While the broader housing supply conversation across Greater Sydney is focussed on density and new dwellings, the City of Sydney is dealing with a different kind of challenge: the quiet loss of housing stock due to apartment consolidation.  

Now, it’s proposing a hard limit on how many dwellings can be lost in redevelopments – a technical planning move with very real implications for developers.  

In September 2023, the City of Sydney passed a resolution responding to a pattern seen across the eastern suburbs and inner-city precincts – developers and wealthy homeowners were knocking down or consolidating existing apartment buildings, replacing them with fewer, larger dwellings.  

These aren’t one-offs. Since 2018, 25 DAs have been approved that resulted in a net loss of 65 dwellings by:  

• Merging two or more units into one 

• Replacing entire apartment buildings with standalone houses  

• Rebuilding blocks with significantly fewer, larger units  

 

What’s Changed?  

City of Sydney has now gazetted changes to its LEP. The changes apply across the entire LGA, regardless of zoning and sets a numerical cap on the allowable reduction in dwelling numbers from redevelopments or DA modifications.  

 

Key points include:  

• Applies to all sites with three or more dwellings (residential or mixed-use) 

• Caps loss of dwellings at the greater of one unit or 15% of existing units  

• Applies only to redevelopments where residential floor space stays residential  

• Does not apply when residential space is converted to non-residential use (e.g. retail), but does apply to the remaining residential floor area  

 

There are savings and transitional provisions to ensure DAs currently in the system aren’t impacted.  

 

What It Means For Developers  

Developers can still increase floor space and average unit size, provided the number of units stays above the threshold. Clause 4.6 still applies, allowing flexibility in rare, justified cases (e.g. heritage reinstatement).  

This means:  

• Luxury conversions that halve the number of units won’t fly anymore  

• Merging units will need to fall within tight limits  

• Projects seeking to maximise yield will need to weigh unit council carefully alongside GFA