Low and Mid-Rise Housing Policy: What Stage 2 means for you
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Big Changes Are Coming To NSW’s Housing Market: What You Need To Know
NSW’s biggest housing shake-up in 50 years is here and we want to help you understand where your property fits in.
Stage 2 of the Low and Mid-Rise Housing Policy began on 28 February 2025, and the NSW government predicts this change will lead to 112,000 new homes over the next five years.[1]
We already saw Stage 1 of this policy in July 2024, which allowed for two dwellings on a single lot in all R2 low-density residential zones. Stage 2 will expand on this, allowing for townhouses, terraces and mid-rise apartments up to six stories near train stations and town centres around Greater Sydney.
NSW homeowners, buyers, and investors should be aware of what this means for them and the NSW housing market. Let’s explore what this policy is and how it might affect you.
What is the Low and Mid-Rise Housing Policy?
NSW is growing and so is the demand for housing. The Low and Mid-Rise reform policy was announced in 2021 as part of a NSW government policy aimed to increase the housing supply, diversity, and affordability across the state.[2]
The policy covers both Low and Mid-rise homes, opening up new opportunities to build up in areas that were previously reserved for single-storey homes.
What does this housing policy mean? Now townhouses, terraces and small apartment buildings (low-rise), and apartment buildings up to six storeys (mid-rise) will be allowed within 800 metres of train stations and town centres in R2 to R4 zones.
The policy itself is designed to fill what is called the “missing middle market” – the gap between single-family homes and high-rise apartments. It’s hoped this will provide more housing options near good transport links, shops, and jobs.
“The last time significant changes such as these were made in NSW was over 50 years ago,” says Victor Gennusa, DiJones’ Head of Sales, Developments. “Property owners could unknowingly be sitting on a development site with potential values in excess of 50% to 200%. DiJones Developments are here to help our clients navigate this change and help them capitalise on these changes.”
Stage 2: Key changes and what they mean
Stage 2 is big news, as it will affect the cost of homes and what you can potentially sell for.
Stage 1 saw dual occupancies, which are simply two homes on a single lot in R2 low-density zones. In Stage 2, expect to see new low and mid-rise buildings popping up across NSW, which brings plenty of potential for investors and homeowners alike.
Where exactly do these changes apply?
If you live within 800 metres of a train station or a town centre, this policy is likely to change the fabric of your neighbourhood.
Town centres are places like the Chatswood, Northbridge, Mosman, and Pymble. Some of the affected suburbs near major transport hubs include Parramatta, Roseville, Artarmon, Gosford, Newcastle, and Wollongong.
These areas were selected due to their proximity to the things that help a community thrive, like transport, jobs, and essential services. If you’d like to see exactly where the policy affects, here’s a helpful map.
What’s allowed under Stage 2?
Stage 2 now allows for new property types to be built in designated areas by allowing for dual occupancies, townhouses, terraces, mid-rise apartments, and shop-top housing.
The good news for those looking to buy in these areas is that the new properties will be easier and faster to develop under the new non-discretionary standards.[3] These standards clarify what will and won’t be approved by the local council, allowing developers to understand expectations and proceed with certainty.
So, what homes are allowed under these changes? Let’s break it down.
Dual occupancies
Dual occupancies are two homes on a single lot that can be either attached or detached.
Under the new policy, they are allowed in all residential zones. On top of that, lot size rules have been relaxed, making it possible to build them on smaller lots of 450 square metres with a minimum frontage of 12 metres.
They are a fantastic option for homeowners looking to add value to their property or investors wanting to generate dual rental income.
Multi-dwelling housing
Multi-dwelling homes are developments with three or more homes on a single block of land, like small townhouse communities.
Under Stage 2, these are now permitted within 800 metres of train stations and town centres. However, they must meet height and setback rules in order to maintain the neighbourhood's character.
They are a great middle ground between single-storey homes and high-rise apartments.
Terrace housing
Sometimes called row houses, these homes are a key part of the “missing middle” solution, offering a more affordable option for buyers.
They are now welcomed in the designated areas within 800 metres of public transport. Much like multi-dwelling homes, they need to abide by a required minimum frontage width to maintain a consistent streetscape.
Terrace homes can be a great investment for homeowners and developers looking to get the most out of their land while still keeping the small neighbourhood feel.
Residential flat buildings
These are mid-rise apartments that allow for up to six storeys, providing more housing in high-demand areas near transport hubs or town centres.
All new residential flat buildings under Stage 2 will need to meet specific height, floor space, and open space requirements. This is to allow for light, adequately sized homes and outdoor space. All these elements help maintain neighbourhood character and livability.
Residential flats can be a great opportunity for investors and developers looking to make better liveability and communities in desirable locations.
Shop-top housing
These are designed to make the most of the available space by building homes above ground-floor shops, cafés, or offices.
These builds are now encouraged in commercial zones to create mixed-use communities. By connecting both workspaces and residential buildings, the NSW government hopes this will increase the walkability of these suburbs.
Shop-top homes can be a great investment for small business owners looking to add a steady rental income or investors looking to combine retail and residential incomes.
In addition to the new types of residential buildings, the streamlined approvals process will help developers understand clearly what is permitted and avoid obstacles.
Here are the key residential zone differences:
Exclusions
While Stage 2 of the Low and Mid-Rise Housing Policy opens up a bunch of new opportunities in prime areas of NSW, there are some exceptions.
These areas are excluded to protect against environmental, historical, and safety concerns:
- Heritage-listed properties
- Flood-prone land
- Bushfire-prone land
- Sensitive environmental areas
- Land with existing planning restrictions
If you’re unsure whether your property is excluded, you can check out the NSW Government’s list of detailed exclusions.[4]
How will Stage 2 impact me as a homeowner, buyer, or investor?
Whether you’ve owned your property for years or are looking to buy your first home, these changes will impact how you navigate the real estate market.
For homeowners
For homeowners, if your property falls within the newly designated zones, Stage 2 could mean a major increase in its potential value and your property will now appeal to developers.
For buyers
Stage 2 means there will be more housing options for you in highly sought-after areas. This is great news, as you may be able to live closer to where you work or near reliable public transport hubs.
For sellers
If your property is in one of the Stage 2 zones, you might see increased interest from developers looking to build up under the new guidelines. You could also personally explore subdividing your property or developing it yourself to boost its value.
For investors
These changes will create new development opportunities in areas that may not have been as lucrative in the past. Understanding the non-discretionary standards will be crucial for making an informed decision.
At DiJones, we’ve conducted more than 55 feasibility studies and now have listed seven sites, five of which are under the new planning controls (with more on the way).
You can explore four of these opportunities here:
Key benefits for homeowners and investors
The Low and Mid-Rise Housing Policy opens up new opportunities for homeowners, buyers, and investors by making it easier to develop, sell, or invest in property.[5]
Here are the key changes that will benefit homeowners and buyers.
Increased property value
Properties that find themselves within the Stage 2 zones could see a large growth in value, especially those with development potential.
The option to develop or subdivide
As of today, homeowners can develop or subdivide their property to include more than one home on one piece of land. A key benefit of this change is the opportunity to open up new revenue streams from using one dwelling as a rental property.
Alternatively, it might open up the option for your family to live intergenerationally.
More housing options for buyers and renters
Buyers and renters will both benefit from the increased housing opportunities, which provide more variety, flexibility, and affordability.
A simplified approval process
The new non-discretionary standards will help cut through the red tape, as councils must approve compliant developments, which will reduce uncertainty and delays for those wanting to build.
As you can see, if you’re looking to get the most out of your property, Stage 2 will unlock a bunch of new possibilities in NSW's most desirable areas.
Now let’s look at the potential impacts the NSW housing policy will have on your local community.
What impact will Stage 2 have on local communities?
Stage 2 will be overwhelmingly positive for affected areas. However, it’s understandable to have questions and concerns, particularly about increased traffic, congestion, and changes to your neighbourhood’s character.
Stage 2’s strict regulations regarding height, setback, and design standards are to ensure the new builds blend in with existing areas.
In addition, more investment in infrastructure (such as public transport, roads, and green spaces in your area) will only make your neighbourhood a more desirable place to live.
While there might be a lot of change in the next five-plus years, the long-term benefits of these changes will allow for more types of affordable housing, better access to amenities in your neighbourhood, and a thriving local economy.
The NSW Government is also providing opportunities for community feedback and responses.[6]
Summing up
Stage 2 of the Low and Mid-Rise Housing Policy is a complete game-changer for homeowners, potential buyers, renters, and developers. There will soon be an influx of lucrative opportunities in prime NSW neighbourhoods.
If you have any questions about these changes, including:
- How you might benefit as a homeowner, investor, or developer
- Opportunities for buyers (including first-home buyers)
- Opportunities in the rental market (for homeowners and prospective renters)
We can help. We have decades of experience in the NSW property market and can guide you through these changes and what they mean for you. Contact us today.
FAQs
Will the Stage 2 changes affect areas that are at risk of bushfires or floods?
No. Flood-prone land and bushfire risk zones are explicitly excluded from the reforms due to the potential safety concerns posed by building large dwellings in natural hazard areas. The goal is to increase housing supply without compromising safety.
How do you determine if a property is within the 800-meter radius?
If you are looking for houses, or are curious if your own home falls within the 800 metre radius, you can visit the NSW Government’s interactive map. Simply enter an address to see if the property qualifies.
What is the minimum lot size for a dual occupancy?
The minimum lot size for dual occupancies in R2 Low-Density Residential Zones has been reduced to 450 square metres under the new policy. This will make it easier for homeowners to develop double home lots on smaller pieces of land.
What has the NSW Government said it is doing to address housing affordability?
The NSW Government has said they are committed to addressing the housing crisis by increasing the housing supply. The Low and Mid-Rise Housing Reform is one way they are doing this, by making it easier to build more homes in less space.
Sources
[1] NSW Government: Low and Mid-Rise Housing Policy. Sourced 2025.
[2] NSW Government: State Environmental Planning Policy (Planning Systems) 2021. Sourced February 2025.
[3] NSW Government: Guidance for industry, developers and councils. Sourced 2025.
[4] NSW Government: Low and Mid-Rise Housing Policy exclusions. Sourced 2025.
[5] NSW Government: Benefits for you and your community. Sourced 2025.
[6] NSW Government: Feedback on the Low and Mid-Rise Housing Policy. Sourced 2025.
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