Tab 6) at paragraph 4.1.6; 2. The Valuation Consultancy Report prepared by M3 Property (Annexure A to Mr Bolduan's expert report dated 22 December 2021 (Ex 9); 3. The Council's assessment report for the DA (Ex 2, Tab 14, p. 10).

Council submissions

1. The Council submits (CS 3) that the sole issue to be determined on the remitter is whether, having regard to Robson J's reasoning in the Appeal Decision, the Court should now impose an affordable housing condition in the form of Condition 27. According to the Council (CS 4), the "proper application of the relevant principles requires that Condition 27 be imposed".
2. The Council submits (CS 8) that, based on Robson J's reasoning in the Appeal Decision, the only outstanding matter for determination is whether Condition 27 satisfies s 7.32(3)(c) of the EPA Act (s 7.32(3)(c)). The Council says (CS 9) that, where s 7.32(c) is satisfied, then Condition 27 may be imposed under s 7.32 of the EPA Act and therefore should be imposed as required by SEPP 70 (Principle 1 of the Affordable Housing Principles set out in Sch 2).
3. The Council submits (CS 10) that, apart from satisfying the Court of the matters in s 7.32(3)(c), the Council has otherwise satisfied all of the jurisdictional preconditions for the Court to impose an affordable housing contribution: 1. Section 7.32(1): This provision is satisfied because: 1. SEPP 70 identifies that there is a need for affordable housing within each area of the State (i.e. including the Willoughby local government area): see cl 9 of SEPP 70; and 2. the Proposed Development is allowed only because of the rezoning of the Site (s 7.32(1)(c)). The Site was rezoned and now falls within Area 3 on the Special Provisions Area Map in the LEP, which is one of only two areas where an affordable housing contribution may be imposed. 1. Section 7.32(2): This provision is satisfied because proposed Condition 27 is a condition requiring the payment of a monetary contribution to be used for the purpose of providing affordable housing (s 7.32(2)(b)). 2. Section 7.32(3)(a): This provision is satisfied because proposed Condition 27 complies with all relevant requirements made by SEPP 70 with respect to the imposition of affordable housing conditions under s 7.32: Appeal Decision at [46]. 3. Section 7.32(3)(b): This provision is satisfied because proposed Condition 27 is authorised to be imposed by cl 6.8 of the LEP, and is in accordance with the scheme for contributions set out in the LEP: Appeal Decision at [77].
4. The Council provided detailed submissions on whether the requirements of s 7.32(3)(c) are satisfied. Section 7.32(3)(c) provides that an affordable housing contribution may be imposed under that section only if the condition requires a reasonable dedication or contribution having regard to the following - 1. the extent of the need for affordable housing, 2. the scale of the proposed development, 3. any other dedication or contribution required to be made under that section or s 7.11.

The extent of the need for affordable housing (s 7.32(3)(c)(i))

1. In relation to the extent of the need for affordable housing (s 7.32(3)(c)(i)), the Council submits (CS 21) that the parties' town planners agreed that there is a "significant" need for affordable housing in the Willoughby local government area and refers to the evidence of the Applicant's town planner, Mr Gouge, at Tcpt, 22 February 2022, p 40 (34-36) and the evidence of the Council's town planner, Mr Bolduan, in Ex 9 at paragraphs 14, 21 and 26. The Council says (CS 22) there is also support for this view in a number of reports either prepared by or on behalf of the Council. The Council also submits (CS 23) that, by its inclusion in Area 3 of the Special Provisions Area Map in the LEP, the Site has been specifically designated by the Council to contribute to Willoughby's future affordable housing needs, by way of either the provision of dedicated floor space or the payment of monetary contributions. It also says (CS 24) that, if Condition 27 is not imposed, the Proposed Development will have a negative impact on the provision of affordable housing in the Willoughby local government area "because it would result in the development of a site in Area 3 of the Special Provisions Area Map without the provision of any affordable housing, notwithstanding that the site had been specifically designated by Council to contribute to the provision of affordable housing…".
2. In oral submissions, the Council also submits that the wording of s 7.32(3)(c)(i) is "clear and broad" and includes both existing and likely future need. The Council submits that the provision does not require consideration of need generated by the development or to ignore the need that exists at the time the application is made or determined.

The scale of the Proposed Development - s 7.32(3)(c)(ii)

1. The Council submits (CS 27) that the evidence establishes the following matters concerning the scale of the Proposed Development: 1. The development (as approved) comprises 11 units (which are 2 or 3 bedrooms) over basement carparking for approximately 23 car spaces. 2. The Applicant's property expert (M3 Property) estimated that the 2-bedroom units would have an average value of $1.203 million (or $13,456/m2) and the 3-bedroom units would have an average value of $1.793 million (or $17,077/ m2). 3. M3 Property estimated that the gross floor area (GFA) of the development would have a "blended" average market value of $15,500/m2. 4. Therefore, the value of the applicant's development, as estimated by M3 Property, is approximately $21,018,000 (based on a GFA of 1,356m2 and the blended average market value of $15,500/m2). 5. The Applicant's quantity surveyor, Mitchell Brandtman, prepared a DA Cost Report in which the cost of construction of the Proposed Development was estimated to be $5,493,183 excluding GST (or $6,042,501 including GST). 6. Therefore, the Applicant's experts estimate that the Proposed Development will generate a surplus for the Applicant of approximately $15,552,817, before land acquisition costs and other development costs.
2. Based upon this evidence, the Council submits that the affordable housing contribution payable by the Applicant under proposed Condition 27 of approximately $451,980 is a reasonable contribution having regard to the scale of the Proposed Development, which has an estimated value of approximately $21,018,000, and for which the Applicant will incur construction costs of only $5,493,183 (excluding GST).
3. The Council also relies (CS 29) on the evidence of Mr Bolduan that the 4% affordable housing contribution referred to in cl 6.8(3)(b) of the LEP has applied in the Willoughby local government area since 1999, that it has been included in "several approvals for residential development" given under the LEP and has recently been reviewed by independent economists who concluded that it was "an appropriate level of contribution for the subject site".
4. The Council submits (CS 31) that the amount of a monetary contribution calculated in accordance with cl 6.8(3) of the LEP is "inherently reasonable, fair and equitable" because the amount is proportionate to the total value of the Proposed Development. It says (CS 32) that any complaint about the reasonableness of the fixed 4% contribution is really a complaint about the reasonableness of the affordable housing provisions in the LEP, rather than the reasonableness of Condition 27, and that such a complaint is not relevant to the Court's consideration of the reasonableness of Condition 27.
5. In oral submissions, the Council also submitted that a consideration of the scale under s 7.32(3)(c)(ii) is informed by whether the Proposed Development develops to the maximum permitted by the planning controls. Hypothetically, it says that the fact that an application proposes something less than what is permitted may result in the contribution calculated in accordance with the formula in cl 6.8 of the LEP being unreasonable. The Council submits that this is not the case here as the Proposed Development actually exceeds some of the relevant planning controls.

Any other dedication or contribution required under s 7.32 or 7.11 - s 7.32(3)(c)(iii)

1. The Council submits (CS 35, 36) that, as the Applicant has previously conceded that this matter is not relevant to the Court's decision to impose Condition 27, the Court should proceed on the basis that s 7.32(3)(c)(iii) is satisfied.
2. The Council, therefore, submits (CS 37) that the Court should find that Condition 27 requires a reasonable contribution having regard to the matters specified in s 7.32(3)(c). It further submits (CS 38) that, given that Condition 27 satisfies s 7.32(3)(c), it follows that it "also satisfies the second and third limbs of the Newbury test, that is, the condition reasonably relates to the proposed development, and the condition is not unreasonable" (referring to the Appeal Decision at [59]-[60]). I note that the reference to the Newbury test is a reference to the decision in Newbury District Council v Secretary of State for the Environment [1981] AC 578.
3. The Council submits (CS 39, 40) that, since all of the jurisdictional prerequisites for the imposition of the condition have been satisfied, the Court is authorised to impose Condition 27 and further that the Court should now impose Condition 27 "as required by SEPP 70". This is a reference to Principle 1 of the Affordable Housing Principles in Sch 2 of SEPP 70 which provides: 1 Where any of the circumstances described in section 7.32(1)(a), (b), (c) or (d) of the Act occur, and a State environmental planning policy or local environmental plan authorises an affordable housing condition to be imposed, such a condition should be imposed so that mixed and balanced communities are created.

Applicant's submissions

1. The Applicant submits (AS 9) that the remaining issue to be determined is whether the Court can or should impose Condition 27 as a condition of consent having regard to the decision of the High Court in Temwood (Western Australian Planning Commission v Temwood Holdings Pty Ltd (2004) 221 CLR 30; [2004] HCA 63) and s 7.32(3)(b) and s 7.32(3)(c)(i) and (ii). The Applicant says (AS10) that the error identified in the Appeal Decision: "was of a technical nature and that the injunction on the imposition of Condition 27 remains. Namely, there is no sufficient nexus between Condition 27 and the development, and there is no evidence before the Court to satisfy s 7.32(3)(c) of the (EPA Act) or the Newbury test".
2. The Applicant submits (AS 33) that the two considerations for the Court in deciding whether Condition 27 requires a reasonable contribution are the extent of the need for affordable housing and the scale of the Proposed Development and that the Council's evidence on these matters is "hopelessly inadequate". The Applicant says that the fact that not requiring the Applicant to pay an affordable housing contribution will mean that the Council has less funds to expend on the provision of affordable housing does not address the statutory considerations. To properly address those considerations, the Applicant submits that the Council is required to do more than merely rely on what the Applicant describes as "Mr Bolduan's self-evident arguments".
3. The Applicant submits (AS 38, 39) that the reasonableness of Condition 27 is to be determined by reference to both the mandatory considerations in s 7.32(3)(c) and also the Newbury test. In relation to the Newbury test, the Applicant submits that, absent persuasive evidence, Condition 27 does not satisfy the Newbury test that the condition fairly and reasonably relate to the development and not be legally unreasonable. The kernel of the Applicant's argument is set out at AS 39 as follows: "…Merely because a person proposes to carry out development in Area 3 does not automatically expose the development to an affordable housing tax in accordance with the Council's formula. Much more is required to be shown by the Council before the tax can be imposed. Merely because the Council will use the money to provide affordable housing does not mean the tax is thereby reasonable. Merely because there is a need for affordable housing does not make any contribution called for reasonable."
4. The Applicant points out (AS 40) that additional costs to the developer (such as an affordable housing contribution) are passed on to the consumer, thus increasing the cost of housing in Willoughby and says that this is not in the public interest.
5. The Applicant submits (AS 41) that the evidence relied upon by the Council does not enable the Court to consider: 1. whether Condition 27 is fair and reasonably relates to the Proposed Development - the second Newbury test; 2. whether Condition 27 is legally reasonable - the third Newbury test; and 3. on discretionary grounds, whether the Newbury tests have been satisfied.
6. The Applicant rejects the Council's submission (CS 38) that the considerations in s 7.32(3)(c) necessarily address the second and third limbs of the Newbury test. The Applicant submits (AS 43) that this may be the result in some cases, "but not always and not in this case". It says that whether the contribution fairly and reasonably relates to the Proposed Development is not answered solely by reference to s 7.32(3)(c) matters.
7. The Applicant submits (AS 44) that Robson J found that the Newbury test is a "free standing thing" and that, while there may be some overlap between the considerations relevant under s 7.32(3)(c) and the Newbury test, they nevertheless involve separate considerations.
8. The Applicant accepts that there is a need for affordable housing across the Willoughby local government area but says that that need is pre-existing and is neither created nor generated by the Proposed Development (AS 49). The Applicant submits (AS 50), relying on the Appeal Decision at [112], that the nature of the impact of the Proposed Development on the mix of affordable and other housing stock in the Willoughby local government area is a relevant consideration in the assessment of whether Condition 27 fairly and reasonably relates to the development. The Applicant's submission (AS 51) is that the Proposed Development will have no impact on the mix of affordable housing in the Willoughby local government area.
9. The Applicant rejects (AS 55) the Council's submission that the monetary contribution calculated in accordance with cl 6.8(3) and (4) of the LEP is inherently reasonable, fair and equitable. The Applicant says that, while the amount of the contribution may be proportional to the size and value of the Proposed Development, that says nothing about whether the contribution is reasonable and that "(m)ere proportionality does not demonstrate inherent reasonableness". According to the Applicant, proportionality is one factor amongst others that must be considered when considering the reasonableness of the monetary contribution (AS 56).
10. The Applicant submits (AS 60) that a contribution fixed at 4% of the accountable floor space is not a reasonable contribution when the Proposed Development will have no material impact on the mix of affordable housing in the Willoughby local government area and has no relevant nexus to the Proposed Development.
11. The Applicant further submits (AS 67) that Principle 1 of the Affordable Housing Principles in Sch 2 of SEPP 70 does not create any 'requirement' to impose an affordable housing condition as Robson J held (at [137]) that the principle is to be read as "leaving the decision-maker with discretion to consider other statutorily mandated matters, rather than constituting an automatic trigger for the imposition of a condition if s 7.32(1) is satisfied". The critical inquiry, the Applicant submits (AS 67), is whether Condition 27 is reasonable in the sense required by s 7.32(3)(c) and the Newbury test and the Applicant submits that it is not.

Council's reply submissions

1. The Council submits (CRS 4) that the effect of Robson J's order setting aside "so much of the judgment of the Commissioner as determined that Condition 27 not be imposed" means that pars [154]-[172] in the section entitled "Findings on affordable housing contribution" in my earlier judgment have been set aside and that the Court would fall into legal error again if it were to rely on any of those parts of its initial decision in re-determining the matter on the remitter. It says (CRS 5) that the remitter requires proper consideration of the issue "free of the errors found on appeal".
2. The Council submits (CRS 7, 8) that the Appeal Decision requires the Court to expressly and discretely consider the matters listed in s 7.32(3)(c) and that the Court cannot simply rely upon or reinstate its previous findings.
3. In relation to the Newbury test, the Council submits (CRS 11) that the Court should determine the reasonableness of proposed Condition 27 as follows: 1. It is first and foremost necessary for the Court to consider whether Condition 27 satisfies s 7.32(3)(c) of the EPA Act, in particular sub-paragraphs (i) and (ii) of s 7.32(3)(c) which are mandatory considerations; 2. The Court then has a "discretion" to consider whether the proposed condition complies with the Newbury tests, which may be considered as a matter incidental to consideration of s 7.32(3)(c); 3. An exclusive reliance on the Newbury tests cannot ground consideration of the discrete matters set out in s 7.32(3)(c); 4. The matters in s 7.32(3)(c) are "reflective of" and "pick up" the requirements of reasonableness in the second and third Newbury tests; and 5. The nature of the impact of the Proposed Development on the mix of affordable and other housing stock in the Willoughby local government area is a relevant matter to consider in determining whether Condition 27 fairly and reasonably relates to the development; however, the Court cannot consider that matter to the exclusion of the mandatory matters in s 7.32(3)(c).
4. The Council, in oral submissions, said that the question of whether there is a sufficient nexus between the Proposed Development and the need for an affordable housing contribution is largely subsumed into the language of s 7.32(3)(c). The Council's submission is that the fact that the Site has been rezoned and is included in Area 3 of the Special Provisions Area Map in the LEP is a complete answer to the nexus question. It is that rezoning, the Council says, that triggers the engagement of an affordable housing condition, not any impact on the mix resulting from the Proposed Development.
5. The Council rejects (CRS 12 to 15) the Applicant's complaint concerning the evidence required to enable the Court to consider the matters in s 7.32(3)(c) being either absent or "hopelessly inadequate". It says that the Applicant has not explained why the evidence relied on by the Council is inadequate and does not identify any further evidence which it says the Council should have or could have adduced but did not (CRS 13). The Council says (CRS 14) that the Applicant has conceded that there is a need for affordable housing across the Willoughby local government area and that no further evidence is necessary to address s 7.32(3)(c)(i). In relation to s 7.32(3)(c)(ii), the Council submits (CRS 15) that the Court does not need any further evidence about the scale of the Proposed Development. It says the relevant evidence is summarised in CS at (26)-(33) and that the Applicant has not addressed that evidence at all in its submissions except to submit that the evidence does not identify whether there will be a surplus once land acquisition and other development costs are accounted for. The Council submits that those costs are a matter peculiarly within the Applicant's own knowledge and that, if the Applicant sought to argue that Condition 27 was not reasonable because it could not afford to pay the contribution from the surplus from the development, it could have adduced evidence to that effect but did not. The Council submits that, from that failure, it is to be inferred that such evidence would not have assisted the Applicant's case. The Council submits that there is ample evidence to enable the Court to have regard to the scale of the Proposed Development in deciding whether to impose an affordable housing contribution.
6. In relation to reasonableness, the Council submits that the Court must first consider reasonableness in the context of s 7.32(3)(c) which, as explained by Robson J at [60] of the Appeal Decision, involves a consideration of whether the condition would impose an unreasonable burden upon the Applicant. The Council then submits (CRS 20) that the Applicant does not submit, and has not adduced evidence to prove, that the proposed condition would impose an unreasonable burden on it.
7. The Council also submits (CRS 22) that the evidence establishes a significant existing need for affordable housing in the Willoughby local government area and that this need "demonstrates the reasonableness of proposed Condition 27, on the basis that the affordable housing contribution is reasonably required to fund the provision of affordable housing in the Willoughby local government area".
8. The Council submits (CRS 23) that s 7.32(3)(c) does not require the Court to consider the impact of the Proposed Development on the mix of affordable and other housing in the Willoughby local government area. It says that that matter is not referred to in that section and that, if the Court considers it at all, "it may do so only as a subsidiary, discretionary matter and only after it has considered the mandatory matters in s 7.32(3)(c)(i) and 7.32(3)(c)(ii)". In oral submissions, the Council questioned what additional work the second limb of the Newbury test has to do where it says that Robson J has found that the second and third limbs appear to be "relevantly subsumed" in s 7.32(3)(c).
9. The Council further submits (CRS 24) that whether the Proposed Development would have any impact on the mix of affordable and other housing cannot be determinative of the reasonableness of the condition. It says that such an outcome would be contrary to the express terms of s 7.32(1) which expressly provides that an affordable housing condition may be imposed where a development is allowed only because of the rezoning of the site and even if the Proposed Development would not reduce the availability of affordable housing or create a need for affordable housing in the area. The Council says (CRS 25) that the impact of the Proposed Development on the mix of affordable and other housing is (at most) a "subsidiary and discretionary matter" that can only be considered after the mandatory matters in s 7.32(3)(c)".
10. In oral submissions, the Council submits that the Appeal Decision makes it clear that any matters concerning the impact of the Applicant's development on the existing and likely future mix of affordable and other housing in Willoughby local government area is not relevant to any issue remaining for consideration in the appeal because cl 6.8(2) of the LEP is expressly directed to consideration of affordable housing in the exercise of the power to grant consent, and not on the exercise of the power to impose conditions. When pressed, the Council clarified that such an impact could be permissibly considered but that it was not a mandatory consideration. The Council's submission is that, even if the Court finds that there is no evidence of the impact of the Proposed Development on the mix, that would not preclude the imposition of the condition.
11. The Council submits (CRS 26) that the proportionality of the 4% contribution (which it says is accepted by the Applicant) also weighs in favour of the Court finding that the proposed condition is reasonable.
12. It also submits (CRS 29) that, ultimately, the Applicant's complaints about the supposed unreasonableness of proposed Condition 27 focus on one matter only: the Applicant's claim that its Proposed Development "will have no material impact on the mix of affordable housing in the Willoughby LGA". Even if that is correct (which Council does not accept), that matter would not outweigh the mandatory matters which weigh in favour of the imposition of Condition 27, and which demonstrate the reasonableness of the proposed condition, namely the significant need in the Willoughby local government area for affordable housing (s 7.32(3)(c)(i)), and the relatively large scale of the Proposed Development which is of sufficient size and value to require the payment of the proposed affordable housing contribution (s 7.32(3)(c)(ii)), and the fact that the Applicant's site had been specifically designated by Council to contribute to the provision of affordable housing in Willoughby by reason of its rezoning as R3 Medium Density Residential and its inclusion in Area 3 of the Special Provisions Area Map (thus satisfying s 7.32(1)(c) of the EPA Act).
13. Finally, the Council submits (CRS 30) that, taking into account the mandatory matters in s 7.32(3)(c) of the EPA Act, and applying the correct test set out by Robson J in par [80] of the Appeal Decision, the Court should find that proposed Condition 27 is reasonable because it requires a reasonable quantum of contribution for the provision of affordable housing in the Willoughby local government area, and it would not impose an unreasonable burden upon the Applicant.

An affordable housing condition should be imposed

1. For the reasons that follow, I have decided that an affordable housing condition should be imposed.
2. Section 4.17(1)(h) of the EPA Act provides that a condition of consent may be imposed if it is authorised to be imposed under, amongst other provisions, s 7.32.
3. Section 7.32(1) of the EPA Act provides as follows: (1) This section applies with respect to a development application for consent to carry out development within an area if a State environmental planning policy identifies that there is a need for affordable housing within the area and - (a) the consent authority is satisfied that the proposed development will or is likely to reduce the availability of affordable housing within the area, or (b) the consent authority is satisfied that the proposed development will create a need for affordable housing within the area, or (c) the proposed development is allowed only because of the initial zoning of a site, or the rezoning of a site, or (d) the regulations provide for this section to apply to the application.
4. I observe that subss (a) and (b) of s 7.32(1) rely on there being a relationship or nexus between the proposed development and the demand for affordable housing, either because the proposed development will reduce the availability of affordable housing (s 7.32(1)(a)) or because it will create a need for affordable housing (s 7.32(1)(b)). In this context, it is apparent that the only relationship or 'nexus' required by s 7.32(3)(c) is that the proposed development is allowed only because of the initial zoning of a site, or the rezoning of a site. This, in my view, is a significant point of difference between subss (a) and (b), on the one hand, and subs (c) on the other. Section 7.32(1)(c) does not require any relationship or nexus between the proposed development and the need for affordable housing in the area.
5. For completeness, I note that no regulations have been made under s 7.32(1)(d).
6. I find that s 7.32 applies to the DA because, having regard to the matters set out in s 7.32(1): 1. The DA seeks consent to carry out development within the Willoughby local government area; and 2. A State environmental planning policy, SEPP 70, identifies that there is a need for affordable housing within each area of the State, including the Willoughby local government area; and 3. the Proposed Development is allowed only because of a rezoning of the Site. This is the agreed position of the parties. In this regard, I note that, prior to the making of the LEP on 31 January 2013, the Site was within Zone 2(a)-Residential "A" under the Willoughby Local Environmental Plan 1995. Development for the purpose of residential flat buildings was not permitted on land within that zone. Under the LEP, the Site was rezoned and included within Zone R3 Medium Density Residential in which development for the purpose of a residential flat building became permitted with development consent. The LEP also included the Site in Area 3 on the Special Provisions Area Map, which is one of two areas within the Willoughby local government area in which an affordable housing condition may be imposed.
7. In relation to s 7.32(2) of the EPA Act, I am satisfied that the proposed affordable housing condition (Condition 27) is a condition requiring the payment of a monetary contribution to be used for the purpose of providing affordable housing. That purpose is expressly stated in the proposed condition: "The applicant shall make a monetary contribution for the purpose of providing Affordable Housing… ".
8. In relation to s 7.32(3)(a), the parties agree, and I am satisfied, that the proposed condition would comply with all relevant requirements made by a State environmental planning policy with respect to the imposition of the proposed condition. SEPP 70 is the only State environmental planning policy that specifies requirements with respect to the imposition of a condition under s 7.32. Clause 10 of SEPP 70 requires me to have regard to the affordable housing principles set out in Sch 2 of SEPP 70 before an affordable housing condition is imposed and housing principle 1 provides that, where any of the circumstances described in s 7.32(1)(a), (b), (c) or (d) of the EPA Act occurs and a State environmental planning policy or local environmental plan authorises an affordable housing condition to be imposed, such a condition "should be imposed" so that mixed and balanced communities are created. I have also had regard to the other affordable housing principles contained in Sch 2 of SEPP 70; however, these are concerned with the management of affordable housing and do not specify any considerations relevant to whether an affordable housing contribution can be imposed.
9. Before imposing the proposed condition, I must also be satisfied that the condition is authorised to be imposed by the LEP (s 7.32(3)(b)). Condition 27 requires the payment of a monetary contribution for the purpose of providing affordable housing that is calculated at 4% of the "accountable total floor area" of the development and such a condition falls within the range of affordable housing conditions that can be imposed in accordance with cll 6.8(3) and 6.8(4) of the LEP and is therefore authorised to be imposed by, and will be in accordance with the scheme for contributions set out in, the LEP.
10. Section 7.32(3)(c) provides that a condition may be imposed under that section only if the condition requires a reasonable dedication or contribution, having regard to: 1. the extent of the need in the area for affordable housing (s 7.32(3)(c)(i)); 2. the scale of the proposed development (s 7.32(3)(c)(ii)); and 3. any other dedication or contribution required to be made by the Applicant under ss 7.32 or 7.11 (s 7.32(3)(c)(iii)).
11. I note that the impact, or lack of impact, of the Proposed Development on the demand for affordable housing or on the mix of affordable and other housing, in the area is not a matter expressly referred to in s 7.32(3)(c) as a matter to which regard must be had in determining whether a condition requires a reasonable contribution.
12. In relation to s 7.32(3)(c)(i), I find that the extent of the need for affordable housing in the Willoughby local government area is significant. The parties' town planners agreed that there is a "significant" need for affordable housing in the Willoughby local government area (see the evidence of Mr Gouge, at Tcrpt, 22 February 2022, p 40 (34-36) and the evidence of Mr Bolduan, in Ex 9 at paragraphs 14, 21 and 26). In my view, the need referred to in this provision includes both existing and likely future need. Contrary to the Applicant's submission, there is no warrant, in my view, for reading down the plain language used in the provision to exclude existing need. Where the extent of the need for affordable housing in the area has been identified as significant, I am satisfied that the proposed condition would be a reasonable contribution for that purpose.
13. In deciding whether Condition 27 requires a reasonable contribution for affordable housing, s 7.32(3)(c)(ii) requires me to have regard to the scale of the Proposed Development. The Proposed Development involves the demolition of the two existing dwelling houses on the Site and the erection of a four-storey residential flat building comprising 11 apartments (which are 2 or 3 bedrooms) over basement carparking for approximately 23 car spaces. The Proposed Development exceeds the height control contained in cl 4.3 of the LEP and, in my earlier judgment, I upheld the Applicant's written request under cl 4.6 seeking to justify the contravention of the height standard (at [30] to [55]). I also rejected the Council's contention that the Proposed Development was an overdevelopment of the Site (at 76] to [79]).
14. The Council also relied on a range of evidence in relation to the estimated value of the Proposed Development (set out at [20] above). This evidence establishes that the value of the Proposed Development will be approximately $21,018,000 (based on a GFA of 1,356m2 and the blended average market value of $15,500/m2) and will generate a surplus for the Applicant of approximately $15,552,817, before land acquisition costs and other development costs. The Applicant was critical of the Council for not identifying those costs and says the evidence does not identify if there will in fact be any surplus once land acquisition costs and other development costs are taken into account. It says the Council bears the onus of establishing that the proposed contribution is reasonable.
15. There is no formal onus of proof in a Class 1 merit appeal. However, as Preston CJ observed in Australian Protein Recyclers Pty Ltd v Goulburn Mulwaree Shire Council [2006] NSWLEC 641 at [2]: "… an applicant for development consent always bears a persuasive burden of proof: the applicant must persuade the consent authority, whether it be the council at first instance or the Court on appeal, that development consent ought to be granted. This persuasive burden includes providing information and arguments that relevant environmental impacts can be satisfactorily addressed."
16. The Applicant did not submit that the imposition of Condition 27 would impose an unreasonable financial burden on the Applicant and there is no evidence before the Court that it would. However, the extent of the surplus on the carrying out of the Proposed Development seems to me to be relevant only to that issue: the extent of the surplus (rather than the total construction costs) is not, in my view, itself evidence of the "scale" of the Proposed Development.
17. In oral submissions, the Council submitted that a consideration of the scale under s 7.32(3)(c)(ii) will also be informed by whether the Proposed Development develops to the maximum permitted by the planning controls. Hypothetically, it says that the fact that an application proposes something less than what is permitted may result in the contribution calculated in accordance with the formula in cl 6.8 of the LEP being unreasonable. The Council submits that this is not the case here as the Proposed Development actually exceeds some of the relevant planning controls. Those submissions are, with respect, inconsistent with the wording of cl 6.8, which authorises the imposition of an affordable housing contribution of 4% of the "accountable total floor space" of the development actually proposed by an applicant, not of some notional or hypothetical maximum permitted development. The definition of "accountable total floor space" simply excludes from the calculation any area of the development that will be used for affordable housing.
18. I find that the evidence establishes that the Proposed Development, comprising 11 apartments and with an estimated value of approximately $21 million, will be of a substantial scale.
19. There will be situations in which such a finding will be directly relevant to the consideration of whether a proposed contribution for affordable housing is reasonable. However, it seems to me that a consideration of scale is of less relevance where, as here, the scheme for contributions established by the LEP involves a calculation based on a fixed percentage of the value of the GFA of the proposed development. A contribution based on 4% of the accountable total floor space of the proposed development must have been considered to be reasonable, as a proportion of the cost of the development, when the LEP was made and that will be the case whether the contribution is 4% of $2m or 4% of $20m.
20. The Applicant submits that merely because the contribution is proportional to the size and value of the development says nothing about whether the amount of the contribution is reasonable and that mere proportionality does not demonstrate reasonableness. It further submits that proportionality is only one factor "amongst others" that must be considered when considering the reasonableness of the contribution. However, the only additional matter the Applicant says makes the contribution unreasonable is the absence of any impact by the Proposed Development on the mix of affordable and other housing. For the reasons given below at [79] that is a matter that cannot outweigh my conclusion that the contribution is reasonable having regard to the statutory considerations contained in s 7.32(3)(c).
21. My conclusion therefore is that a contribution of 4% of the accountable total floor space of the Proposed Development would be a reasonable contribution having regard to both the significant need for affordable housing in the Willoughby local government area (s 7.32(3)(c)(i)) and the substantial scale of the Proposed Development (s 7.32(3)(c)(ii)).
22. Finally, s 7.32(3)(c)(iii) requires a consent authority to have regard to any other dedication or contribution required to be made by the Applicant under ss 7.11 or 7.32. Neither party submits that there is any other dedication or contribution to be made by the Applicant under either of these provisions that is of relevance to the DA.
23. As each of the statutory preconditions set out in s 7.32(3)(a), (b) and (c) have been met, I therefore conclude that, in accordance with s 7.32(3), Condition 27 may be imposed.
24. In the Appeal Decision, Robson J held (at [53]) that, aside from the mandatory considerations set out in s 7.32(3)(c), the use of the expression "having regard to" is permissive and leaves it open for a decision-maker to take into account other relevant circumstances. His Honour went on to explain (at [61]) that the other matters that may be taken into account include what has become known as the Newbury test. That test is well known and has been applied regularly in decisions of this and other Courts. The test was formulated by McHugh J in Temwood as follows (at [57]): "… A condition attached to a grant of planning permission will not be valid therefore unless: 1. The condition is for a planning purpose and not for any ulterior purpose. A planning purpose is one that implements a planning policy whose scope is ascertained by reference to the legislation that confers planning functions on the authority, not by reference to some preconceived general notion of what constitutes planning. 2. The condition reasonably and fairly relates to the development permitted. 3. The condition is not so unreasonable that no reasonable planning authority could have imposed it."
25. It is clear from the Appeal Decision, however, that the role of the Newbury test in relation to Condition 27 is a limited one. At [58], his Honour explains that the validity of a condition "is primarily governed by the statutory scheme comprised by the EP&A Act and any applicable local environment plan and state environmental planning policy". His Honour then refers to the decision of Craig J in Cavasinni Constructions Pty Ltd v Fairfield City Council (2010) 173 LGERA 456; [2010] NSWLEC 65 noting that in that case Craig J held that the Newbury tests were additional to the requirements under the applicable statute, and that the proposed condition must be considered, first, by reference to the relevant statutory requirements; and second, "so far as is necessary to address the language of the provision", by reference to the Newbury tests.
26. Robson J held (at [60]) "that s 7.32(3)(c) picks up the second and third Newbury tests (that a condition must reasonably relate to the development and must not be unreasonable) which could therefore permissibly inform the Commissioner's consideration of the provision." His Honour later said (at [112]) that "…in circumstances where Condition 27 addresses affordable housing needs, I consider that the nature of the impact of the proposed development on the mix of affordable and other housing stock in the Willoughby local government area was a relevant consideration to an assessment of whether Condition 27 fairly and reasonably related to the development".
27. The Applicant relies on my previous factual finding that the Proposed Development would not have any material impact on the mix of affordable and other housing in the Willoughby local government area, (which it points out was not disturbed by the Appeal Decision), to support its submission that Condition 27 cannot be said to fairly and reasonably relate to the Proposed Development.
28. I do not accept the Applicant's submission. While the impact of the Proposed Development on the mix of housing is a relevant matter for consideration both under cl 6.8(2)(b) of the LEP (but only in relation to whether development consent should be granted) and also in relation to whether Condition 27 fairly and reasonably relates to the Proposed Development under the second limb of the Newbury test, I find that, having regard to the clear language of s 7.32(1)(c), this consideration should be given little weight in deciding whether the condition should be imposed. As I pointed out at par [55] above, the only relationship required by s 7.32(1)(c) is whether the Proposed Development is allowed only because of the initial zoning of a site, or the rezoning of a site. Section 7.32(1)(c) does not require any nexus between the Proposed Development and the need for affordable housing in the area and I agree with the Council that, in those circumstances, a decision to not impose Condition 27 because of the lack of impact on the mix of housing in the area would be contrary to the express terms of s 7.32(1)(c).
29. The Applicant also submits that, merely because a person proposes to carry out development in Area 3 "does not automatically expose the development to an affordable housing tax in accordance with the Council's formula". It says that much more needs to be shown before an affordable housing contribution can be imposed. In this regard, I understand the Applicant's submission to be that it needs to be shown that the Proposed Development will itself impact on the need for or availability of affordable housing in the area or on the mix of affordable and other housing in the area. This type of nexus has been an important consideration in determining the reasonableness of conditions requiring the dedication of land or payment of monetary contributions under s 7.11 of the EPA Act (and its predecessors). However, the plain language of s 7.32(1)(c) cannot be ignored and, in my view, must be taken to mean that, where a proposed development is permitted only because of the initial zoning of a site or the rezoning of a site, any nexus between the proposed development and the need for or availability of affordable housing (which are expressly relevant under s 7.32(1)(a) and (b)) or on the mix of affordable and other housing in the area, should be given little weight in deciding whether an affordable housing condition is reasonable and should be imposed.
30. The Applicant also submits that it would not be in the public interest to impose Condition 27 because it is a cost that will inevitably be passed on to the consumer thereby increasing the cost of housing in the area. In my view, however, there is a greater public interest in funding the provision of affordable housing and this outweighs any negative impact the imposition of the condition might have on the cost of the housing being directly provided by the Proposed Development.
31. Clause 10 of SEPP 70 states that a consent authority is to have regard to the affordable housing principles set out in Sch 2 of that policy before imposing a condition under s 7.32 of the EPA Act. Relevantly, Principle 1 of Sch 2 provides: Where any of the circumstances described in section s 7.32(1) (a), (b), (c) or (d) of the Act occur, and a state environmental planning policy or local environmental plan authorises an affordable housing condition to be imposed, such a condition should be imposed so that mixed and balanced communities are created.
32. As I have found that the circumstances described in s 7.32(1)(c) have occurred and that an affordable housing condition is authorised to be imposed by cl 6.8 of the LEP, Principle 1 of the affordable housing principles provides that Condition 27 "should be imposed". As Robson J pointed out (at [137]), SEPP 70 provides that the condition should, rather than must, be imposed and I accept that I retain the discretion to consider other relevant matters in deciding whether to impose the condition. (Emphasis added.) However, having found that the condition is reasonable having regard to the matters set out in s 7.32(3)(c), I am satisfied that Condition 27 should be imposed and that there is no other relevant consideration, whether arising under the Newbury test or otherwise, that warrants a different result.
33. It remains to consider the wording of Condition 27. I note that the Consent now already contains a Condition 27 so the proposed affordable housing condition, although referred to throughout this judgment and the parties' submissions as "Condition 27", will need to be renumbered. I have renumbered the condition as "Condition 27A". As originally drafted, the condition required payment of the contribution "prior to release of the construction certificate". The Court has been informed that the construction certificate has already been released and that construction of the Proposed Development has commenced. The Council proposed that the condition be amended to require payment within 90 days of the date of this decision. The Applicant objected to this and proposed that the condition be amended to require payment prior to the release of the occupation certificate. It says that the development is now "well under way" and that a requirement to pay the contribution within 90 days would be onerous, although there was no evidence of this. Nevertheless, the Council did not provide any explanation as to why the Applicant's proposed condition would prejudice it and, in my assessment, the amended condition proposed by the Applicant will still ensure that the affordable housing condition is paid to the Council before the Proposed Development is occupied. In those circumstances, I have decided to amend the condition in the manner proposed by the Applicant.

Orders

1. The Court orders that: 1. The appeal is upheld. 2. The development consent granted by this Court on 17 March 2022 (Council reference DA-2021/90) is, from the date of these orders, subject to the following condition: 27A Affordable Housing Monetary Contribution The applicant shall make a monetary contribution for the purpose of providing Affordable Housing that is calculated at 4% of the accountable total floor area of the development to Council. In calculating the monetary contribution reference is to be made to the market value of dwellings of a similar size and taken from the most recent median sales price of such dwellings for the Willoughby local government area as documented in the Rent and Sales Report NSW published by Housing NSW or, if another document has been approved for that purpose by the Director-General, that document. Prior to payment of the contribution evidence shall be submitted to Council's Director of Planning & Infrastructure demonstrating how the contribution has been calculated in accordance with the above requirement. The contribution is to be paid prior to release of the occupation certificate. 1. As a consequence of the addition of Condition 27A, development consent DA-2021/90 is now subject to the consolidated conditions of consent set out in Annexure A.

Acting Commissioner of the Court Annexure A (374003, pdf)

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 24 October 2023