Canberra’s housing reset: why the real issue for the NSW Canberra Region is development viability

The ACT Budget’s housing measures are not just a Canberra story.

They are part of a wider housing delivery problem now being felt across NSW and the broader Capital Region.

Governments are increasing housing targets, releasing land, promoting infill development and adjusting planning controls to create more theoretical housing capacity. However, the market responds to project reality, not policy intent. The message from the development sector is increasingly clear: more capacity does not necessarily mean more delivery.

The central issue is no longer simply whether more housing can be permitted.

The central issue is whether more housing is viable.

This builds on the argument advanced in Upside Planning’s first Insight: housing need, zoning capacity and planning approval do not automatically translate into deliverable housing. A planning system can create theoretical capacity, but projects still need to be commercially viable. They need to be capable of being serviced, financed, approved, built and sold or rented at a price the market can support.

That distinction is becoming increasingly important in the NSW areas influenced by Canberra’s housing market, including Queanbeyan-Palerang, Yass Valley and the broader south-east.

This is not simply a market failure

Across NSW and the ACT, housing policy is heavily focused on supply.

The ACT Budget includes a major five-year land-release program, missing-middle housing reforms, stamp duty changes and lease variation charge concessions intended to support more diverse housing. NSW is also pursuing increased housing delivery through state-led reforms, housing targets and planning pathway changes.

However, the delivery environment is not responding as cleanly as policy assumes.

The problem is not that housing demand has disappeared. The problem is that many projects do not stack up.

Construction costs remain high. Finance is expensive. Skilled labour is constrained in some regional areas. Infrastructure costs are material. Approval risk remains significant. Infill sites are usually complex. Councils are under pressure to accommodate more housing, but local infrastructure systems are frequently limited, ageing, poorly located or expensive to augment.

This creates a widening gap between theoretical capacity and what can actually be delivered.

A planning policy may allow more housing. A housing strategy may identify more potential dwellings. A structure plan may point to future supply. But unless a project can absorb construction costs, infrastructure costs, approval risk, holding costs, developer return and market risk, the additional housing may not be delivered.

That is the viability gap.

It is not simply a private market problem. It is increasingly a policy-induced delivery failure.

Governments are asking the market to deliver more housing, faster and more affordably, while the cumulative effect of planning requirements, infrastructure costs, technical standards, approval risk and contribution settings often makes housing harder and more expensive to deliver.

Most of these requirements have a rationale when viewed in isolation. Roads, stormwater, sewer, parking, waste, bushfire, biodiversity, design quality and infrastructure contributions all matter.

The difficulty is cumulative.

In combination, they can turn otherwise logical housing projects into unviable projects.

Why regional infill is especially exposed

The viability issue is particularly acute in established regional towns.

In places such as Queanbeyan, Cooma, Yass and other towns in the broader Canberra Region, there may be a strong strategic case for infill housing. These areas often have existing services, established centres, schools, shops and employment connections. On paper, they are logical places to accommodate more housing.

But many infill sites are not simple development sites.

They may involve:

• ageing, poorly located or capacity-constrained sewer, water and stormwater infrastructure

• difficult vehicle access or limited frontage

• fragmented ownership

• existing dwellings or improvements requiring demolition

• bushfire, biodiversity, heritage or tree constraints

• parking and manoeuvring challenges

• neighbour sensitivity and local character issues

• higher professional, approval and holding costs relative to project size.

Each of these matters adds risk.

In higher-value markets, that risk may be absorbed by stronger sale prices or rents. In lower-value regional markets, the same construction cost and approval risk can make an otherwise logical infill project unviable.

This is why a generic “more infill” policy position can be misleading.

The issue is not whether infill is desirable. In many locations, it is. The issue is whether the local market can deliver it.

Jindabyne shows why end values matter

Jindabyne illustrates the other side of the viability equation.

Compared with many inland regional towns, Jindabyne has stronger land values and stronger end values. That does not make infill development easy. Infrastructure, access, parking, local character, seasonal demand, environmental constraints and short-term accommodation pressures remain significant issues.

However, stronger end values can make it easier for projects to absorb higher construction costs, servicing costs and approval risk.

That is the key point.

The same planning control can produce very different outcomes in different markets. A dual occupancy, townhouse project or small apartment development may be viable in Jindabyne but unviable in Cooma, Berridale or parts of Queanbeyan-Palerang, even where the planning policy appears to support additional housing.

The difference is not simply planning permissibility.

It is the relationship between land value, construction cost, infrastructure cost, approval risk and achievable revenue.

The ACT Budget should be read through a viability lens

The ACT Government’s housing measures are significant. They show a clear policy intent to increase supply through land release, infill housing and missing-middle reform.

However, the broader lesson for the NSW Canberra Region is not that planning reform alone will solve housing supply.

The lesson is that housing delivery depends on whether planning reform is matched by infrastructure capacity, reasonable connection costs, construction feasibility and market support.

For NSW border areas, this matters because Canberra’s housing market does not stop at the Territory boundary. Queanbeyan, Googong, Jerrabomberra, Bungendore, Braidwood, Sutton, Murrumbateman, Yass and the Snowy Mountains towns are all affected by Canberra’s labour, housing and construction markets to varying degrees.

Some sites will benefit from that pressure. Others will not.

A well-located site with good servicing, accessible infrastructure, manageable constraints and realistic end values may have genuine development potential. If those attributes are absent, even a site with supportive planning controls may remain undeveloped.

The planning question needs to change

Housing strategies often ask: where can more housing be directed?

That remains an important question, but it is no longer enough.

The better question is: where can more housing actually be delivered?

For councils, that means housing capacity analysis should not rely only on zoning, lot size and theoretical yield. It should also consider infrastructure, ownership patterns, likely development economics, site complexity and market depth.

For landowners, it means apparent uplift should be tested before assuming a site has development value.

For developers, it means acquisition decisions need early planning, servicing and feasibility input before design costs and holding costs accumulate.

For government, it means housing policy needs to be matched with practical measures that reduce delivery risk: infrastructure funding, clearer approval pathways, proportionate standards, realistic contribution settings and better alignment between planning policy and development economics.

What should be tested early

For landowners and developers considering opportunities in the NSW Canberra Region, early due diligence should focus on viability.

The key matters include:

• zoning, minimum lot size and land-use permissibility

• realistic yield after setbacks, parking, access, landscaping, private open space and waste requirements are applied

• sewer, water and stormwater connections

• infrastructure contributions

• bushfire, flooding, biodiversity, heritage and contamination constraints

• demolition, staging and construction complexity

• likely approval pathway and approval risk

• achievable sale prices or rents

• market depth for the proposed product

• finance, holding and contingency costs.

The objective is not to maximise the number of theoretical dwellings on a plan.

The first test is to identify whether a site has a credible, defensible and deliverable planning pathway.

The opportunity is real, but viability is the test

The ACT Budget reinforces a broader point: the Capital Region needs more housing, but housing delivery will be shaped by infrastructure, construction cost and development viability. Some of those matters sit outside the direct control of local government, but they directly affect whether local housing strategies can be delivered.

That creates an opportunity for the NSW Canberra Region, particularly where land is well located, serviceable and supported by strong market demand.

However, it also means that generic assumptions about housing supply should be treated carefully. Some infill and greenfield sites will be well positioned. Others will remain difficult or unviable, even where the planning system is supportive.

The next phase of housing delivery will be driven by the sites where planning permissibility, infrastructure capacity, construction cost and market value align.

For councils, the challenge is to identify where growth can be realistically delivered, not just where it can be theoretically planned.

For landowners and vendors, the challenge is to understand whether their land has genuine development potential or only theoretical uplift.

For developers, the challenge is to select sites where planning risk, infrastructure cost and end values can be managed together.

The ACT is making a significant push to increase housing supply. NSW is doing the same. But across both jurisdictions, the evidence points to the same problem: housing policy is creating capacity faster than the market can convert that capacity into completed dwellings.

That is the broken link.

In regional housing markets, viability is a key hurdle.