Using planning agreements

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:

Part 7 of the Environmental Planning and Assessment Act 1979 (EP&A Act) which provides the legislative framework for planning agreements
Part 9 of the Environmental Planning and Assessment Regulation 2021 (EP&A Regulation) which provides other procedural matters.

Requirements for using planning agreements
Legislative requirements	Reference
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.	7.4 (1) EP&A Act
A public purpose includes, but is not limited to: providing or recouping the cost of public amenities or services, affordable housing, and transport or other infrastructure funding recurrent expenditure for providing public amenities or services, affordable housing and transport or other infrastructure monitoring planning impacts of development conservation or enhancement of the natural environment.	7.4 (2) EP&A Act
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).	7.4 (4) EP&A Act
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.	7.3 EP&A Act
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. 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.	7.4 (3A) EP&A Act 7.4 (5) EP&A Act
A planning agreement cannot exclude the application of a housing and productivity contribution without approval from the minister or the designated development corporation.	7.4 (5A) EP&A Act

Policy positions

Councils should consider certain principles before entering into a planning agreement

There are specific principles councils should apply when using 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.

Councils may wish to apply additional principles that are relevant to their specific circumstances. These should be detailed in the council’s planning agreements policy.

Planning agreements can achieve a number of objectives

The objectives of a planning agreement are usually dictated by the circumstances of each council. 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 not enter into a planning agreement if it does not meet the acceptability test

Councils should consider the circumstances around each planning agreement and relevant state, regional or local planning policies when determining if a planning agreement is acceptable. Planning agreements should be assessed for acceptability against points A-E below.

Councils may wish to add additional points to the acceptability test specific to their circumstances. The acceptability test, with any additions, should be detailed in the council’s planning agreements policy.

Planning agreements acceptability test

Councils should ensure planning agreements:

A. Are directed towards legitimate planning purposes, which can be identified in the statutory planning controls and other adopted planning strategies and policies applying to development.

B. Provide for the delivery of infrastructure or public benefits not wholly unrelated to the development.

C. Produce outcomes that meet the general values and expectations of the public and protect the overall public interest.

D. Provide for a reasonable means of achieving the desired outcomes and securing the benefits.

E. Protect the community against adverse planning decisions.

Best practice guidance

Planning agreements can be useful in a variety of circumstances

Planning agreements can be useful tools in many circumstances, for example by:

providing a framework under which council can share responsibility for the provision of infrastructure in new release areas or urban renewal projects
permitting tailored governance arrangements and the provision of infrastructure in an efficient, co-operative and coordinated way
providing enhanced and more flexible infrastructure funding opportunities
allowing flexible delivery of infrastructure for a development proposal that may have good planning merit but may not have been anticipated in broader strategic planning processes
providing a means for achieving tailored development outcomes and focused public benefits, including agreement by communities about the redistribution of the costs and benefits of development.

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 not use planning agreements to avoid planning for funding and delivery of infrastructure. There is a clear legislative, regulatory and policy framework supporting contributions plans that does not apply to planning agreements. Where there is need for public infrastructure across a development area with a range of landowners, a local contributions plan is likely to be the more appropriate mechanism.

There is no requirement 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 may require developers to make contributions towards the recurrent costs of infrastructure. This could be the recurrent costs of items that primarily serve the development to which the planning agreement applies or neighbouring development.

This could also include interim funding of the recurrent costs for infrastructure that will ultimately serve the wider community. The planning agreement would only require the developer to make such contributions until a public revenue stream is established to support the ongoing costs of the facility.

When it is to serve the wider community, it should only require the developer to make recurrent contributions until a public revenue stream is established to support the ongoing costs.
When it is primarily to serve 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.

Councils should consider the role of a planning agreement in a planning proposal or development application

A planning agreement may be one of several matters council considers when determining a development application or planning proposal. 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.

Planning proposals. The EP&A Act requires councils to state the objectives and outcomes of a planning proposal, and to describe and justify the process by which they will be achieved. The role of a planning agreement in facilitating these objectives or outcomes should be set out in the planning proposal documentation.
Varying development standards. Benefits provided under a planning agreement must not be exchanged for a variation from a development standard. Variations to development standards under clause 4.6 of the Standard Instrument LEP must be justified on planning grounds, and the benefit under the agreement should contribute to achieving the planning objective of the development standard.
Development applications. Councils are required by the EP&A Act to take into consideration any relevant planning agreement or draft agreement when determining a development application. They are also required to take into consideration any public submissions made in respect of the development application, which may include submissions relating to a planning agreement.
Conditions of development consent. Planning agreements should not be used to require compliance with or restate obligations imposed by conditions of development consent.

Councils should consider land use and infrastructure planning when using planning agreements

Site specific planning proposals may be accompanied by offers to enter into planning agreements. Councils should ensure that the agreement will lead to adequate infrastructure delivery to support the change in planning controls, that the community can be confident in the integrity of the planning decision and that the council is not improperly relying on its statutory role to extract unreasonable contributions.

Planning agreements should not be used as a substitute for proper infrastructure planning.
Site specific planning proposals should not be prioritised on the basis that they provide an opportunity for public benefits.
The public benefits should not be wholly unrelated to the planning proposal.
Planning agreements related to planning proposals should integrate with a comprehensive approach to infrastructure planning and funding.

Planning agreements related to affordable housing 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.

Examples

Planning agreements have the potential to be used in a wide variety of planning circumstances. Below are some examples.

Meeting demand created by development

Planning agreements can provide for infrastructure contributions that meet the demand for new public infrastructure, amenities or services generated by development. For example, development may create a demand for public transport, drainage services, public roads, public open space, streetscape and other public domain improvements and community and recreational facilities.

The public benefit provided under the agreement could be the provision, extension or improvement of public infrastructure, amenities and services to meet the additional demand created by the development. An agreement may be used to meet the requirements set out in a contributions plan or to provide infrastructure that meets the demand created by the development in different ways.

Compensation for loss caused by development

Planning agreements can provide for infrastructure contributions that compensate for the increased demand on a public amenity, service, resource or asset that will or is likely to result from carrying out the development. For example, the agreement could replace or restore public open space or public access impacted by development.

Prescribing inclusions in development

Planning agreements can be used to secure the implementation of particular planning policies by requiring development to incorporate particular elements that confer a public benefit.

Examples include agreements that require the provision of public facilities, open space or the retention of urban bushland. Agreements may also require development, in the public interest, to meet aesthetic standards, such as design excellence.

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