Sydney City Council Approves Inclusionary Zoning Amendments, Affecting New Apartment Projects in Pyrmont and Surry Hills

The City of Sydney Council voted on 7 July to amend the Local Environmental Plan, requiring new residential developments with more than 20 dwellings to include 12 percent affordable units at below-market rents for 15 years. The change applies to sites in Pyrmont, Surry Hills and parts of Redfern, where several large apartment proposals are under assessment.

Why the amendments reached the council agenda now

Housing affordability ranks as the top concern for voters in the 47 federal seats that cover greater Sydney, including marginal electorates in Western Sydney. Council officers prepared the amendments after reviewing the 2025-26 City of Sydney budget papers, which allocated $4.8 million for affordable housing contributions collected through the existing voluntary planning agreement process. The meeting considered 14 submissions from resident groups and three from property industry bodies.

Under the new rules, developers can meet the target either by building the units on site or by making an equivalent cash contribution to the council’s affordable housing fund. Properties transferred to community housing providers will be managed at rents capped at 80 percent of market rates for eligible households earning under $80,000 a year.

Direct effects on Sydney residents and local projects

Households on the City of Sydney social housing waiting list, currently 8,200 people, stand to gain priority access to the new units. Local advocates note that families currently paying more than 40 percent of income on private rent in Surry Hills could qualify for the capped tenancies. Construction workers employed on the affected sites will see no immediate change to project timelines, though developers have indicated some proposals may be scaled back.

Businesses operating ground-floor retail in mixed-use buildings covered by the amendments will continue under existing lease arrangements. The legislation states that commercial floor space remains outside the 12 percent calculation. Implementation begins with development applications lodged after 1 September 2026, with the first units expected to be completed by late 2029.

Council staff will publish quarterly reports on contributions received and units delivered, starting in December 2026. Residents can review the reports on the City of Sydney website or attend the next ordinary meeting scheduled for 4 August.