In July 2023, the NSW parliament passed the Environmental Planning and Assessment Amendment (Housing and Productivity Contributions) Act 2023 (NSW), which introduces Housing and Productivity Contribution (HPC). HPC replaces the previous Special Infrastructure Contribution (SIC) scheme and applies a more consistent contribution framework over a much wider area, including the entire Local Government Areas located in:
- the Greater Sydney region;
- the Illawarra-Shoalhaven region;
- the Lower Hunter region; and
- the Central Coast region.
The HPC will apply from 1 October 2023, except in relation to land within the Western Sydney Growth Areas and Western Sydney Aerotropolis SIC areas (to transition to the HPC regime by 2026).
The purpose of HPC is to facilitate provision of “regional infrastructure” that supports and promotes housing and economic activity, including public amenities, affordable housing, public housing, transport infrastructure and roads, as well as measures that conserves the natural environment for the benefit of the region.
The HPC will apply to development applications and complying development certificate (CDC) applications made on, or after 1 October 2023. In essence, HPC requires new developments to contribute to payments for infrastructure including roads, parks, schools, and hospitals (via grants from a Housing and Productivity Fund), to promptly address the increased demands for such services in the newly developed regional areas.
Payment of HPC will be imposed as a condition of development consent or condition of a CDC, if the development is within the mapped regions of Greater Sydney, Illawarra-Shoalhaven, Lower Hunter or Central Coast, and is classed as:
- Residential development that intensifies land-use where new dwellings are created, such as houses, apartments, terraces, and dual occupancies;
- Commercial and retail development such as shops, neighbourhood shops, supermarkets, and commercial office buildings where new floorspace is created; and
- Industrial development such as warehouses and industrial buildings, where new floorspace is created.
Some developments may be exempt from paying HPC, which may include public housing, affordable housing, seniors housing and secondary dwellings (granny flats) carried out under the State Environmental Planning Policy (Housing) 2021 (NSW) (SEPP).
The amount of HPC payable depends on the location and type of development proposed. A digital tool to allow for contributions to be calculated online is underway, which will be integrated into the NSW Planning Portal and automates the ongoing administration, tracking and reporting of contributions.
Transitional provisions will apply from the commencement date:
- initial period (1st October 2023 to end of June 2024) – 50% discount rate;
- second Year (July 2024 to end of June 2025) – 25% discount rate; and
- third year onwards (July 2025 +) – full contribution comes into effect.
A key benefit for developers of residential subdivision development is that HPC is to be paid before the issue of a subdivision certificate, which is much later in the process than the previous requirement to pay SIC before the issue of a construction certificate. As the subdivision certificate is typically issued at the end of the construction process, the levy has a decreased cash-flow burden for developer businesses.
In addition to local infrastructure contributions, some areas will attract a strategic biodiversity component (SBC) and a transport project component (TPC) to be paid in addition to the base component of the HPC. SBC applies to land that has been biodiversity certified under the Biodiversity Conservation Act 2016 (NSW), and while initially applied only to the Cumberland Plain Conservation Plan certified land, the application of the SBC may expand over time to include other biodiversity certified areas. TPC applies to land near significant transport infrastructure investment that increases development potential, and while initially applied only to land within the Pyrmont Peninsula area, where the Pyrmont Peninsula SIC will transition into the first TPC, there may be other applications of the TPC to other transport corridor areas in the future. Prudent developers will need to factor in the likelihood of additional levies if their developments take place in these areas.
In summary, the HPC is a new broad-based scheme of taxation for new developments, unifying a previously fragmented approach of many pre-existing SICs. This approach aims to create uniform, broad-reaching policy, and proposes to provide a reliable and predictable source of public revenue that can better align infrastructure investment with land-use planning and development in high-growth regions, which in turn may give greater confidence to communities and the development industry.
