What we gain by building more homes in the right places

About the paper

This paper is part of a NSW Productivity Commission series on how to make housing more affordable and make the best use of Sydney’s infrastructure.

The first paper, Building more homes where people want to live, highlighted the places in Sydney where there is strong demand for more homes, and discussed the affordability benefits of building more in these places.

The second paper, Building more homes where infrastructure costs less, found that many of these areas also have lower infrastructure-related costs.

This paper builds on the findings of the first two papers, showing the broader social benefits of allowing more homes to be built in the right places. 

Improving housing affordability lifts living standards by enabling NSW residents to spend more on other things, rather than housing. This is especially important for younger households and other lower-income households that spend a large share of their income on housing.

Building in the right places has further benefits:

  • Density is good for productivity—workers earn more in denser cities, in large part due to more learning opportunities and better matching between jobs and workers.
  • Density is good for convenience and amenity. Denser places tend to have a greater variety of goods and services, and lower costs. They are also more convenient for connecting with friends and family, and fulfilling caring responsibilities.
  • Well-located infill development reduces the community’s exposure to floods and bushfires, reduces pollution through shorter commutes and, in using land more efficiently, helps to protect sensitive ecosystems.

Key findings

The paper discusses how policymakers can unlock more homes in high-demand locations:

  • Recognise the benefits, not just the costs, of allowing more people to live in existing areas, and listen to a broader range of people—including prospective residents.
  • Focus on providing access to high-quality open space, which may mean adapting existing open space to suit a community’s changing needs.
  • Take a more strategic and balanced approach to heritage protection—preserve Sydney’s identity while still allowing more homes in inner-areas, enhancing the value of heritage by letting more people live near and enjoy it.