Using planning agreements
An introduction for councils using a planning agreements in connection with planning proposals or development applications to deliver infrastructure , or other public purposes, with public benefit outcomes.
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Planning agreements are tools that can be used in connection with planning proposals or development applications to deliver innovative or complex infrastructure solutions, or other public purposes, with public benefit outcomes. Local planning agreements are negotiated and entered into between councils and developers.
Planning agreements can be complex and there is no standard approach. Before starting negotiations, councils should determine that this is the best mechanism to deliver the required infrastructure.
This module is an introduction for councils using a planning agreement.
Legislative requirements
The use of planning agreements is governed by:
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Planning agreements are voluntary agreements between a planning authority and a developer. They must be related to a development application or complying development certificate, or a change to an environmental planning instrument through a planning proposal. They can require a developer to provide land, monetary contributions or material public benefit to be used or applied towards a public purpose. |
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A public purpose includes, but is not limited to:
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Planning agreements do not require nexus to development (having no connection between the development and the object of expenditure of any money required under a planning agreement does not make it invalid). |
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Money contributions received through planning agreements must be held for the purpose it was required and applied towards that purpose in a reasonable time. Land dedicated under a planning agreement must be made available within a reasonable time. |
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A planning agreement cannot exclude the application of section 7.11 or 7.12 contributions unless the relevant consent authority or minister is a party to the agreement, or the Minister has approved the planning authority entering into the agreement. If a planning agreement does exclude the application of section 7.11 or 7.12 to a development, the consent authority cannot impose a condition under those sections. |
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A planning agreement cannot exclude the application of a housing and productivity contribution without approval from the minister or the designated development corporation. |
The objectives of a planning agreement are generally informed by the circumstances, strategic priorities and infrastructure needs of the relevant local government area. As a general guide, planning agreements should be directed towards achieving the following broad objectives:
- meeting the demands created by the development for new or augmented public infrastructure, amenities and services
- securing off-site benefits for the community so that development delivers a net community benefit
- compensating for the loss of or damage to a public amenity, service, resource or asset by development through replacement, substitution, repair or regeneration.
Councils may wish to tailor objectives that are relevant to their circumstances. These should be detailed in the council’s planning agreements policy.
Councils should demonstrate they have considered the principles of planning agreements and the acceptability test
The principles of planning agreements apply to council’s use of planning agreements generally; they should guide the development of a councils planning agreement policy and how council continues to consider planning agreements overall.
The acceptability test is applied to each planning agreement. Councils should not enter into any planning agreement that does not meet the acceptability test.
Councils should publicly demonstrate they have considered the principles and acceptability test for each planning agreement. This can be done by addressing each consideration in the explanatory note for that agreement.
Principles of planning agreements
- Councils should always consider a development proposal on its merits, not based on a planning agreement.
- Planning agreements should provide for public benefits that have some relationship to the development.
- Planning agreements should not be used as a means of general revenue raising or to overcome revenue shortfalls.
- Value capture should not be the primary purpose of a planning agreement.
Acceptability test
- The planning agreement is directed towards a public purpose as identified in section 7.4(2) of the EP&A Act.
- The planning agreement is in the public interest.
- The planning agreement provides for a reasonable means of achieving the desired outcomes and securing the benefits.
- The value of the planning agreement was determined using a reasonable methodology.
- The agreement represents value for money for the community.
Planning agreements should be in the public interest
Councils must ensure planning agreements are in the public interest. When considering whether a planning agreement is in the public interest councils might think about:
- what benefit the planning agreement is proposing to create for the community
- whether planning controls are being imposed fairly and unbiased decisions are being made for the benefit of the community
- whether the private the interests of individuals or groups might be influencing the decision to the detriment of the broader community.
Public benefits offered by developers in a planning agreement do not make unacceptable development acceptable. Councils must ensure the community can be confident in the integrity of the final planning decision.
If a council has numerous interests in a planning agreement, such as being both the consent authority and also a landowner under the agreement, safeguards should be imposed, for example the use of an independent third party in the development assessment process.
Best practice guidance
Planning agreements can be used for a wider scope of public purposes than other local contributions
Planning agreements are an efficient way to achieve infrastructure outcomes where other local contributions mechanisms do not have the required flexibility. Planning agreements should complement other local contributions mechanisms and can be used instead of or in addition to section 7.11 contributions or section 7.12 levies.
However, councils should carefully consider what contribution mechanism is appropriate and not use planning agreements as the default funding mechanism.
Planning agreements can be useful tools in many circumstances, for example by:
- providing a framework under which council can share responsibility for infrastructure provision
- permitting tailored governance arrangements in an efficient, co-operative and coordinated way
- providing enhanced and more flexible infrastructure funding opportunities
- allowing flexible delivery of infrastructure for an out of sequence development proposal with good planning merit
- providing a means for achieving tailored development outcomes and focused public benefits, including redistribution of the costs and benefits of development.
Planning agreements are not required to demonstrate nexus
Infrastructure contributions provided in a planning agreement are not required to demonstrate a direct connection or nexus with development as is required for section 7.11 contributions. However, planning agreements should not provide for public benefits that are wholly unrelated to development.
Planning agreements can include recurrent costs and maintenance payments
Planning agreements can include contributions towards the recurrent costs of infrastructure. This could be for items that primarily serve the development to which the planning agreement applies or for infrastructure that will serve the wider community
- When the infrastructure serves the wider community, recurrent contributions should only be required until a public revenue stream is established to support the ongoing costs.
- When the infrastructure only serves the development covered by the planning agreement (or neighbouring development) this can be for a longer agreed time.
Value capture should not be the primary purpose of a planning agreement
Planning agreements should not be used primarily for value capture. For example, they should generally not be used to capture land value uplift resulting from rezoning or variations to planning controls, often expressed as monetary contribution per square metre of increased floor space of as a percentage of the increased value of land. This can lead to the perception that planning decisions can be bought and sold and that councils may leverage their bargaining positions based on their statutory powers.
Affordable housing planning agreements have additional considerations
The Environmental Planning Assessment (Planning Agreements) Direction 2019 sets out the matters to be considered by council if negotiating a planning agreement which provides for affordable housing.
Councils can also collect affordable housing contributions via affordable housing contributions schemes established in their local environmental plans.