Boarding House Projects In Australia: Design & Finance Guide
As Australia grapples with a housing affordability crisis, boarding houses have re-emerged as a viable solution to provide compact, affordable rental accommodation. Particularly in New South Wales (NSW), recent reforms have made it easier and more attractive for developers to invest in boarding house projects. This article explores the essential aspects of developing boarding houses in Australia, focusing on design principles, funding mechanisms and regulatory frameworks.
Image credit: Hill Thalis Architecture + Urban Projects
The Role of Boarding Houses in Affordable Housing
Boarding houses are a form of affordable housing that typically offers private rooms with shared communal facilities such as kitchens and living areas. They cater to a diverse range of occupants, including students and low-income individuals. Under the NSW Housing State Environmental Planning Policy (SEPPs), boarding houses must be managed by registered community housing providers and used for affordable housing in perpetuity.
This requirement distinguishes boarding houses from co-living housing, which does not have affordability obligations and is often targeted at young professionals. Boarding houses also benefit from a more generous 30% floor space ratio (FSR) bonus compared to the 10% bonus for co-living developments.
Design Considerations
Designing a boarding house involves balancing compact living with quality communal spaces. The Housing SEPP outlines specific standards:
• Room Sizes: Private rooms must be at least 12 m² for single occupancy and 16–25 m² for couples, excluding kitchen and bathroom areas.
• Communal Areas: Developments must include shared living spaces, open areas and landscaping to foster community interaction.
• Accessibility: Boarding houses should be built in well-connected areas with access to public transport, employment hubs and educational institutions.
• Sustainability: Projects must comply with the Building Sustainability Index (BASIX), which sets benchmarks for thermal comfort, water efficiency and energy usage.
Recent reforms under the Low and Mid-Rise Housing Reforms – Phase 2, effective from February 2025, have introduced alternative assessment pathways for large boarding houses. These changes aim to streamline approvals and override restrictive local planning controls, making it easier to deliver housing in designated areas.
Funding and Financial Viability
Funding boarding house developments can be complex due to their unique operational model. However, several mechanisms can support financial viability:
• Government Incentives: The 30% FSR bonus allows developers to build more units on the same land, improving yield. Additionally, some projects may qualify for grants or low-interest loans through state housing initiatives.
• Positive Cash Flow: New Generation Boarding Houses (NGBHs) are designed as high-yield micro-apartments. With growing rental demand in urban areas, these developments can offer strong returns for investors.
• Community Housing Partnerships: Collaborating with registered community housing providers can unlock access to funding and ensure compliance with affordability requirements.
• Tax Benefits: Developers may be eligible for tax concessions if the boarding house meets specific criteria under the Australian Taxation Office’s guidelines for affordable housing.
Regulatory Framework
Navigating the regulatory landscape is crucial for successful boarding house development. Key considerations include:
• Development Approval: All boarding house projects require development approval, except those self-assessed by government entities like the NSW Land and Housing Corporation.
• Zoning and Land Use: Boarding houses are typically permitted in zones that allow residential flat buildings or residential units above commercial or retail spaces (i.e. shop-top). Developers must demonstrate compatibility with the local character or desired future character of the area.
• Management Requirements: Boarding houses must be managed by registered community housing providers in perpetuity. These providers must adhere to the NSW Affordable Housing Ministerial Guidelines.
• Compliance and Monitoring: The NSW Government is tracking local and state government performance to ensure housing targets are met under the National Housing Accord.
Challenges and Opportunities
While boarding houses offer a promising solution to Australia’s housing challenges, developers must navigate several hurdles:
• Community Opposition: Some projects face resistance from local communities concerned about density, parking and social impacts.
• Operational Complexity: Managing communal living spaces requires robust systems and experienced operators.
• Regulatory Compliance: Meeting all planning, design and management standards can be resource intensive, with compliance and regulations to adhere too than more common subdivision residential property development.
However, the opportunities are significant. With strong government support, rising rental demand and evolving design models, boarding houses can play a pivotal role in addressing housing shortages, especially in urban and well-connected areas.
Investment Returns
Boarding houses offer investors significant advantages, including high rental yields, often 40 to 60% more than traditional leases, and net returns ranging from 5 to 7%, compared to 1 to 2% for standard residential properties.
Additional incentives such as land tax exemptions, subsidies and planning bonuses further enhance their financial viability, making them a compelling choice for property investors seeking stable cash flow and long-term growth in NSW’s urban markets
Conclusion
Developing boarding houses in Australia is a multifaceted endeavour that requires careful attention to design, funding and regulatory compliance. As planning reforms and housing targets reshape the landscape, boarding houses stand out as a practical and scalable solution for affordable living. For developers, investors and community housing providers, the time is ripe to explore this evolving sector and contribute to a more inclusive housing future.