NFF at 410 Pitt Street Pty Ltd v Council of the City of Sydney

Land and Environment Court (NSW)|2016-05-19

Solicitors: Mills Oakley Lawyers (Applicant) Council of the City of Sydney (Respondent) File Number(s): 10752 of 2015

Judgment

COMMISSIONER: This is an appeal pursuant to the provisions of s 97 of the Environmental Planning and Assessment Act 1979 (EPA Act) against the deemed refusal of Development Application No. D/2015/661 for the demolition of a 74 room boarding house and Stage 1 building envelope of a new 33 storey accommodation hotel (the proposal) at 410 Pitt Street, Haymarket (the site) by the Council of the City of Sydney (the Council).

Issues

The Council's contentions in the matter can be summarised as:

The proposal is for a 'tower development' on land having a site area of less than 800sqm, and as such cl 6.16 of Sydney Local Environment Plan 2012 (LEP 2012) applies. The proposal does not satisfy the requirements in subcl 6.16(3) of LEP 2012 nor the objectives in subcl 6.16(1) of LEP 2012.
The likely impacts of the proposal are not acceptable and the site is not suitable for the development. The proposal is contrary to the promotion and co-ordination of the orderly and economic use and development of land, as it would serve to penalise the adjoining site at 412 Pitt Street in terms of redevelopment opportunities above the street wall as it proposed a building envelope with nil or minimal side setbacks to the southern site boundary. The site is significantly constrained by the small size and narrow dimensions of the site and these constraints serve to limit the provision of a building envelope that would maintain acceptable levels of residential amenity to the adjoining development, making it unsuitable for a tower development.
The demolition of the existing boarding house is likely to cause adverse social and economic effects on the general community and inadequate measures are proposed to assist the residents of the building to be displaced to find alternative comparable accommodation. The proposal contributes to the cumulative loss of affordable housing in the City of Sydney local government area generally and the CBD specifically.
It has not been demonstrated that the proposal satisfactorily responds to and is compatible with the public domain to Pitt Street, as it requires extensive use of the public domain for servicing of the hotel use, including waste collection, transport, service vehicle parking and coach parking.
The proposed building envelope does not exhibit design excellence and the site is not suitable for the scale of the proposed building envelope. The proposed building envelope does not have adequate regard for the need to achieve an acceptable relationship with the towers on the neighbouring sites, particularly in terms of separation, setbacks, amenity and urban form.
The proposal is not in the public interest as it would erode the community's and developer's certainty in the planning controls which have been informed by design studies and in consultation with the local community, contrary to the requirements of s 79C(1)(e) of the EPA Act.

The site and its context

The site is on the eastern side of Pitt Street, on the block bounded by Goulburn Street to the north and Campbell Street to the south.
The site has an area of approximately 345sqm with a boundary to Pitt Street of 6.445m. The site contains a six storey building, with a restaurant on the ground floor and five floors, occupied by 74 boarding rooms, above ("Cosy Private Hotel").
The site is located within Central Sydney, an area characterised by a mix of commercial and residential buildings. The scale of surrounding development ranges from 2 to 3 storeys to 35 storey residential towers.
The Miramar Apartments are located adjacent to the site to the north and the southern elevation of the Miramar Apartments is constructed on the boundary between the properties. The southern elevation of the Miramar Apartments includes windows to the living rooms of apartments located on the southern side of the building.
There are residential tower developments to the south of the site.

The proposal

The development application proposes the demolition of the existing 74 room boarding house and Stage 1 building envelope for a 31 storey tower, including a 6 storey podium with a 25 storey tower above, setback from Pitt Street by 8m. The proposal is for 178 indicative hotel rooms and a ground floor café.
The proposal, includes indicative layouts to demonstrate that each floor plate on the upper levels can accommodate a core, service rooms and 6 hotel rooms, of which two face the street, two face the rear and two face the narrow light well created by the 1.272m side setback on the northern side of the site for the length of the Miramar Apartments southern elevation built to the site boundary.

Resident objector evidence

Resident objectors from the Miramar Apartments and a planner on behalf of the Miramar Action Group, Mr Mark Swain, provided evidence at the commencement of the hearing on site and the Court, in the company of the parties and some of their experts, viewed the site from apartments on the southern side of the Miramar Apartments on levels 35 and 37. Their objections to the proposal can be summarised as:

The proposal will obstruct district views to the south from the windows on the southern façade of the Miramar Apartment tower, including views of the Central Station Clock Tower in the foreground of the view;
The proposal will be positioned close to the southern façade, including the enclosed balcony on the south-eastern corner of the unit on level 35, and will significantly affect the amenity of the units on the southern side of Miramar Apartments by reducing daylight and outlook.

Planning framework

State Environmental Planning Policy (Affordable Rental Housing) 2009 (SEPP ARH) includes, at cl 50 'Reduction of availability of affordable housing', a requirement that in determining a development application to change the use of a building from a boarding house to another use, the consent authority is to take into account, amongst other things, the financial viability of the continued use of the boarding house. The 'Affordable Rental Housing SEPP: Guidelines for Retention of Existing Affordable Rental Housing' October 2009 issued by the Department of Planning (the Guidelines) specifies the method to be used to assess the financial viability of a boarding house, as follows: The assessment of financial viability is only required for boarding house DAs and is a crucial part of the assessment of those applications. The underlying principle is that it would be unfair and counterproductive to seek the continued operation of a boarding house where that operation could not provide a reasonable return on investment. The continued operation of a non-viable boarding house can have adverse consequences such as inadequate expenditure on maintenance leading to reduced amenity, health and safety for lodgers and neighbours. The method used to evaluate financial viability is based on rental yield. Clause 50(4) provides that a boarding house is viable if the rental yield determined under clause 51(5) is greater than 6%. It is acknowledged that returns on boarding houses vary due to site specific characteristics and property cycle factors. The 6% threshold is based on case studies in the boarding house sector and analysis of the residential property market more generally. This figure attempts to balance the returns from income and capital gain obtained from boarding houses with those from other sectors of the residential property market. In the private rental market, net yields measured by this method are generally much lower than 6%. Most investors expect, however, that a private rental property will realise greater capital gain than a boarding house when it is sold. A higher yield threshold for boarding houses compensates the investor for lower expectations of capital gain. A key objective of the assessment method is consistency across the boarding house sector. For this reason, viability is determined with reference to the property rather than the operator - that is, the financial and taxation arrangements of the boarding house operator are not included in the assessment. The capital costs associated with providing a boarding house are, however, included by making allowance for depreciation. Financial viability assessments submitted by applicants need to be carefully reviewed, especially when the property is initially assessed as not being viable. In general, there are two situations which will prompt a review of the initial assessment. The first is when the initial assessment is close to the 6% threshold. The second is when the rental income and expenses are significantly different to recognised industry benchmark values. There is some scope for negotiation of the values used in the financial viability assessment, particularly with regard to rent levels and upgrading opportunities. While the method used is relatively simple, discretion will be required when values are estimated in specific cases. The general formula The test for financial viability is set out in clause 51(5) in the following formula. The formula calculates the rental yield of the boarding house taking into account depreciation and capital upgrading. Y - E - d > 6% V + U where: Y = rental income E = expenses d = annual depreciation V = current investment value U = capital upgrading If the assessment determines that the property has a yield greater than 6%, then the property will be assessed as being financially viable. If a boarding house is assessed as financially non-viable, the values used for the various elements of the formula should be reviewed to determine whether they reflect normal industry practice. For example, upgrading a boarding house could increase its viability by decreasing maintenance and management costs (expenses), reducing vacancies or increasing rents (but at a level below the land tax exemption threshold). Determining expenses (E) Valid expenses include: • management fees and costs • insurance • utilities • cleaning • maintenance and repairs • council and water rates Any expenses charged to tenants must be excluded. Expenses typically equate to 20-30% of income of a boarding house, but this varies with the configuration, age and condition of the building. Heritage status can also increase maintenance costs by requiring the use of particular techniques and materials when undertaking repairs and restoration. Where claimed expenses fall outside the typical range, documentation of actual amounts by receipts and financial records should be provided. Land tax cannot be claimed as an expense where the property qualifies for exemption under the Office of State Revenue tax ruling - even where the exemption has not actually been claimed. Determining capital upgrading (U) Capital upgrading is expenditure on the property that enhances rather than preserves the value of the property. The current value of any upgrade expenditure will be calculated as follows. U = C x i - D where: C = upgrade cost i = CPI inflator for Sydney2 D = accumulated depreciation (2% p.a.)
The Guidelines include the following in relation to a claim by the applicant that the cost of the work required to achieve acceptable housing standards is prohibitive: Cost of structural and fire safety upgrading: clause 50(2)(f) It is vitally important that acceptable levels of health, amenity and safety be maintained in low rental housing. In some cases, a building may be currently providing low rental accommodation only because it is in sub-standard condition. The cost of undertaking work necessary to achieve acceptable housing standards needs to be considered in assessing an application for alteration or demolition of such a building. To substantiate a claim that the cost of the work required is prohibitive, work schedules should be prepared and assessed by a suitably accredited building industry professional such as an architect, licensed builder, quantity surveyor or building surveyor.
The site is zoned B8 Metropolitan Centre pursuant to LEP 2012 and the proposal is permissible with consent. The objectives of the B8 zone are as follows: • To recognise and provide for the pre-eminent role of business, office, retail, entertainment and tourist premises in Australia's participation in the global economy. • To provide opportunities for an intensity of land uses commensurate with Sydney's global status. • To permit a diversity of compatible land uses characteristic of Sydney's global status and that serve the workforce, visitors and wider community. • To encourage the use of alternatives to private motor vehicles, such as public transport, walking or cycling. • To promote uses with active street frontages on main streets and on streets in which buildings are used primarily (at street level) for the purposes of retail premises.
The site is located in Area 3 on the height of buildings development standard map (Height of Buildings Map Sheet HOB_015 LEP 2012). The maximum height for the site is governed by the Belmore Park 1A Sun Access Plane, as specified in 6.17(5) of LEP 2012. The proposal is below the height maximum height development standard for the site (exhibit A, dwg AD-DA131 Rev 4).
Clause 6.16 'Erection of tall buildings in Central Sydney' of LEP 2012 is in the following terms: (1) The objectives of this clause are to ensure that tower development on land in Central Sydney: (a) provides amenity for the occupants of the tower and neighbouring buildings, and (b) does not adversely affect the amenity of public places, and (c) is compatible with its context, and (d) provides for sunlight to reach the sides and rear of the tower, and (e) promotes the ventilation of Central Sydney by allowing the free movement of air around towers, and (f) encourages uses with active street frontages. (2) This clause applies to development involving the erection of a building with a height greater than 55 metres above ground level (existing) on land in Central Sydney. (3) Development consent must not be granted to development to which this clause applies if the building is on land having a site area of less than 800 square metres unless the consent authority is satisfied that: (a) the building will have a freestanding tower each face of which will be able to be seen from a public place, and (b) the development will provide adequate amenity and privacy for occupants of the building and will not significantly adversely affect the amenity and privacy of occupants of neighbouring buildings, and (c) the ground floor of all sides of the building facing the street will be used for the purposes of business premises or retail premises.
The site is not identified as a heritage item, nor is it within a heritage conservation area. The adjoining property to the north is a heritage item, 'Miramar Apartments', (I856, Schedule 5 LEP 2012) as it incorporates the 5 storey former 'Sydney Tourist Hotel' façade. There are other heritage items in the vicinity of the site, including the CB Hotel and the Chamberlain Hotel (exhibit 11, figure 12).
Clause 6.21 Design Excellence of LEP 2012 relevantly includes the following: (1) The objective of this clause is to deliver the highest standard of architectural, urban and landscape design. (2) This clause applies to development involving the erection of a new building or external alterations to an existing building on land to which this Plan applies. (3) Development consent must not be granted to development to which this clause applies unless, in the opinion of the consent authority, the proposed development exhibits design excellence. (4) In considering whether development to which this clause applies exhibits design excellence, the consent authority must have regard to the following matters: (a) whether a high standard of architectural design, materials and detailing appropriate to the building type and location will be achieved, (b) whether the form and external appearance of the proposed development will improve the quality and amenity of the public domain, (c) whether the proposed development detrimentally impacts on view corridors, (d) how the proposed development addresses the following matters: (i) the suitability of the land for development, (ii) the existing and proposed uses and use mix, (iii) any heritage issues and streetscape constraints, (iv) the location of any tower proposed, having regard to the need to achieve an acceptable relationship with other towers (existing or proposed) on the same site or on neighbouring sites in terms of separation, setbacks, amenity and urban form, (v) the bulk, massing and modulation of buildings, (vi) street frontage heights, (vii) environmental impacts, such as sustainable design, overshadowing and solar access, visual and acoustic privacy, noise, wind and reflectivity, (viii) the achievement of the principles of ecologically sustainable development, (ix) pedestrian, cycle, vehicular and service access and circulation requirements, including the permeability of any pedestrian network, (x) the impact on, and any proposed improvements to, the public domain, (xi) the impact on any special character area, (xii) achieving appropriate interfaces at ground level between the building and the public domain, (xiii) excellence and integration of landscape design. (5) Development consent must not be granted to the following development to which this clause applies unless a competitive design process has been held in relation to the proposed development: (a) development in respect of a building that has, or will have, a height above ground level (existing) greater than: (i) 55 metres on land in Central Sydney, or (ii) 25 metres on any other land, (b) development having a capital investment value of more than $100,000,000, (c) development in respect of which a development control plan is required to be prepared under clause 7.20, (d) development for which the applicant has chosen such a process. (6) A competitive design process is not required under subclause (5) if the consent authority is satisfied that such a process would be unreasonable or unnecessary in the circumstances or that the development: (a) involves only alterations or additions to an existing building, and (b) does not significantly increase the height or gross floor area of the building, and (c) does not have significant adverse impacts on adjoining buildings and the public domain, and (d) does not significantly alter any aspect of the building when viewed from public places. (7) A building demonstrating design excellence: (a) may have a building height that exceeds the maximum height shown for the land on the Height of Buildings Map, to be determined by the consent authority, of up to 10% of the amount shown on the map, or (b) is eligible for an amount of additional floor space, to be determined by the consent authority, of up to 10% of: (i) the amount permitted as a result of the floor space ratio shown for the land on the Floor Space Ratio Map, and (ii) any accommodation floor space or community infrastructure floor space for which the building is eligible under Division 1 or 2. (8) Nothing in this clause permits a consent authority to grant development consent to the following development: (a) development that would result in any building on land projecting higher than any sun access plane that is taken to extend over that land by operation of Division 3, or (b) development that results in any building causing additional overshadowing of a kind specified in Division 3, or (c) development that results in any building on land in Area 1 or Area 2 on the Height of Buildings Map having a height greater than the height of the building that was on the land at the commencement of this Plan. (9) In this clause: building demonstrating design excellence means a building where the design of the building (or the design of an external alteration to the building) is the winner of a competitive design process and the consent authority is satisfied that the building or alteration exhibits design excellence. capital investment value has the same meaning as in the Environmental Planning and Assessment Regulation 2000. competitive design process means an architectural design competition, or the preparation of design alternatives on a competitive basis, carried out in accordance with the City of Sydney Competitive Design Policy.
Sydney Development Control Plan 2012 (DCP 2012) is a relevant consideration. DCP 2012 includes in the general provisions, at 3.11.6, that separate parking spaces for service vehicles are to be provided and at 3.11.8 that parking spaces are to be provided for buses in addition to other parking requirements, when the proposed land use is a hotel. Hotels are to provide 1 service vehicle parking space per 50 hotel bedrooms or part thereof up to 100 bedrooms and then 1 space per 100 bedrooms, plus 1 space per 400sqm of reception, lounge, bar and restaurant up to 2000sqm and 1 space per 8000sqm thereafter, at 7.8.1 of DCP 2012.
DCP 2012 includes, at 3.11.13(4), for multi-storey commercial buildings, that it is preferable for the collection and loading point for waste collection is to be inside the building. The objectives for waste at 3.14 of DCP 2012 relevantly includes to ensure waste within developments can be collected and disposed in a manner that is healthy, efficient, minimises disruption to amenity and is conducive to the overall minimisation of waste generated. The path for wheeling binds between a central waste storage point and the collection vehicle must be level and free of steps, with a maximum distance between storage point and collection point of 10m for bins including 240, 660 and 1000L, at A16 of Section A of DCP 2012.
DCP 2012 includes, at 5.1.2 Building setbacks, that side and rear setbacks allow ventilation, daylight access, view sharing. For the purpose of this section of DCP 2012, 'commercial buildings' includes hotels. At 5.1.2.2, above a height of 45m, a setback of 12m is required from the side or rear boundary to ensure visual privacy is achieved between dwellings. Side and rear setback distances to the property boundary can be reduced with architectural features such as bay windows, or splayed windows with oblique outlooks, provided that a minimum separation of 6m between the main walls of each building is maintained; separation is between sections of building walls that include service room windows; and oblique views are available to side boundaries.

Expert evidence

The applicant relied on the expert evidence of Mr Aaron Sutherland (planning), Ms Elizabeth Griffin (social planning) and Mr Andrew Hulse (traffic).
The Council relied on the expert evidence of Mr Jesse McNicoll (urban design and strategic planning), Mr David Reynolds (social planning) and Ms Brigid Kelly (traffic).

Tower development on a small site

The proposal is for a 'tower development' on land having a site area of less than 800sqm, and as such cl 6.16 of LEP 2012 applies. The Council contends that the proposal does not satisfy the requirements in sub-cl 6.16(3) of LEP 2012 or the objectives in sub-cl 6.16(1) of LEP 2012.
In relation to cl 6.16 of LEP 2012, the experts agreed that the clause only applies to small sites (below 800sqm) and that the planning regime does not require a proposal on a larger site to be a 'freestanding tower', or to provide a setback from a blank wall constructed on the boundary of an adjoining site. The applicant submits and Mr Sutherland also raised an objection that the Council has more onerous requirements for towers on sites of less than 800sqm, than it does for towers on larger sites as towers on sites smaller than 800sqm are to be freestanding. As it is the Council's prerogative to do so, the applicant's complaint does not bear on my consideration of this contention.
Subclause 6.16(3) of LEP 2012 requires the subjective satisfaction of the consent authority that the (a) the building will have a freestanding tower, of which each face will be able to seen from a public place, and (b) the development will provide adequate amenity and privacy for the occupants and not significantly adversely affect the amenity and privacy of occupants of neighbouring buildings. The planning experts agreed that (c) is not in issue, as it is satisfied by the proposal.
In Mr McNicoll's view, it is necessary to understanding the evolution of this clause to fully appreciate the intention behind it, which is to preclude tower development on small sites in the city. I disagree with Mr McNicoll's interpretation of cl 6.16 of LEP 2012 because the clause should be construed in accordance with the general principles relating to statutory construction based on the instrument itself as made by the Council.
Dealing firstly with (a), there is no definition in the dictionary of LEP 2012 for freestanding tower. According to Mr McNicoll, a freestanding tower is a tower setback from its side and rear boundaries and according to Mr Sutherland, it is not necessary for a tower to have a setback on all sides as long as it is not attached to another adjacent structure. The Macquarie Dictionary defines freestanding as 'adj. Free of attachment or support, standing independently'. A tower or building that abuts its neighbour is not freestanding, because the two buildings touch and are not free of attachment, although they do not rely on their neighbour for structural support. To be freestanding, therefore, a tower must be physically isolated from any other structure adjacent. As the proposed tower will be structurally and physically independent of another building (above RL 60.479), I am satisfied that it is a freestanding tower for the purpose of cl 6.16 of LEP 2012.
Sub-clause (a) does not specify whether the entirety of 'each face' of the tower must be seen from a public place. Some portion of each façade of the tower will be seen from a public place; the western end of the northern façade will be visible from Pitt Street and part of the eastern end of the northern façade will be visible from public places to the north, including some vantage points in Goulburn Street; the western façade will be seen in its entirety from the public domain in Pitt Street and elsewhere; the southern façade will be seen above 412 Pitt Street and the eastern portion of the southern façade will be visible around the tower of 416-418 Pitt Street; and the eastern façade will be visible from vantage points in the public domain to the east. I am satisfied that for the purpose of sub-cl (a), that each face will be able to be seen from a public place, as what can be seen will give an adequate impression of the three dimensional tower within the proposed building envelope.
Dealing then with (b), the applicant submits that the development will provide adequate amenity and privacy for the occupants, as the daylight analysis establishes level of solar access within the tower and proposed hotel rooms that provides reasonable level of amenity to the hotel's patrons, in the absence of controls which regulate the amount of solar access or daylight required for hotel rooms. The Council presses the contention primarily in relation to the impact of the proposed building envelope on the residential amenity of adjoining development as being unacceptable and not in relation to the internal amenity of the hotel. On that basis, I accept the applicant's submission that the proposed building envelope will provide adequate amenity and privacy for the occupants of the hotel.
For the reasons set out below in relation to setbacks and the obstruction by the proposal of views from the windows on the southern façade of the Miramar Apartments, I am satisfied that the proposed building envelope does not significantly adversely affect the amenity and privacy of occupants of neighbouring buildings.
As Council has set the controls in sub-cl 6.16(3) as being those required to satisfy the objectives of the clause in (1), it is not necessary to deal individually with the objectives of the clause. Had Council wanted to provide additional control that furthered the objectives of the clause, they would have done so. There is nothing specifically raised by the objectives of the clause, not dealt with by the controls in (3), that would cause me to revisit those objectives now that I am satisfied that the proposal meets the requirements of sub-cl 6.16(3).

Setbacks and impact of the proposal on the Miramar Apartments

The Council contends that the likely impacts of the proposal are not acceptable and the site is not suitable for the development. According to the Council's contention, the proposal is contrary to the promotion and co-ordination of the orderly and economic use and development of land, as it would serve to penalise the adjoining site at 412 Pitt Street in terms of redevelopment opportunities above the street wall, because it proposed a building envelope with nil or minimal side setbacks to the southern site boundary. The site is significantly constrained by the small size and narrow dimensions of the site and these constraints serve to limit the provision of a building envelope that would maintain acceptable levels of residential amenity to the adjoining development, making it unsuitable for a tower development.
There are two issues raised by this contention for the proposed building envelope; firstly whether the nil southern setback from the site boundary of the proposed building envelope above a height of 45m is acceptable (being the airspace above the existing building at 412 Pitt Street for the western portion of the southern elevation and the existing residential apartments at 416-418 Pitt Street for the eastern portion of the southern elevation); and secondly whether the 1.272m northern setback from the site boundary for the southern elevation of the Miramar Apartments constructed on the shared boundary is acceptable.

Southern side setback of the proposed building envelope

It is the applicant's submission that there is a conflict in the setback controls for hotels in DCP 2012. DCP 2012, at 5.1.2, states that commercial buildings include hotels for the purposes of the section. At 5.1.2.2(1), above a height of 45m, windows or balconies of commercial buildings are to be set back at least 3m from side and rear property boundaries, however at (3), walls without windows do not need to be set back. At (5), above a height of 45m, a setback of 12m is required from the side or rear boundary for hotels to ensure visual privacy is achieved between dwellings and at (8) side and rear setback distances can be reduced with architectural features such as bay windows and so on, provided at (a) the minimum separation of 6m between the main walls of each building is maintained, (b) separation is between sections of building walls that include service room windows and (c) oblique views are available to site boundaries.
In my opinion the side and rear setback controls in DCP 2012 for hotels above 45m are not inconsistent.
At 5.1.2.2(3) walls without windows in a new commercial building (including hotels) do not need to be setback from the site boundary. There are no windows proposed in the southern elevation, permitting a nil setback from the southern boundary above 45m.
At 5.1.2.2(1), above a height of 45m, windows or balconies of commercial buildings are to be set back at least 3m from side and rear property boundaries. The Pitt Street, western elevation contains windows and is setback approximately 8m from the front boundary. The rear, eastern elevation contains windows and is setback 3.5m from the rear boundary (exhibit A, AD-DA031 Rev 4).
The controls at 5.1.2.2(5) and (8) have visual privacy between buildings as their objective, at (5) 'to ensure visual privacy is achieved between dwellings'. Hotels are required to be setback 12m from the side or rear boundary and this distance can be reduced with architectural features if the requirements at (8) are met.
The proposed building envelope achieves visual privacy between dwellings, as demonstrated by the visual privacy diagram at exhibit A, AD-DA031 Rev 4. This is achieved by having the front two and rear two hotel rooms orientate to the east and west and by providing light wells within the building footprint for either recessed windows to provide some natural light to the corridor and the two northern hotel rooms have windows onto the light wells to the east and west, so that there are no windows in either the northern or southern façades.
As the proposal achieves the object of controls 5.1.2.2(5) and (8) to ensure visual privacy is achieved between dwellings and provides a reasonable alternative solution to the numerical distances required by the controls; I am satisfied that it is appropriate to exercise the flexibility afforded by s 79C(3A)(b) of the EPA Act in relation to the numerical controls set by DCP 2012 at 5.1.2.2(5) and (8).
I do not accept the Council's contention that the nil side setback to the southern boundary of the proposal necessarily penalises the adjoining site at 412 Pitt Street in terms of redevelopment opportunities above the street wall. There are no windows or openings proposed in the southern façade or western façade of the stair of the proposal, which are the portions of the façade proposed to be constructed on the boundary shared with 412 Pitt Street. Future development of the site at 412 Pitt Street can be achieved with a nil side and rear setback by abutting the future development and the hotel on the site for the portion of the northern and eastern boundaries of 412 Pitt Street shared with the site or by creating a light well in a similar manner to the light well created by the proposal adjacent to the nil side setback of the Miramar Apartments on its southern boundary.

Impact of the proposed building envelope on the southern elevation of Miramar Apartments

The planning experts agreed that the view loss from the windows in the southern façade of the Miramar Apartments affects only the upper levels of the Miramar Apartments from levels 33 to 36 and the leading edge of the proposed building envelope will be visible from level 37, because district views from the lower levels are obstructed by the Regis Towers.
There are two windows on each level of the southern façade of the Miramar Apartments on the upper levels. The southern façade is constructed on the shared boundary. On a typical level, there are two apartments on the southern side of the building, one in the south-east corner with an outlook to the rear of the site and one in the south-western corner with an outlook towards Pitt Street. Both apartments have a balcony at the southern corners of the Miramar Apartments. The windows provide significant amenity to the living room and on the upper levels there are sweeping district views from the windows in the southern façade, which include the clock tower of Central Station.
Importantly, in relation to the existing windows in the southern façade of the Miramar Apartments, the modification approval for the Miramar Apartments at 412 Pitt Street, Sydney, issued by City of Sydney Council in 1992 and modifying the consent of 26 October 1989, included the following in relation to the incorporation of windows in the southern façade of the development (exhibit 12): You are advised that the approval to incorporate windows on the northern and southern facades will not prejudice any future development on the adjoining sites with particular respect to construction at the northern and southern boundaries of the site.
In Meriton Properties Management Pty Ltd v Sydney City Council (2004) 140 LGERA 144 [42] (Meriton Properties), the then Senior Commissioner dealt with a similar issue in relation to a development application for the Stage 1 building design envelope of the Regis Towers to the south of this site, at 420-426 Pitt Street and 36-38 Campbell Street and the adjoining building to the north, the Pitt Tower, and held the loss of outlook from apartments on the southern side of the Pitt Tower was not a reason for refusing the application: Whatever the interpretation [of the poorly worded covenant requiring owners of adjoining property to block up windows at the Council's direction should the adjacent site be developed] a purchaser of those apartments would (or should) be aware that the windows to the south, being on or close to the boundary, are vulnerable.
I understand and am sympathetic to the distress of the residents in apartments with a window on the southern façade of the Miramar Apartments. I accept that it is possible that purchasers were not provided with an appropriate caveat emptor in relation to the windows in the southern façade constructed on the boundary, however I give determinative weight in relation to this issue to the fact that the information was available at Council and that it is clearly evident, when viewed from a southern window of the Miramar Apartments or from Pitt Street, that the southern wall of the Miramar Apartments is constructed on the property boundary, because the adjacent building on the site can be seen abutting the southern wall of the Miramar Apartments. I concur with the Senior Commissioner's reasoning in Meriton Properties in regard to the vulnerability of windows in a façade constructed on the boundary of the site. For these reasons, in so far as the contentions relate to impacts on amenity obtained by the inclusion of the windows in the southern façade of the Miramar Apartment, I accept the applicant's submission that the amenity of the Miramar Apartments borrowed from the undeveloped site should not reduce the building envelope otherwise able to be achieved on the site and that the loss of outlook from the adjacent apartments is not a reason for refusing the appeal.

Loss of affordable housing in the CBD

The Council submits that the only part of the contention pressed is the requirement in cl 50 of SEPP ARH in relation to the financial viability of the continued use of the boarding house. At sub-cl 50(4) of SEPP ARH, the continued use of a boarding house is financially viable if the rental yield of the boarding house determined under sub-cl 51(5) not less than 6 per cent. Subclause 51(5) of SEPP ARH is as follows: rental yield means the rental yield for a period (expressed as a percentage) determined by the consent authority in accordance with the following formula and taking into account the guidelines: where: RY in the rental yield. Y is the gross rental income from the boarding house for the period. E is the total expenses for the boarding house (excluding expenses that have been charged to lodgers) for the period. D is the capital depreciation of the boarding house for the period. V is the total value of the boarding house were it to be purchased for the purposes of continuing its use as a boarding house. U is the estimated cost or carrying out work as determined under clause 50 (2) (f).
If the return of the boarding house is less than 6% according to the formula reproduced above, then the boarding house is held to be financially unviable.
According to a valuation prepared by Jones Lang LaSalle Advisory Services Pty Ltd (JLL) on behalf of the application (attached to exhibit 6), the application of the above formula results in a rental yield of 4.32% (excluding income from the retail component), which supports the applicant's proposed demolition of the boarding house; where Y is $588,770; E is $346,927; D is 0; V is $5,600,000 and U is 0.
The Council commissioned a peer review of the JLL valuation report by Preston Rowe Paterson International Property Consultants (PRP) (attached to exhibit 6). The PRP report considered the expenses component (E) of the JLL report to be a high, when compared to the income generated by the boarding house, resulting in a ratio of 58% compared to 7 other boarding houses, where the expenses to income ratio ranged from 15% to 50%. The PRP report found that the gross rental income estimate appeared to be reasonable. The PRP report states, 'The calculated yield of 4.32% for the subject boarding house falls at the lower end of the analysed evidence yield range.' The PRP report raises a number of questions in the conclusion of the report, particularly in relation to the justification for expenses claimed. I accept the Council's evidence that the boarding house falls at the lower end of the yield range for boarding housing, however, the expenses to income ratio determined by JLL for the boarding house does fall within the range of 15% to 50%.
The JLL report determined the market value of the boarding house and retail as $7,500,000, apportioning $1,900,000 of the total to the retail component. The PRP report queries this apportionment of the value on the basis that the amount apportioned to the retail is not clearly explained. However, Mr Reynolds agreed, in cross examination, that even if the amount apportioned to the retail component was increased, the existing boarding house would still be financially unviable (as determined by the formula in subcl 51(5) of SEPP ARH).
While the PRP report raised some questions regarding specific figures adopted in the JLL report; following the peer review, the JLL report remains fundamentally uncontested and a feasible assessment of the financial viability of the existing boarding house. From the view of the existing boarding house at the commencement of the hearing on-site, I concur with Ms Griffin's evidence that the existing boarding house does not provide an adequate standard of accommodation, even by the most basic of standards. It is not difficult to appreciate that in its current substandard state, the boarding house is not financially viable, as the inadequate and unacceptable accommodation could not possibly generate an income commensurate with the value of the site in Sydney's Haymarket. For the purpose of determining the financial viability of the continued use of the boarding house pursuant to subcl 50(2)(h) of SEPP ARH, I am satisfied that the rental yield is below 6% when calculated in accordance with the formula at sub-cl 51(5) of SEPP ARH.
Mr Reynolds is of the view that the JLL valuation report is not prepared in accordance with SEPP guidelines. However, Mr Reynolds agreed in cross examination that the upgrade of the building required for non-fire safety is significant and if the cost of carrying out the necessary work to the boarding house is increased, the denominator in equation is increased and consequently the rental yield would be less than 4.32%.
According to Ms Griffin, the costs associated with the fire safety works, in combination with the cost of other essential building works, are prohibitive, even allowing for a range of cost estimates.
The Council commissioned a review and analysis of costs estimates for upgrading the existing boarding house to comply with the Building Code of Australia (BCA) by Altus Page Kirkland (APK) (attached to exhibit 6). The APK report found that one of the quantity surveyor's costing of $8,202,579 was the more accurate of the estimates provided and that this figure is in the 'higher end' of expectations as to costing for an upgrade to achieve BCA compliance. On the basis of the APK report and taking into account that the adopted estimate is considered to be at the 'higher end' of the potential range of cost estimates, I accept that the likely cost of upgrading the existing boarding house to meet BCA compliance will be prohibitive.
I accept the agreed evidence of the experts that the closure of the boarding house on the site will contribute to a loss of affordable housing at the lowest end of the rental market, and that the supply of boarding house accommodation in the City of Sydney local government area is increasing, primarily because 'new generation' boarding houses and student accommodation are being provided.
In balancing the obligations for retaining and mitigating the loss of existing affordable rental housing, including the items in sub-cl 50(2) of SEPP ARH, with the substandard condition of the accommodation in the existing boarding house that does not achieve acceptable levels of health, amenity and safety; and the accepted evidence of the cost of fire safety works and other essential building works; and the evidence of the lack of financial viability of the existing boarding house; I am satisfied that the proposal to demolish the existing building is acceptable.

Use of the public domain for servicing, parking and waste collection

The Council contends that the proposal will require extensive use of the public domain, rather than the site, for servicing of the hotel use, including waste collection, transport, service vehicle parking and coach parking, contrary to the objective of ensuring that the demand for transport generated by development is managed in a sustainable manner, as the size of the site frontage renders it impractical.
Ms Kelly agreed under cross-examination that it is preferable that there be no vehicle crossing to provide vehicular access to the site from Pitt Street, because this maintains an active street frontage as well as pedestrian flow along the footpath and pedestrian safety. She agreed that a hotel use is more favourable for a site with no vehicular access, compared to any other use.
According to Ms Kelly, the traffic arrangements in Pitt Street were changed last October, 2015, when the light rail construction in George Street began and buses were rerouted along Pitt Street, increasing the bus routes along Pitt Street from two to six. In order to accommodate the additional buses in the street, the eastern side of Pitt Street has no stopping signage from 3pm until 8pm and the western side of Pitt Street has no stopping signage from 6am until 10am and 3pm until 8pm. Ms Kelly does not know whether the former traffic arrangements along Pitt Street will resume once the light rail commences operating in George Street.
Ms Kelly concedes that the proposal will not result in any additional movement of bins, as bins are currently collected on-street; however she anticipates that the hotel will require an increased number of bins requiring collection and this will result in a garbage collection truck being parked outside the site for a longer period. She acknowledges that the bins can be collected anytime during the day or night to avoid the 3pm to 8pm clearway.
The experts agreed that hotel patrons requiring a taxi drop off or pick up during the 3pm to 8pm period would have to alight or hail a taxi in Goulburn Street or Campbell Street, approximately 100-120m walk from the site.
The experts agreed that the proposal would generate one coach drop off/pick up per week for tour groups. Mr Hulse is of the view that it is not ideal for a coach not be able to stop outside the site, however, it is typical in a busy city like Sydney.
According to Mr Hulse, the current use results in approximately 8 traffic movements per day, including deliveries, refuse collection, grease trap servicing, fire inspections and so on. The experts agreed that the proposal will result in a similar number of traffic movements and that deliveries to the hotel can be scheduled for before 7.15am. The experts agreed that there will be some ad hoc deliveries and servicing vehicles visiting the site, including for maintenance and repairs, and those vehicles can park in nearby car parks by prior arrangement of the hotel.
The experts agreed that there are four existing hotels within the vicinity of the site and as such, shuttle pick up and drop offs already occur in this section of Pitt Street and the number of vehicles is not expected to increase.
I accept Ms Kelly's evidence that it is preferable there be no vehicle crossing to provide vehicular access to the site from Pitt Street as the size of the site frontage renders it impractical to provide a vehicle crossing to the site from Pitt Street and that hotel use is more favourable for a site with no vehicular access, compared to any other use. On the basis of Ms Kelly's evidence, I accept that the proposal will require use of the public domain rather than the site, for servicing of the hotel use, including waste collection, transport, service vehicle parking and coach parking.
I accept the agreement of the experts that hotel patrons requiring a taxi drop off or pick up during the late afternoon and early evening period would have to alight or hail a taxi in Goulburn or Campbell Streets; that the proposal would generate one coach drop off/pick up per week for tour groups; that the proposal will result in a similar number of traffic movements when compared to the existing use; that deliveries to the hotel could be scheduled for before 7.15am; and that ad hoc deliveries and servicing vehicles visiting the site could be accommodated in nearby car parks by prior arrangement of the hotel.
I am satisfied the proposed hotel and café use is appropriate for this site in terms of its impact on traffic and parking in the locality and that flowing from the evidence of the experts, nothing is raised by the contentions relating to traffic and waste collection that cannot be adequately addressed and managed by a traffic, loading and coach parking management plan and a waste management plan (in accordance with Council's 'Policy for Waste Minimisation in New Developments', exhibit 13) for the future use of the hotel and café, as part of the Stage 2 Development Application.

Design excellence

The Council contends that the proposed building envelope does not exhibit design excellence and the site is not suitable for the scale of the proposed building envelope. The proposed building envelope does not have adequate regard for the need to achieve an acceptable relationship with the towers on the neighbouring sites, particularly in terms of separation, setbacks, amenity and urban form.
The applicant gave an undertaking that no additional height or floor space will be sought under cl 6.21(7) of LEP 2012 for any future Stage 2 development application.
For the reasons provided above, I am satisfied that the proposed building envelope achieves an acceptable relationship with the towers on the neighbouring sites. The approval of a Stage 1 development application is to establish an appropriate building envelope and demonstrate that an acceptable layout is achievable within that envelope. On that basis, the proposed building envelope meets the requirements in sub-cl 6.21(4) relevant to a building envelope. The Stage 2 development application will need to address the outstanding requirements in cl 6.21 of LEP 2012.

Findings

As the proposed tower will be structurally and physically independent of another building, I am satisfied that it is a freestanding tower for the purpose of cl 6.16 of LEP 2012 and that each face will be able to be seen from a public place, as what can be seen will give an adequate impression of the three dimensional tower within the proposed building envelope.
I am satisfied that the side and rear setbacks of the proposed building envelope comply with the numerical controls in DCP 2012 for commercial buildings, including hotels; that the proposal ensures visual privacy is achieved between dwellings; and that the nil side setback to the southern boundary of the proposal does not necessarily penalise the adjoining site at 412 Pitt Street in terms of redevelopment opportunities above the street wall.
In balancing the obligations for retaining and mitigating the loss of existing affordable rental housing, including the items in sub-cl 50(2) of SEPP ARH, with the extremely poor condition of the existing boarding house; the accepted evidence of the cost of fire safety works and other essential building works; and the evidence of the lack of financial viability of the existing boarding house; I am satisfied that the proposal to demolish the existing structure is acceptable.
I am satisfied the proposed hotel and café use is appropriate for this site in terms of its impact on traffic and parking in the locality and that flowing from the evidence of the experts, nothing is raised by the contentions relating to traffic and waste collection that cannot be adequately addressed and managed by a traffic, loading and coach parking management plan and a waste management plan (in accordance with Council's 'Policy for Waste Minimisation in New Developments', exhibit 13) for the future use of the hotel and café, as part of the Stage 2 Development Application.

Conditions of consent

The applicant seeks a number of amendments to Council's version of the conditions of consent (exhibit F).
The applicant's version of condition (1) includes a description of the consent, '… for demolition of the existing structures and building envelope for construction of a 31 storey hotel accommodation with café at ground level at 410 Pitt Street, Sydney…'. I prefer the applicant's version of condition (1) as it includes a description of the consent granted.
The applicant's version of condition (2) deletes the word 'indicative' prior to land uses. I prefer the applicant's version deleting the word 'indicative' as the consent is granted for the stage 1 building envelope and the use of the site as a hotel and café. The spatial layout of each level is indicative; however the use is not indicative.
The applicant seeks the deletion of '(b) any change of land use;' in condition (3) which lists the matters not approved and not forming part of the Stage 1 development consent. I prefer the applicant's version of condition (3) as the land use approved by the consent is a changed use from the existing boarding house use.
The applicant seeks the deletion of condition (8)(c)(i) in relation to the future Stage 2 development application, 'acknowledging the height of the adjoining heritage item'. I prefer the Council's version which includes this requirement as it articulates one of Council's priorities for the detailed design of the proposal.
The applicant seeks the deletion of condition (9) 'Documentation must be submitted with the Stage 2 Development Application for the hotel use and its operation in accordance with the requirements of Section 4.4.8 of the Sydney Control Plan'. I accept the applicant's submission that this requirement is addressed by the agreed version of condition (21) 'An operational Plan of Management for the hotel use is to be submitted in accordance with the requirements of Section 4.4.8 of the Sydney Control Plan 2012'.
The applicant seeks the deletion of condition (12) 'Daylight, An analysis of daylight access to the rooms of the hotel tower must be prepared by an appropriately qualified person and submitted with any future Stage 2 Development Application'. I accept the applicant's submission that an analysis of daylight access to the rooms of a hotel is unnecessary for the approved use and this condition is deleted.

Conclusion

For the reasons set out above, I am satisfied that it is appropriate to grant development consent to the proposal for a Stage 1 building envelope.

Orders

The orders of the Court are: 1. The appeal is upheld. 2. Development Application No. D/2015/661 for Stage 1 building envelope for a new 31 storey accommodation hotel at 410 Pitt Street, Haymarket, is approved, subject to the conditions of consent at Annexure A. 3. The exhibits, other than exhibits 11, A and B, are returned.

Susan O'Neill Commissioner of the Court 10752 of 2015 O'Neill (C) (204 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: 19 May 2016

(2004) 140 LGERA 144

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