The policy getting in the way of improving Sydney’s housing supply

Last month, Landcom chief executive Alex Wendler revealed the state developer had decided against acquiring three publicly owned sites in western Sydney despite “working with the [Office of Strategic Lands] for a number of years to develop the sites”.

The problem? The two agencies could not agree on the land value.

Opposition planning spokesman Chris Rath was incredulous in budget estimates: “This is government-owned land that a government agency, Landcom, wants to buy to develop it, and you couldn’t agree on the price. Why aren’t you getting this land for free?”

His view is shared across politics. Many cannot understand why the taxpayer-funded state developer was using funds to purchase land already owned by taxpayers.

“That is a policy decision,” Planning Minister Paul Scully responded to Rath. “That is not one of Landcom’s making. That is one of accounting standards and treasury policy.”

Treasury policy requires both Landcom and Homes NSW to pay market value for the land, which is often vacant, known as the “highest and best use” or the highest valuation possible, rather than the existing use.

It is part of the reason neither Landcom nor Homes NSW have purchased more sites through the audit of surplus public land, despite having first and second call on identified land. Between them, they have acquired seven of about 60 sites.

Instead, most of the sites have been sold to developers or private buyers through public auctions since April 2025, netting more than $90 million in revenue. Despite Premier Chris Minns saying surplus land sales would deliver 21,000 new homes, only five of the sites sold so far have a development application submitted.

In August, the government said the state developers were undertaking due diligence on about 18 properties. Landcom moved ahead with two. Landcom, a state-owned corporation required to pay 70 per cent of net profit after tax to the government as a dividend, has announced two sites: the Joinery in Annandale, and another in Chatswood, which the government says combined would deliver more than 2000 homes.

Of the 10 land audit sites assessed by Landcom, only two were acquired in the 2024-25 financial year, the developer’s latest financial year business plan revealed. Homes NSW has just purchased three sites – at Camden, Box Hill and Menai – at a cost of $30.4 million.

University of Sydney professor of urbanism Laurence Troy said: “I don’t think there is a particular justification for paying full freight. If we are in a housing crisis, why aren’t we using the full tools of government to solve the problem?”

Wendler said his agency was a “price taker” and “we are not part of the bureaucracy that decides policy”.

Landcom turned down vacant land in St Leonards adjacent to Royal North Shore Hospital. The site is “perfectly positioned to provide high-quality housing and key worker housing in a high-amenity area and with excellent public transport connections”, said Property and Development NSW, the agency leading the audit. Sites across Chippendale, Parramatta and Rouse Hill are all being sold on the private market.

There is disquiet within Labor that Landcom is not moving urgently enough in the face of the housing crisis. A senior party source said: “There is concern within government about the performance of Landcom in delivering housing with urgency when clearly the priority is increasing supply.”

Landcom has a target of delivering 1800 affordable homes by June 2029. So far, the agency had only identified 1477 dwellings. Its target for overall sales in the past two years was 8081. Landcom has met about 50 per cent of the goal.

Wendler said his agency was working with faith-based and community housing providers to close the affordable housing gap. He attributed the settlement shortfall to the freeze on sales of government-owned land in May 2023, and developers asking for deferred settlement.

“There’s nothing that we have done wrong,” he said.

Landcom pulled the tender on a thousand dwellings in Edmondson Park because the cost of construction was greater than the price offered, Wendler said, reflecting the view of private developers.

Troy urged the state government to return Landcom’s remit to the original intent when first established under the Whitlam government. During downturns in the development cycle when the private market was struggling to deliver housing, the state developer would act as a counter-cyclical force, ensuring consistent supply.

“They should be a more significant player in the supply of housing rather than just facilitating and planning new housing,” he said.

“History would tell you that agencies like Landcom can deliver housing more cheaply than anyone because of the advantages they have as a government-backed agency. If they used these capacities, they could provide supply far more consistently.”

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