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Sydney’s boarding house boom to be curbed by proposed government changes

The boarding house boom

Boarding houses, lodgings offering self-contained studios, have been booming across Sydney’s suburbs in recent times, particularly in response to the affordability issues arising from costs to buy or rent in major metropolitan areas.

They offer a cheaper, more convenient housing alternative, and contrary to popular belief, cater to a wide variety of lodgers from young professionals to middle-aged people, divorcees and retirees. They tend to be most popular in inner city suburbs as well as areas around universities, hospitals and good transport links.

These types of assets are in huge demand from developers who see them as very high yielding investments, returning 15-20 percent with very low vacancy rates. 

The proposed changes

But the boom in this alternative asset class may be coming to an end with the recent NSW Government proposed changes, which would require developers to build extra car parking to reduce the demand and impact on street parking.

Currently the government regulations state 0.2 car spaces per boarding room. Due to the high density living in boarding houses, some areas have seen a strain in available car parking, with street parking filled to capacity for these residents. The new laws propose 0.5 spaces per boarding room, in an attempt to alleviate this strain, and in direct response to multiple complaints and concerns raised with councils and community meetings.

The effects on the community

These changes however will have a roll-on effect on costs for both developers and residents. From a developer point of view, this would significantly raise the price of development to excavate basements for further car spaces. This would mean that in turn, the developer would raise the rental costs within the boarding house to the lodgers, and could strike a further blow to people already priced out of the regular housing market. Such changes could severely affect the supply of good boarding house rooms.

With the proposed regulation changes imminent, many developers have been in a scramble to get DA approval before the new laws come into effect. In the past few weeks alone, we have seen 70 to 80 new DAs launched, and there are estimated to be nearly 800 DAs for boarding houses currently under consideration at various councils within NSW. 

We recently sold an Erskineville site with plans to build a boarding house for $3 million at auction after receiving nearly 300 inquiries during the sales campaign, and are currently in the process of selling a fully-completed 15-room boarding house in Rockdale for more than $3.5 million, having sold the same site last year for $1.8 million.

Although not confirmed, it is likely that the new laws will go through, and once they come in, this will certainly slow down the number of boarding houses going through the DA process and being approved. 

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Nick Tuxworth

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