Micro Nest No 1 Pty Ltd on behalf of Micro Nest Ashfield Trust v Inner West Council

Land and Environment Court (NSW)|2019-05-08

t Council (Respondent) Representation: Counsel: J Smith (Applicant)

Solicitors: McKees Legal Solutions (Applicant) M Bonanno, Inner West Council (Respondent) File Number(s): 2018/297316 Publication restriction: No

Judgment

COMMISSIONER: At 33 Chandos Street, Ashfield, development consent was granted for the demolition of existing structures and the construction of a four storey boarding house containing 29 boarding rooms and basement car parking. The consent was granted by the Court on 16 March 2018 after an agreement was reached between Chandos House Pty Ltd and Inner West Council ("the Council") following a conciliation conference held pursuant to s 34 of the Land and Environment Court Act 1979 ("the LEC Act"). The grant of development consent was subject to conditions. Condition H(1)(f) limits the number of occupants to 34, and condition G(16) requires the creation of a covenant on title that restricts the income level of the occupants and the rent that can be charged to them.

Micro Nest seeks to increase the number of occupants to 50 plus the manager's room, which it submits makes it consistent with the development consent and with the sizes of the boarding rooms.
The terms of condition G(16) that is sought to be deleted are: "(16) SEPP ARH rent compliance A Positive Covenant under Section 88E of the Conveyancing Act shall be created on the title of the property providing that while the property is being used as a boarding house: (i) the only persons to whom accommodation within the boarding house will be offered shall be those who have a household income that is equal to or less than 120% of the Median Equivalised Total Household Income (Weekly) for Ashfield for the most recent year published, as published by the Australian Bureau of Statistics; (ii) the rent which the owner or operator of the boarding house will charge shall not exceed 40% of that income on rent;"
At the conclusion of the hearing, I granted leave to Micro Nest to amend the modification application to include an amendment to condition 1 of the development consent to incorporate an updated BASIX certificate. Whilst a BASIX certificate accompanied the original development application, it does not appear to have been updated to reflect the amended plans that were the subject of the consent, and there is no reference to a BASIX certificate in the conditions of development consent. The Council consents to the modification application insofar as it concerns updating the BASIX certificate and inserting a reference to an updated BASIX certificate in condition 1 of the development consent. The updated BASIX certificate was filed on 21 May 2019.
The Council opposes both of the other modifications sought. It contends that the deletion of condition G(16) modifies the development such that it is not substantially the same as the development for which consent was granted. It also says that it is not in the public interest to remove condition G(16), and that the removal of that condition will increase the demand for on-site parking. The Council also opposes the increase in occupants, although it conceded in opening submissions that the number of occupants in condition H(1)(f) "probably is an error".
For the reasons set out below, I have determined that the change to the occupancy numbers is appropriate to correct a minor error, misdescription or miscalculation. I have also determined that the proposed development, as modified by the removal of condition G(16), is substantially the same as the development for which consent was granted and that there is therefore power to grant the application. I have found that there is no requirement in the relevant state policy or in the definition of "boarding house" to restrain occupancy to people in certain income brackets or to keep rents at a certain rate, and that the evidence does not support the Council's contentions that the removal of condition G(16) will reduce access to affordable housing, reduce social inclusion or result in a development for which there is inadequate parking.

The site and the development consent

The site is located on the southern side of Chandos Street in Ashfield. It comprises a single allotment legally defined as Lot 39 in DP 666374 and known as 33 Chandos Street. It is approximately 696.77m2 and is generally rectangular in shape with a frontage of 15.24m and a depth of 45.72m.
The site presently accommodates a single storey face brick dwelling house and a single storey brick garage.
The immediate locality is predominantly characterised by 2-storey residential flat buildings, which are located adjacent the site to the east, south and south-west. There are also a small number of 2-storey dwelling houses, located to the west of the site. The site is situated approximately 500m from Ashfield train station, and around 400m from a local bus stop.
The development consent (as amended by further orders made on 20 March 2018, 19 April 2018 and 4 June 2018) is described in the preamble to the conditions as follows: "Description of Work as it is to appear on the determination: Demolition of existing structures and construction of a three-storey boarding house with attic accommodation comprising:- (a) Twenty eight boarding rooms accommodating a maximum of 50 lodgers; (b) One manager's room accommodating a maximum of 2 lodgers; (c) A communal room; (d) A basement car park accommodating 7 vehicle spaces of which 2 spaces are accessible spaces, 7 motor cycle parking spaces, 8 bicycle spaces and a waste room."
Contrary to this description, condition H(1)(f) limits the occupancy to 34, as quoted above at [3].
The consent was granted following a conciliation conference, and the short perfunctory reasons for the decision are contained in Chandos House Pty Ltd v Inner West Council [2018] NSWLEC 1136.

Relevant matters for consideration on the modification application

The application to modify the development consent is made to the Court pursuant to s 4.55(8) of the EPA Act. Section 4.55(8) allows all of the powers in s 4.55 to extend to the Court with respect to a consent granted by it. As such, the Court has the power to modify a grant of consent pursuant to subss (1), (1A) and (2). Section 4.55(1) allows the modification of development consent to correct a minor error, misdescription or miscalculation. Section 4.55(1A) allows the modification of development consent for a modification of "minimal environmental impact". Section 4.55(2) allows other modifications to be granted. Section 4.55(2) provides: (2) Other modifications A consent authority may, on application being made by the applicant or any other person entitled to act on a consent granted by the consent authority and subject to and in accordance with the regulations, modify the consent if: (a) it is satisfied that the development to which the consent as modified relates is substantially the same development as the development for which consent was originally granted and before that consent as originally granted was modified (if at all), and (b) it has consulted with the relevant Minister, public authority or approval body (within the meaning of Division 4.8) in respect of a condition imposed as a requirement of a concurrence to the consent or in accordance with the general terms of an approval proposed to be granted by the approval body and that Minister, authority or body has not, within 21 days after being consulted, objected to the modification of that consent, and (c) it has notified the application in accordance with: (i) the regulations, if the regulations so require, or (ii) a development control plan, if the consent authority is a council that has made a development control plan that requires the notification or advertising of applications for modification of a development consent, and (d) it has considered any submissions made concerning the proposed modification within the period prescribed by the regulations or provided by the development control plan, as the case may be. Subsections (1) and (1A) do not apply to such a modification.
Section 4.55(2) confers a broad discretion on a consent authority to modify a development consent. However, that discretion only arises if all of the matters in (a) to (d) are satisfied. Pursuant to s 4.55(2)(a), the power in subs 4.55(2) requires the Court, in exercising the functions of the consent authority, to be first satisfied that "the development to which the consent as modified relates is substantially the same development as the development for which the consent was originally granted". If the Court is not so satisfied, then there is no power to modify the consent pursuant to s 4.55(2).
Upon reaching the satisfaction that "the development to which the consent as modified relates is substantially the same development as the development for which the consent was originally granted" and that the other matters in subs 4.55(2) are satisfied, subs (3) provides that: (3) In determining an application for modification of a consent under this section, the consent authority must take into consideration such of the matters referred to in section 4.15 (1) as are of relevance to the development the subject of the application. The consent authority must also take into consideration the reasons given by the consent authority for the grant of the consent that is sought to be modified.
However, subs (3) does not apply to modifications made pursuant to the power in s 4.55(1) to correct a minor error, misdescription or miscalculation. Section 4.55(1) specifically states that "Subsections (1A), (2), (3), (5) and (6) and Part 8 do not apply to such a modification."
In applying subs (3) to the exercise of the power under s 4.55(2), s 4.15(1)(a) of the EPA Act requires that the Court consider the provisions of any applicable environmental planning instrument, development control plan, planning agreement, certain draft instruments and regulations. Section 4.15(1) also requires consideration of the likely impacts of the development, the suitability of the site for development, any submissions made, and the public interest.
The site is zoned R3 - Medium Density Residential pursuant to the Ashfield Local Environmental Plan 2013 ("ALEP 2013"), and development for the purpose of boarding houses is a nominated permissible use in the zone. A boarding house is defined in the ALEP 2013 as follows: boarding house means a building that: (a) is wholly or partly let in lodgings, and (b) provides lodgers with a principal place of residence for 3 months or more, and (c) may have shared facilities, such as a communal living room, bathroom, kitchen or laundry, and (d) has rooms, some or all of which may have private kitchen and bathroom facilities, that accommodate one or more lodgers, but does not include backpackers' accommodation, a group home, hotel or motel accommodation, seniors housing or a serviced apartment.
Residential flat buildings are an innominate permissible use in the R3 zone.
The proposal is subject to the provisions of State Environmental Planning Policy (Affordable Rental Housing) 2009 ("SEPP ARH"). At cl 29 of the SEPP ARH, the policy sets out a number of grounds on which consent cannot be refused if certain criteria are met. In relation to floor space, it provides: (1) A consent authority must not refuse consent to development to which this Division applies on the grounds of density or scale if the density and scale of the buildings when expressed as a floor space ratio are not more than: … (c) if the development is on land within a zone in which residential flat buildings are permitted and the land does not contain a heritage item that is identified in an environmental planning instrument or an interim heritage order or on the State Heritage Register - the existing maximum floor space ratio for any form of residential accommodation permitted on the land, plus: (i) 0.5:1, if the existing maximum floor space ratio is 2.5:1 or less, or (ii) 20% of the existing maximum floor space ratio, if the existing maximum floor space ratio is greater than 2.5:1.
In relation to parking, cl 29 provides: (2) A consent authority must not refuse consent to development to which this Division applies on any of the following grounds: … (e) parking if: … (iia) in the case of development not carried out by or on behalf of a social housing provider - at least 0.5 parking spaces are provided for each boarding room, and (iii) in the case of any development - not more than 1 parking space is provided for each person employed in connection with the development and who is resident on site,
Clause 29 has been amended since the grant of development consent. At the time of the grant of development consent, cl 29(2)(e) precluded the refusal of a development on the ground of parking if "in the case of development in an accessible area - at least 0.2 parking spaces are provided for each boarding room." That is, whereas the SEPP ARH previously precluded refusal of the present boarding house development on the basis of parking if 0.2 parking spaces are provided for each boarding room, the SEPP ARH now precludes refusal on the basis of parking if 0.5 parking spaces are provided for each boarding room.
Clause 30 sets out a number of standards for boarding houses as follows: 30 Standards for boarding houses (1) A consent authority must not consent to development to which this Division applies unless it is satisfied of each of the following: (a) if a boarding house has 5 or more boarding rooms, at least one communal living room will be provided, (b) no boarding room will have a gross floor area (excluding any area used for the purposes of private kitchen or bathroom facilities) of more than 25 square metres, (c) no boarding room will be occupied by more than 2 adult lodgers, (d) adequate bathroom and kitchen facilities will be available within the boarding house for the use of each lodger, (e) if the boarding house has capacity to accommodate 20 or more lodgers, a boarding room or on site dwelling will be provided for a boarding house manager, (f) (Repealed) (g) if the boarding house is on land zoned primarily for commercial purposes, no part of the ground floor of the boarding house that fronts a street will be used for residential purposes unless another environmental planning instrument permits such a use, (h) at least one parking space will be provided for a bicycle, and one will be provided for a motorcycle, for every 5 boarding rooms. (2) Subclause (1) does not apply to development for the purposes of minor alterations or additions to an existing boarding house.
The Comprehensive Inner West Development Control Plan 2016 ("IWDCP 2016") also sets out controls with respect to boarding houses. Concerning parking for boarding houses and group homes, it requires (at Table 3 of Pt 8) "1 space per staff member. Parking rate for residents to be assessed on merit of application." It does not specifically require a Traffic and Parking Assessment Report, instead stating "Assessment should consider type of dwelling and residents".
Part 6 of the IWDCP 2016 concerns boarding houses and student accommodation. Within Part 6, PC 5 is a performance criteria with respect to parking, and requires that "Development provides an amount of carparking that caters for the forecast needs of residents and minimises the cost of housing provision." The design solution is stated as "Car parking complies with car parking provisions for Boarding Houses contained with the ARHSEPP".

Evidence on the merits

The hearing commenced with a site inspection and a number of local residents gave evidence of their concerns about the modification application. That evidence can be summarised as raising the following issues:

A developer who gets the benefit of additional floor space and a bulkier building as a result of the SEPP ARH should be bound to ensure that the housing is affordable and only available to low to middle income earners.
There is a risk of increased social amenity issues as a result of the increase in occupancy.

One of the residents spoke in support of removing condition G(16), as it would remove the cap on the income required to occupy a boarding house, therefore attracting a better range of residents.

Expert evidence

Expert evidence on the town and social planning issues was given by Dr Hazel Blunden, a social policy research fellow engaged by the Council, and by Ms Ellen Robertshaw, a consultant town planner engaged by Micro Nest.

Matters for determination

For there to be power to grant the modification, I must first be satisfied that the modifications sought meet the requirements of s 4.55(1), (1A) or (2) of the EPA Act. On being so satisfied, I then must determine whether the modification should be granted on its merits, given the issues raised by the Council on access to affordable housing, social inclusion and parking.

The change to the occupancy numbers meets s 4.55(1)

I am satisfied that the change in the occupancy numbers is a modification to "correct a minor error, misdescription or miscalculation" in accordance with s 4.55(1).
The occupancy number of 34 in condition H(1)(f) is inconsistent with both the description of the approved development in the preamble to the conditions of development consent, and the terms of the Plan of Management that formed part of the consent. The preamble to the conditions, quoted above at [11], refers to the determination being described as including "Twenty eight boarding rooms accommodating a maximum of 50 lodgers" and "One manager's room accommodating a maximum of 2 lodgers". The Plan of Management states that "The boarding house has the capacity to accommodate up to 50 people - with 6 x single rooms and 23 x double rooms".
Whilst condition H(1)(f) would likely prevail over those documents to restrain the occupancy numbers to 34, an examination of the table in condition H(1)(f) reveals that there is a calculation error in arriving at an occupancy of 34. This is acknowledged by the Council. For completeness, the table is repeated here for reference: Room No. Maximum Borders Room No. Maximum Borders Room No. Maximum Borders G.01 Double room 101 & 201 Double room 301 Double room G.02 Single room 102 & 202 Single room 302 Double room G.03 Single room 103 & 203 Double room 303 Double room G.04 Communal Room 104 & 204 Double room G.05 Double room (Managers Room) 105 & 205 Double room G.06 Double room 106 & 206 Double room G.07 Double room 107 & 207 Single room 108 & 208 Double room 109 & 209 Double room 110 & 210 Double room

A simple addition of the occupancy of each room in the table achieves a total occupancy of 52, comprised of 50 lodgers plus the double manager's room. It is clear that the miscalculated occupancy of 34 arises from an error caused by failing to recognise that the third column has two rooms in each cell of the table, with the resulting calculation omitting 10 of the rooms (8 double rooms and 2 single rooms), which results in total occupancy of 34.
This is clearly an error or miscalculation that ought to be corrected pursuant to s 4.55(1) of the EPA Act, and in accordance with the power of the Court under s 4.55(8).

Is the modified development substantially the same (s 4.55(2))?

As set out above, the power to modify the consent pursuant to s 4.55(2), which is required to be exercised in order to delete condition condition G(16), cannot be exercised unless the Court is satisfied that "the development to which the consent as modified relates is substantially the same development as the development for which the consent was originally granted".
In North Sydney Council v Michael Standley & Associates Pty Ltd (1998) 43 NSWLR 468 ("Standley"), the Court of Appeal endorsed the approach of Stein J in Vacik Pty Ltd v Penrith City Council [1992] NSWLEC 8, in which His Honour found that the word "substantially" in this context means "essentially or materially or having the same essence."
In considering this in the context of a predecessor to s 4.55(2)(a) in Moto Projects (No 2) Pty Ltd v North Sydney Council (1999) 106 LGERA 298 ("Moto Projects"), Bignold J observed: "55. The requisite factual finding obviously requires a comparison between the development, as currently approved, and the development as proposed to be modified. The result of the comparison must be a finding that the modified development is "essentially or materially" the same as the (currently) approved development. 56. The comparative task does not merely involve a comparison of the physical features or components of the development as currently approved and modified where that comparative exercise is undertaken in some type of sterile vacuum. Rather, the comparison involves an appreciation, qualitative, as well as quantitative, of the developments being compared in their proper contexts (including the circumstances in which the development consent was granted)." (emphasis added)
Therefore, in undertaking the comparative task, both the qualitative and quantitative changes need to be considered to determine whether the development as modified is substantially the same as that for which consent was granted. In Moto Projects, Bignold J determined that a modification application to remove separate ingress for vehicular traffic resulted in a proposal that was not substantially the same because that separate ingress was "a material and essential physical element of the approved development" (at [59]).
In Vacik Pty Ltd v Penrith City Council, Stein J considered that the mere fact that the land use remains the same is not determinative of the proposed modified development being substantially the same. His Honour stated that in making the comparison "a development… must be assumed to include the way in which the development is to be carried out."

The Council's position that it is not substantially the same

The Council submits that the removal of condition G(16) materially changes the development such that it is not substantially the same. It makes this submission on two grounds. First, it says that the condition is based on cl 6 of the SEPP ARH, and was essential to the Council entering into an agreement at or after the conciliation conference. Second, the Council says that a development which limits the people who may occupy the boarding house and limits the amount that they can be charged is a "substantially different proposition" to one which does not have such limitations.
In support of its argument, the Council refers to the aims of the SEPP ARH, which are as follows: 3 Aims of Policy The aims of this Policy are as follows: (a) to provide a consistent planning regime for the provision of affordable rental housing, (b) to facilitate the effective delivery of new affordable rental housing by providing incentives by way of expanded zoning permissibility, floor space ratio bonuses and non-discretionary development standards, (c) to facilitate the retention and mitigate the loss of existing affordable rental housing, (d) to employ a balanced approach between obligations for retaining and mitigating the loss of existing affordable rental housing, and incentives for the development of new affordable rental housing, (e) to facilitate an expanded role for not-for-profit-providers of affordable rental housing, (f) to support local business centres by providing affordable rental housing for workers close to places of work, (g) to facilitate the development of housing for the homeless and other disadvantaged people who may require support services, including group homes and supportive accommodation.
Given that most of the aims concern the provision of affordable rental housing, the Council points to the definition of the same in the EPA Act and the SEPP ARH. At cl 6, the SEPP ARH provides as follows: 6 Affordable housing Note. The Act defines affordable housing as follows: affordable housing means 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. (1) In this Policy, 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, or (b) is eligible to occupy rental accommodation under the National Rental Affordability Scheme and pays no more rent than that which would be charged if the household were to occupy rental accommodation under that scheme. (2) In this Policy, residential development is taken to be for the purposes of affordable housing if the development is on land owned by the Land and Housing Corporation.
In seeking the covenant required by condition G(16), the Council says that it is seeking certainty that the benefits that the SEPP ARH confers on applicants, are actually flowing to the people that the SEPP ARH is designed to help. Accordingly, it submits that to remove that requirement would materially change the development.

Micro Nest's position on substantially the same

Micro Nest submits that Condition G(16) is not one that is required by SEPP ARH, there being no requirement for a boarding house to provide affordable housing within the meaning of cl 6. Further, based on an examination of the development consent and its terms, Micro Nest submits that the development will remain substantially the same before and after the modification. Based on the current market rates for boarding rooms in Ashfield, the income class of the occupants may not actually be different once the condition is removed. It says there is otherwise no change in the built form for a quantitative appreciation. Additionally, the approved development will remain a boarding house and is not described as "affordable housing" or "affordable housing in the form of a boarding house". Micro Nest submits that a limitation on the income level and rent payable by a "household" is not a determining factor in the nature of the residential accommodation, such that a dwelling that is rented to low income households is still a dwelling, as is a dwelling rented to a high income household. Similarly, Micro Nest says that the income level of the occupant or the rent charged does not characterise the development, which will still comprise a boarding house where the design and management features of the development remain the same.
Micro Nest submits that although one aspect of the occupancy of the development may change (as persons earning incomes higher than that specified in the G(16) formula could become occupants), the deletion of the condition simply widens the customer base and it is not a "radical transformation" (relying on Sydney City Council v Ilenace Pty Ltd [1984] 3 NSWLR 414 at 42, Standley at 474, Scrap Realty Pty Ltd v Botany Bay City Council (2008) 166 LGERA 342 ; [2008] NSWLEC 333 at [13] and Moto Projects at [27]).

The modified development remains substantially the same

I am not persuaded by the Council's submission that the removal of condition G(16) materially changes the development such that it is not substantially the same as that for which consent was granted.
In undertaking the quantitative comparison between the development as proposed to be modified and the development for which consent was granted, there is no change whatsoever. The development remains a boarding house, with the same built form, number of rooms and capacity as that for which consent was granted.
In undertaking the qualitative comparison, there is no modification to the essential physical elements or to the way in which the development is to be carried out. The boarding house remains subject to the same Plan of Management, and the use of the boarding house by lodgers and management will remain the same.
Condition G(16) seeks the imposition of a covenant that limits, in perpetuity, the occupants that could become lodgers by their income, and the rent that can be charged to lodgers. Removing the condition will mean that there will be no restriction on the lodgers by their income, and there will be no restriction on the rent charged. The effect might be that the average income of all the occupants of the boarding rooms will be higher than the average income of those who would occupy the rooms with the covenant and condition in place. I accept the submission made on behalf of Micro Nest that a change in the income earned by occupants does not alter the nature of the use or the characteristics of the residential accommodation provided in the boarding house.
Similarly, the effect of removing the condition might mean that there can be higher rents charged than those that could be charged with the covenant and condition in place. I accept the submission of Micro Nest that a change to the rent charged does not so substantially alter the development that it is not substantially the same as that for which consent is granted. A change to the rent charged does not alter the nature of the boarding house use or the characteristics of the residential accommodation.
I do not accept that the condition requiring the covenant is "a material and essential physical element of the approved development" in the manner referred to by Bignold J in Moto Projects. I accept the submission of Micro Nest that the SEPP ARH does not require the imposition of a condition of the nature of G(16). There is nothing in the definition of "boarding house" or in the standards required of boarding houses in Part 2 Division 3 of the SEPP ARH that requires the boarding house to provide affordable housing for the households that are described in cl 6(1). Whilst the aims of the SEPP ARH refer to the provision of affordable rental housing, those aims describe what is achieved through the operation of the SEPP ARH and do not impose any additional obligations for the carrying out of development in accordance with the SEPP ARH. This is consistent with the decision of the Court of Appeal in Minister For Urban Affairs and Planning v Rosemount Estates Pty Ltd (1996) 91 LGERA 31, in which the Court held that consideration of an object of the EPA Act that concerned public participation did not command a particular outcome in the exercise of discretionary power. Specifically, Sheller JA stated that "[t]he objects referred to may explain ambiguity, if it exists, but do not permit the Court to override the language of the Act" (at 47). Similarly, in Initial Action Pty Ltd v Woollahra Municipal Council [2018] NSWLEC 118, Preston CJ of LEC considered that, in the absence of any provision that requires compliance with the objectives of cl 4.6 of the relevant LEP, there was no test in cl 4.6 that required the objectives to be met (at [89-90]).
Accordingly, in the absence of any provision that gives the aims of the SEPP ARH an operative effect, such as requiring their substantive consideration or application in determining a development application, any obligation that is imposed as a result of those aims, such as condition G(16), cannot be considered a material or essential element of the development.
Further, other than the assertion by Mr Bonanno and the email discussing the terms of the condition, there is no evidence to support the Council's position that the condition formed an essential element of the development as agreed between the parties. Even if the Council could establish by evidence that "but for" the covenant, an agreement would not have been reached after the conciliation conference, I am not persuaded that this circumstance alone is sufficient for the condition to form an essential element of the approved development. The mere fact that such a condition was used as a bargaining tool by the Council, secured by the promise of agreement to the grant of consent, does not change the qualitative assessment by making it a material or essential physical element of what has been approved. This is consistent with the decision of Commissioner Dixon (as she then was) in Dragoneye Properties Pty Ltd v Northern Beaches Council [2016] NSWLEC 1555, wherein she considered that (at [55]) "the s 34 process behind the Court's final orders… cannot be a focus in the comparative exercise." Where the condition agreed upon seeks to control the rent charged and the income brackets of its occupants, is unrelated to the physical characteristics and operation of the boarding house, and is not required by operation of the SEPP ARH, the condition cannot be considered as forming a material or essential physical element of the boarding house.
As such, for the above reasons, I consider that there is no substance to the Council's submission that the removal of condition G(16) materially changes the development. Instead, I consider that the development as proposed to be modified remains substantially the same as that for which consent was granted, and that the remainder of the matters in s 4.55(2) are satisfied.

Assessment of the merits of the modification application

In determining the application for modification of the consent by removal of condition G(16), pursuant to s 4.55(3) the Court "must take into consideration such of the matters referred to in section 4.15(1) as are of relevance to the development the subject of the application." In Standley, Mason P determined that this means that "a consent authority is required to consider the totality of the development as proposed for modification" and that the consent authority is not confined to considering those matters that relate only to the aspects of the development that are being modified. As the power to make the modification to the occupancy numbers in condition H(1)(f) arises pursuant to s 4.55(1) of the EPA Act, s 4.55(3) does not apply to that modification (see above at [18]).
The Council's position is that, pursuant to s 4.55(3), the following issues arise on consideration of the merits of removing condition G(16):

The SEPP ARH requires that a mechanism be imposed for ensuring that the development is reserved for lower income residents,
The removal of the condition restricts access to affordable housing contrary to the aims of the SEPP,
There is a negative impact on social inclusion by removal of the condition,
Public interest requires its retention, and
The parking demands of the modified development are not met.

Micro Nest submits that the SEPP ARH requires no such mechanism, and that the evidence demonstrates that the removal of the condition will not have a negative impact on social inclusion or restrict access to affordable housing. Further, Micro Nest relies on the uncontradicted traffic assessment provided in support of the original development application to support its position that the parking provided is adequate, and submits that there is no evidence to support the Council's submission that the deletion of condition G(16) will increase the demand for parking.
I deal with each of the merit issues separately, as follows.

The requirements of the SEPP ARH

The Council argues that the provision of housing to the groups set out in cl 6(1)(a) of the SEPP ARH is a precondition to a grant of approval under the SEPP ARH.
The submission advanced by the Council is that cll 3 and 6 of the SEPP ARH, taken together, require consideration of whether the aims of the SEPP ARH will be achieved through a proposed development. The Council says that they mandate the imposition of a mechanism to ensure compliance with the aims in cl 3, by limiting occupancy to persons of certain income levels and limiting the rent that can be charged.
Micro Nest instead points out that cl 6 is not applied to boarding house development or boarding houses in the SEPP ARH. It points out that this is distinct from infill affordable housing, which, pursuant to cl 17, must be the subject of conditions of development consent that limit specific dwellings to being used for affordable housing for a period of 10 years from the issue of the occupation certificate. A similar provision applies to residential flat buildings pursuant to cl 38 of the SEPP ARH. Micro Nest refers to the decision of Commissioner O'Neill in Pomering v Hawkesbury City Council [2018] NSWLEC 1146, in which she considers that there is able to be inferred a legislative intention of SEPP ARH not to limit the eligibility of boarders in boarding houses to particular income groups. The Commissioner determined at [40]: "Boarding houses may provide short term accommodation, being a minimum of 3 months, to a range of income groups, as well as accommodation to those that fall within the definition of low and moderate income households under cl 6 of SEPP ARH. It is possible that the intention behind the policy of not limiting the eligibility of boarders in boarding houses is to encourage diversity and counteract some of the historic stigma associated with boarding houses that predate the "new generation" boarding houses under SEPP ARH. It is an aim of the policy at cl 3(f) to support local business centres by providing affordable rental housing/or workers close to places of work and potential employees in the Richmond town centre should not be precluded from being accommodated in the boarding house if their income for a period exceeds the limit in cl 6 of SEPP ARH, as this would be contrary to the aims of the policy".
In response, the Council submits that the decision of Commissioner O'Neill in Pomering v Hawkesbury City Council is incorrect as it relies on "market rents" to keep boarding houses affordable, which is not consistent with the text of the SEPP ARH. The Council instead argues that cll 17 and 38 are constraints on the application of the SEPP ARH to a period of 10 years, whereas boarding houses are not subject to the same constraint and a covenant can be imposed in perpetuity.
The arguments of the Council are unfounded and run contrary to the plain terms of the instrument. I have above determined that there is nothing in the definition of "boarding house" in the ALEP 2013 or in the controls for boarding houses in the SEPP ARH that constrains a boarding house to providing affordable housing for the households that are described in cl 6(1). I similarly determined that without a provision that gives the aims of the SEPP ARH an operative effect, such as requiring their substantive consideration, they are not a mandatory consideration that can command a particular outcome in the exercise of the discretion to consider a proposed development.
As such, I reject the Council's submission that limiting boarding houses to the groups set out in cl 6(1)(a) of the SEPP ARH is a precondition to a grant of approval. I agree with the decision of Commissioner O'Neill in Pomering v Hawkesbury Council that, in light of the clear drafting of the SEPP ARH, "to further restrict the boarding house accommodation to those that fall within the definition of very low, low or moderate household incomes in cl 6 of SEPP ARH further constrains the policy in a way that was not intended in the drafting of the policy."
In carrying out the functions of a consent authority, the Court is bound to apply the SEPP ARH on its terms. If, as the Council contends, the SEPP ARH is not delivering affordable rental housing in the form of boarding houses, that is a criticism of the SEPP ARH and is a matter for consideration for the drafters of the policy. It is not appropriate for the Court to incorporate additional terms into the policy in order to address an alleged shortcoming of the policy.
This does not prevent consideration of the merits of retaining such a condition, which form the remainder of the merit issues raised by the Council.

Access to affordable housing

The Council submits that the evidence demonstrates that the market has not kept the rents of boarding houses affordable. As such, it submits that if there is no mechanism to keep the rents affordable, or to make them available only to low and middle income earners, then high income earners will have the market power to secure the accommodation, therefore preventing low and middle income earners from having access to this type of residential accommodation. The Council says that this falls foul of the aims of the SEPP ARH.
Ms Robertshaw and Dr Blunden agree that if the rent for affordable housing was to be calculated in accordance with cl 6(1) of the SEPP (and assuming that the percentage of 30% is applied to the calculation of 120% of median gross income in Greater Sydney), then the rent that is considered affordable pursuant to cl 6(1) would be $630 a week.

Evidence in support of the Council's position

In support of the Council's submission that the market has not kept rents affordable, it relies on the evidence of Dr Blunden, who opines that, despite encouraging boarding house and secondary dwelling developments, the SEPP ARH is not increasing affordable housing stock to the extent that housing has become generally more affordable. She cites the UNSW City Futures Research Centre, 'State Environmental Planning Policy (Affordable Rental Housing) 2009 and affordable housing in Central and Southern Sydney' (June 2018) ("City Futures Report"), which states that the affordability of rental housing across metropolitan Sydney has been declining in the last decade. As such, she opines that merely increasing supply, in lieu of any controls on rent levels, is not enough to ensure that the aims of the SEPP ARH are met.
Dr Blunden also gave evidence that there is an affordability crisis occurring in Australia, and that the capital cities offer few genuinely affordable rental premises for lower income households. As such, she considers that there is not a reasonable supply of affordable rental accommodation in Ashfield. She opines in her evidence in the joint report that: "people on low incomes in Ashfield are in severe housing stress, even those paying the lowest rents in the worst, most dilapidated boarding houses. Median rents for a one-bedroom unit are currently, $393 a week, and average weekly earnings as of November 2018 are $1604 gross, which is $1212 net. So, even a full-time employee would pay 32 per cent of their income in rent in Ashfield. For lower income people - students, those working casually - the proportion would be higher. For single persons on Centrelink, median rent would exceed their weekly benefit."
Dr Blunden also considers that "new generation" boarding houses are "out of the realms of affordability altogether" and are not affordable for those on Centrelink payments, which she considers to be due to the lack of any rent controls.
The Council also relies on real estate advertising for the boarding house at 33 Ormond Street, Ashfield, which advertises the sale of a "Rare DA Approval for 33 Self contained studios" rather than conveying that the approval is for a boarding house.

Micro Nest's position on affordable housing

Micro Nest submits that there is not sufficient evidence to support the imposition of the condition. It refers to the decision of Lizard Apple Pty Ltd v Inner West Council [2019] NSWLEC 1146 ("Lizard Apple"), in which Commissioner Walsh considered the reasonableness of a restrictive covenant of the same nature as condition G(16) in relation to a proposed boarding house in Ashfield. In granting consent, he did not impose the condition, finding at [66] - [69]: "66 But Mr Pickles' strongest point in my view was that the suggested condition was provided without sufficient evidence that there was an existing problem. 67 Provision of affordable housing is well-known as a significant challenge in Sydney. It seems fair to me to say that bonuses available to boarding house development should be associated with addressing this affordability problem. If there was evidence that this was not occurring, then steps, such as that proposed by Mr Bonanno here, may come into play. However I cannot see the evidence in the material before the Court. I am generally with Mr Pickles in his argument that the advertisement (Ex 9) demonstrates little. More pertinent is the UNSW study which does provide information on the rental costs for boarding house development in comparison with other higher density housing options. Its findings in regard to medium density boarding houses include that (Ex 9, p35): "Comparisons of boarding room rates and 1-bedroom unit rents in the same (area) show a differing degree of discounting, with around 20% lower rents on average." 68 But a different question is faced here. This is the question of to what extent the rents in boarding rooms are aligned with cl 6(1) of the SEPP. While it seems the data behind the UNSW report may be not so far off point, this question is not able to be answered from the comparative material presented. 69 There is insufficient evidence before the hearing to support the inclusion of the condition requiring the aforementioned positive covenant."
Micro Nest submits that the evidence in the present case is not sufficiently more advanced than the evidence presented in Lizard Apple. This submission is made on a number of grounds.
First, Micro Nest submits that the median rent in the Inner West area is still within the bounds of affordability. It relies on the evidence of Ms Robertshaw, who points out that in the City Futures Report, median rents in the Inner West area rose by 41% from $400 per week in 2009 to $565 per week in 2017, and in the same period, the CPI in Sydney rose by 27% (from 87.9 to 111.7). Whilst the rise in median rents did exceed the CPI for the same period, Ms Robertshaw notes that the median rent of $565/week for all rental properties was still within the bounds of affordability as set out in cl 6 of the SEPP ARH. That is, the median rent of $565 is less than 30% of the gross income of a household earning 120% of the median weekly earnings. Ms Robertshaw therefore opines that whilst median rents in Ashfield increased by more than the CPI, they have not increased to an extent that boarding house, studio and 1 bedroom rental accommodation has become unaffordable.
The second ground upon which Micro Nest says that the evidence does not support condition G(16) is that the rents of boarding houses are, on average, lower than the rents for one bedroom apartments. Micro Nest relies on the evidence of Ms Robertshaw, who points to Figure 31 of the City Futures Report, which indicates that the median rent for a boarding house room in the Inner West Local Government Area was $240/week, compared to $435/week for a 1 bedroom apartment. Ms Robertshaw's evidence is that overall, the research found that, for medium sized boarding house developments (boarding house developments between 15 to 60 rooms), the rents of boarding houses were on average around 20% lower than 1 bedroom apartments (page 35 of the City Futures Report). Furthermore, Micro Nest points out that the City Futures Report refers to evidence of the boarding house incentives making some impact on the supply of low-cost rental housing, although this is not consistent across all markets. As such, Micro Nest submits that the market appears to be achieving the objectives of the SEPP ARH without any statutory controls to limit the income of occupants or the rent payable.
Third, Micro Nest submits that the email from the Newtown Neighbourhood Centre does not assist the Council's position, and that Dr Blunden's opinion that "new generation" boarding houses are unaffordable is not supported by any empirical evidence or research data. In relation to the email from Newtown Neighbourhood Centre, Ms Robertshaw points out that this centre typically sees clients who are mainly on Centrelink payments and rental accommodation for more than $250/week is not recommended by the outreach team. Accordingly, Ms Robertshaw says that on the Council's evidence, the measure of affordability by the Newtown Neighbourhood Centre is different to that expressed in cl 6 of the SEPP ARH.
Fourth, the ABS data on average weekly earnings relied upon by Dr Blunden concerns full-time adult average weekly ordinary time earnings across Australia. As such, Ms Robertshaw opines that it does not form a proper basis for the opinion of Dr Blunden that residents on low incomes in Ashfield are in severe housing stress. Dr Blunden reaches this opinion based on median rents for a one bedroom unit ($393 a week) and average weekly earnings across Australia of $1604 gross ($1212 net). Ms Robertshaw's evidence is that it is unclear from the data provided how the average weekly ordinary earnings of full-time working adults as expressed in the ABS catalogue correlate to the average weekly ordinary earnings of full time working adults in Ashfield, and opines that Dr Blunden has therefore made a "quantum leap" in relation to the Australian earnings data and households in housing stress in Ashfield.
Finally, Micro Nest relies on the desktop review undertaken by Ms Robertshaw, in which she found that in the week commencing 15 April 2019 there were 21 studio and 1 bedroom apartments available for rent in Ashfield. The average rent was $410/week, ranging from $325/week up to $500/week. In the same week, she found that there were 10 boarding house rooms available to rent, some of which had their own bathrooms and others had shared facilities. The average rent for these boarding house rooms was $292/week, with rents ranging from $170/week to $400/week. A review of rental accommodation on 26 April 2019 revealed that there were 28 boarding house rooms, studio apartments and 1 bedroom apartments available for rent. The rents of these 28 properties ranged from $160/week up to $640/week. On the basis of these desktop investigations, Ms Robertshaw concludes that there is a reasonable supply of rental accommodation available in Ashfield at what would be considered "affordable" rents based on cl 6 of the SEPP ARH.
In addition, Micro Nest submits that there are two operational problems with the condition. The first is that household income in the ABS data is calculated based on the income of a private dwelling, whereas a boarding house room is neither a private dwelling nor a household. As such, the household income is not a relevant criteria for boarding house rooms. The second is that, by using the reference to Ashfield and to the "Median Equivalised Total Household Income (Weekly)", the requirement of condition G(16)(ii) is inconsistent with the definition of a very low income household, low income household or moderate income household within the definition of affordable housing in cl 6(1).

The evidence does not support the imposition of the condition

The empirical data relied upon by Dr Blunden is not sufficiently precise to support her opinion that either "people on low incomes in Ashfield are in severe housing stress, even those paying the lowest rents in the worst, most dilapidated boarding houses" or that "new generation" boarding houses are "out of the realms of affordability altogether" due to the lack of rental controls. To support these opinions, she relies on household income across Australia, rather than the income of "people on low incomes" in Ashfield, and she relies on data on median rent for one bedroom apartments rather than median rent for boarding houses.
In oral evidence, she sought to clarify this by referring to the surveys conducted for the Boarding Houses Act 2012 Evaluation Report in 2014, in which 58% of 204 residents of boarding houses in Ashfield, Marrickville and Newcastle were paying more than 50% of their income on rent, and 89% of those boarding house residents were paying more than 30% of their income on rent. The problem with this data set is that 82% of participants were on Centrelink benefits. This puts the participants at the extreme end of low income earners, whereas "affordable housing" in the SEPP ARH is concerned with "housing for very low income households, low income households or moderate income households", which is defined in cl 6 as being "a gross income that is less than 120 per cent of the median household income for the time being for the Greater Sydney…" I accept that this, together with the reliance on the email from the Newtown Neighbourhood Centre, demonstrates that Dr Blunden is using a measure of affordability that does not align with the SEPP ARH. I also accept the submission of Micro Nest that there is no evidence to support Dr Blunden's opinion that "new generation" boarding houses are not affordable due to a lack of rental controls.
To the contrary, the research clearly shows that for medium sized boarding house developments, the rents of boarding houses are on average around 20% lower than 1 bedroom apartments and that the boarding house incentives are making some impact on the supply of low-cost rental housing. In the Inner West Council area, the rents of boarding houses are 45% lower than the rents for 1 bedroom apartments.
I accept the evidence of Ms Robertshaw, from her desktop evaluation, that there is a reasonable supply of rental accommodation available in Ashfield at a range of rents, many of which would be considered "affordable" based on cl 6(1) of the SEPP ARH.
I note also that the advertisement for the sale of 33 Ormond Street is wholly irrelevant to the availability of affordable housing.
I also accept that condition G(16) and cl 6(1) is operationally inconsistent with a boarding house in circumstances where they to the income of "households", whereas boarding houses usually accommodate individuals rather than households.
As such, I do not accept the Council's submission that mechanisms of the type in condition G(16) are required to keep the rents of boarding houses affordable or to keep them available to low and middle income earners. Instead, the evidence clearly demonstrates that boarding house rooms are on average cheaper to rent than one bedroom apartments, and that there is availability of boarding house rooms in Ashfield at a range of rents, many of which are affordable within the meaning of cl 6(1) of the SEPP ARH.

Social inclusion

The Council contends that the removal of condition G(16) will also reduce social inclusion. It relies on the evidence of Dr Blunden that the housing is unaffordable to those on very low and low incomes, which therefore excludes them, resulting in communities that are not socially mixed. Her evidence is that if the condition is removed, the boarding house owner/operator will be able to charge occupancy fees or rents in excess of what would otherwise be deemed as affordable for households on incomes up to the median for Ashfield.
In cross-examination, Dr Blunden conceded that there is a range of accommodation available in Ashfield, which deals with the social inclusion issue. Ms Robertshaw's evidence is that, as a result of her desktop review that demonstrates the range of accommodation available for rent in boarding houses, studio apartments and one bedroom apartments, a restriction on the rental 'pool' of this boarding house and the rent payable is not necessary to promote social inclusion.
I accept the evidence of Ms Robertshaw, and that the range of accommodation available in Ashfield demonstrates that there is no issue with respect to social inclusion.

Public interest

The Council contends that the removal of the condition is against the public interest, as it is part of the balancing exercise to allow the developer to take advantage of the additional floor space and greater yield permitted by the SEPP ARH. The Council says that it is against the public interest if the proponent gets the benefit of higher rents and an unchanged profile or tenants to a normal residential flat building. The Council notes that the resident objectors who made their concerns known are paying "the price" with a larger number of neighbours, and that they are now legitimately questioning why they should pay this price without the benefits flowing to those who need accommodation at a reduced cost.
In support of this ground, the Council relies on the decision of the Court in Doran Developments Pty Ltd v Newcastle City Council (1984) 13 APAD 436, in which Senior Assessor Bignold (as he then was) determined that there is a "legitimate public interest in the exercise of development control powers of maintaining the integrity and efficacy of "bargains" conferring public benefits by virtue of planning gain entered into by planning authorities and applicants for development consents" (at 449). The Council therefore says that there is a public interest in the condition that will be removed by its deletion, and that this was a public benefit that the applicant agreed to in the conciliation conference process.
I do not accept that the public benefit of providing boarding house accommodation is removed by the removal of condition G(16). I also consider that the present application is distinguishable from Doran Developments Pty Ltd v Newcastle City Council, which concerned the removal of public car parking. In the present application, there is no discernible benefit to the public that is being removed by the removal of the condition, particularly in circumstances where there remains a benefit in providing boarding house accommodation, which is a type of accommodation that has on average, rents that are 20% lower than rents for 1 bedroom apartments.

Car parking

The Council's contentions with respect to the adequacy of car parking are twofold. First, the Council says that the removal of condition G(16) will result in a changed profile in occupants and therefore increase the demand for car parking. It relies on the evidence of Dr Blunden, who states in her joint report that "The developers may be aiming for residents who may have higher than Centrelink-level incomes so car ownership is likely to be higher among their intended clientele." Second, the Council says that the modification to the development consent requires a re-assessment of the adequacy of the car-parking, particularly in circumstances where the "must not consent" criteria in the SEPP ARH have been amended since the grant of consent (described at [24]). The Council submits that such a re-assessment is required pursuant to the provisions of s 4.55(3) of the EPA Act and in accordance with the reasoning of Mason P in Standley.
With respect to the first point, the opinion of Dr Blunden is only that people who are not on Centrelink payments are more likely to own cars. That opinion concerns the difference in car ownership between those on Centrelink payments and those who are not, and is insufficient to establish that removal of condition G(16) will result in occupants who are more likely to own vehicles and therefore require parking. Indeed, there is no evidence supporting the same. For example, there is no data to demonstrate that in the area of Ashfield, moving from a rental rate that complies with condition G(16) to another (higher) rental rate will put an occupant into a socio-economic category that is more likely to own a car. Further, there is no data to demonstrate a link between income level and car ownership in Ashfield for those who are not on Centrelink payments, particularly in areas within 500m of the train station, as the proposal is.
As to the Council's contention that there should be a re-assessment of the parking, the Council has not furnished any evidence to contradict the assessment carried out in the Traffic Impact Assessment ("TIA") dated 15 December 2016 by PDC Consultants (Ex B).
The TIA notes the proximity of the site to public transport, and that the Ashfield Interim Development Assessment Policy 2013 does not contain a rate for boarding house resident parking but requires a merit assessment. The TIA then states that the development provides a total of 8 car spaces "and therefore satisfies the minimum requirement of the SEPP ARH 2009". It subsequently concludes that "[t]he proposed car parking provision is therefore considered acceptable and will ensure that all parking demands are accommodated on-site".
The Council founds its case concerning the inadequacy of this assessment on the changed "must not refuse" criteria in cl 29(2)(e) of the SEPP ARH. That "must not refuse" criteria now requires 0.5 car parking spaces for each boarding room, but previously required only 0.2 car parking spaces for each room if the boarding house is located within an accessible area. The Council has not provided evidence as to why 0.2 car parking spaces for each boarding room is inadequate. Neither the City Futures Report, nor the Boarding Houses Act 2012 Evaluation Report, consider the level of car ownership in boarding houses either generally or where the boarding houses are in close proximity to public transport. The Explanation of Intended Effect concerning the amendment to the SEPP ARH similarly does not provide any data on car ownership for boarding house occupants, either generally or where boarding houses are in close proximity to public transport. Given that the criteria in cl 29 the SEPP ARH are "must not refuse" criteria, and are not a standard for boarding houses in cl 30 or a control established by the IWDCP 2016, the change to the criteria alone is not sufficient evidence to contradict what is contained in the TIA. As such, I can only accept the assessment carried out in the TIA, and the conclusion that the development accommodates all the parking demand on site.
For the above reasons, there is no evidence to support the Council's contention that the parking demands of the modified development are not met.

The condition should be deleted

In circumstances where the terms of SEPP ARH do not require the imposition of condition of the type contained in G(16), and where the merits do not warrant its imposition, there is no basis on which to retain the condition and it should be deleted on principle.
It may be that a condition such as condition G(16) could operate to enable boarding house accommodation to be reserved for people on low to medium incomes. However, there is no policy or development control in place in the SEPP ARH or in the Council's regulatory controls that forms part of the s 4.15(1) consideration and requires or warrants the imposition of such a condition. Nor does the evidence relied upon by the Council in the current proceedings support such a condition. The dissatisfaction of the Council with developers taking the opportunity for additional floor space allowed by the SEPP ARH without offering discounted rents on the rooms subsequently created cannot be resolved by me in my role exercising the functions of the consent authority conducting an assessment under ss 4.55(3) and 4.15(1) of the EPA Act. In carrying out that assessment, I must consider the merits of the modification application in accordance with the terms of the SEPP ARH. It is not my role to question its adequacy, and I consider that if I were to determine that a condition should be retained, I would be taking a step that would be inconsistent with the plain terms of the SEPP ARH and would more appropriately be the subject of a policy decision made by the governing authority rather than by a consent authority.

Outcome of the application

Each of the modifications sought by Micro Nest should be granted, allowing an updated BASIX certificate to be included in the development consent, amending the occupancy number to reflect the correct calculation of the capacity of the boarding house, and deleting condition G(16).
The Court orders that: 1. The application to modify the development consent for the construction of a boarding house at 33 Chandos Street, Ashfield (granted by the Land and Environment Court on 16 March 2018 in proceedings 2017/272007), by amending conditions A(1) and H(1)(f) and deleting condition G(16), is granted. 2. The development consent referred to in order (1), for the demolition of existing structures and the construction of a three-storey boarding house with attic accommodation comprising 28 boarding rooms and one manager's room at 33 Chandos Street, Ashfield, is now subject to the modified conditions of consent contained in Annexure A. 3. The exhibits are returned, except for Exhibits A, B and C. …………………………… J Gray Commissioner of the Court Annexure A (221 KB, 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: 09 July 2019

(1999) 106 LGERA 298

(2008) 166 LGERA 342

At a glance

Court

Decision date

Source

Judgment (27 paragraphs)

Parties

Cases Cited (11)

Cited By (2)