NSW’s Low and Mid-Rise Housing Reforms: What They Mean for Medium-Density Development
- Adam Bahrami
- Apr 1
- 3 min read
The NSW Government’s latest Low and Mid-Rise Housing Policy is poised to reshape the state’s residential landscape, unlocking 112,000 new homes over the next five years. For property developers, investors, and homeowners, these sweeping changes represent a once-in-a-generation opportunity to tap into the “missing middle” of housing.
What Is the Low and Mid-Rise Housing Policy?
Effective from 28 February 2025, the policy expands development permissions within 800 metres of 171 town centres and train/light rail stations across Greater Sydney, Newcastle, the Central Coast, Illawarra-Shoalhaven, and Hunter regions.
Key housing types now permitted include:
Dual occupancies
Townhouses
Terraces
Low- to mid-rise residential flat buildings (up to 6 storeys in some areas)
Shop-top housing
Previously restricted or outright banned in many R1, R2, R3, and R4 residential zones, these housing forms can now be developed as-of-right, provided they meet new non-discretionary development standards.
Why Medium-Density Housing Matters
The so-called “missing middle” — housing that bridges the gap between standalone houses and high-rise apartments — has long been underutilised in NSW. Until recently:
Only 2 of 33 Greater Sydney councils allowed townhouses in R2 zones
Residential flats were prohibited in 60% of R3 zones
By reinstating medium-density options, the NSW Government aims to:
Boost housing supply near essential infrastructure
Support greater housing choice and affordability
Make better use of existing transport, schools, and community assets
What Are the New Planning Controls?
For properties within mapped Low and Mid-Rise zones:
Lot size minimums: 450–600 m² depending on housing type
Building heights: Up to 9.5 m in R1/R2, and up to 22 m in R3/R4 within 400m of a centre
FSR (Floor Space Ratio): Up to 2.2:1 in R3 zones near centres
Subdivision now permitted: As small as 225 m² per lot for dual occupancy
Key Opportunities for Developers
At OwnerDeveloper, we help you unlock the full potential of your land with practical guidance and compliance-ready development solutions. The LMR reforms present immediate advantages:
Faster approvals: Compliant developments can’t be refused based on zone-specific restrictions
Increased yield: Build more dwellings on the same lot, especially within 400m of key transport
Higher density = higher ROI: More units mean more returns, particularly in underutilised R2 and R3 zones
Areas to Watch
Suburbs like Lane Cove, St Leonards, Riverview, and parts of Northern Beaches are now primed for redevelopment. According to PropCode data:
1,487 properties in Lane Cove meet the new criteria for dual occupancy
Over 226,000 properties across NSW are affected by the LMR zoning reforms
Considerations and Constraints
While the policy opens doors, it’s not without nuance:
Site-specific checks are essential — bushfire, flood, or heritage overlays may apply
Local DCP(Development Control Plan) and LEP(Local Environmental Plan) requirements still influence design and approval processes
Infrastructure support is lagging behind rezoning in some areas — particularly transport and schools
Next Steps for Property Owners and Developers
Whether you’re an investor, owner-builder, or seasoned developer, navigating these changes effectively requires:
Site analysis – Know your zoning, restrictions, and development potential
Strategic planning – Understand how to maximise yield under the new controls
Partnering with experts – Work with professionals who understand both planning and project delivery
Ready to Capitalise on Medium-Density Development?
OwnerDeveloper is here to help you unlock your site’s value and build smarter under the new LMR housing rules. Contact us today for a tailored feasibility report or to discuss your medium-density development plans.
Keywords: Medium-density housing, Low and Mid-Rise Housing Policy NSW, missing middle, townhouse development, dual occupancy Sydney, NSW housing reforms 2025
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