Thousands of family homes could be freed up across NSW if planning restrictions on seniors housing were eased, according to the Urban Development Institute of Australia NSW (UDIA NSW), which is urging the State Government to overhaul development incentives as demand for age-appropriate accommodation accelerates.
In its new policy paper, A Better Future for Seniors Housing in NSW, the industry body argues that current planning settings are making seniors housing less competitive than conventional residential developments, limiting opportunities for older homeowners to move into more suitable accommodation and potentially release larger properties for younger families.
The proposed reforms come as NSW faces significant demographic change, with the population aged over 60 projected to grow by more than 40 per cent over the next 20 years, while the number of people aged over 80 is expected to more than double.
According to the report, approximately 76,000 people currently live in retirement villages across NSW, representing about five per cent of the state’s senior population, with 640 registered retirement villages operating across the state.
UDIA NSW CEO Stuart Ayres said the ageing population would require a broader range of housing options, particularly in established communities where older residents want to remain close to family, transport and essential services.
“As our population ages NSW will need to deliver more seniors living opportunities across our mix of housing typologies,” Mr Ayres said.
The organisation is calling on the NSW Government to increase floor space ratio (FSR) and height bonuses for seniors housing developments to 30 per cent, bringing them more closely into line with incentives available under other housing policies.
UDIA NSW argues that existing seniors housing incentives, including floor space bonuses of 15 to 25 per cent, are less competitive than the 30 per cent bonuses available to certain other residential developments, and is calling for greater parity to improve project feasibility.
The report identifies recent transport-oriented development and low- and mid-rise housing reforms as contributing to the imbalance, with conventional apartment developments potentially offering more attractive returns to developers and landowners.
Although changes introduced in April 2026 allow qualifying seniors housing developments to use certain low- and mid-rise development standards, UDIA NSW maintains that further reform is needed to improve the sector’s competitiveness. Planning
The implications extend beyond the development sector, with the availability of suitable downsizer accommodation potentially influencing whether older homeowners decide to sell long-held family properties.
UDIA NSW believes increasing the supply of independent living units and other seniors housing options would give older Australians greater choice while allowing existing homes to be occupied by households whose needs have changed.
“Increasing supply of seniors housing facilitates more ‘right-sizing’ across the housing market. Allowing more people to choose the home that best suits their needs,” Mr Ayres said.
The organisation is also calling for the removal of the 1,500-square-metre minimum site area requirement associated with certain seniors housing bonus provisions, arguing that the restriction prevents smaller developments from proceeding in established suburbs.
According to the policy paper, smaller infill sites could accommodate boutique seniors housing projects close to shopping centres, public transport, healthcare facilities and other amenities, allowing residents to remain connected to their existing communities.
The report also highlights the higher costs associated with delivering seniors housing, including accessibility requirements, communal facilities, specialised design standards and ongoing operational services.
UDIA NSW argues that these additional costs, combined with less competitive planning incentives, can make conventional residential developments more financially attractive, reducing the likelihood of land being used for seniors accommodation.
Beyond increasing development bonuses, the organisation is seeking changes to the State Significant Development approval pathway, including removing the requirement for seniors housing proposals to incorporate a residential care facility.
Under its proposal, developments consisting solely of independent living units, as well as eligible mixed-use seniors housing projects, would be able to access the pathway.
The organisation also wants independent living units exempted from the Housing and Productivity Contribution, bringing their treatment into line with residential care facilities, which already benefit from an exemption.
Another recommendation focuses on the redevelopment of older retirement villages, many of which were approved under planning controls that no longer apply.
The report warns that some existing villages already exceed current height or floor space limits, meaning redevelopment could result in fewer dwellings being permitted on the same site.
UDIA NSW wants greater planning flexibility and merit-based assessment provisions to allow ageing villages to be upgraded or replaced without necessarily losing existing housing capacity.
The policy paper also identifies a shift in the type of accommodation older Australians are seeking, with traditional retirement village models increasingly being complemented by integrated developments combining independent living, healthcare, retail, community facilities and aged care services.
Examples highlighted in the report include BaptistCare’s Gracewood Community in Kellyville and Uniting Mayflower in Westmead, both of which combine different forms of seniors accommodation with access to services and community facilities.
The organisation argues that these developments reflect a broader shift towards what it describes as ‘right-sizing’, where older Australians move into homes better suited to their changing lifestyles rather than simply choosing smaller properties.
For the wider housing market, UDIA NSW believes this could help improve the use of existing housing stock, particularly where older homeowners are occupying larger properties that no longer meet their needs.
However, the report does not quantify how many family homes would be released through the proposed reforms, and any increase in available stock would depend on new developments proceeding and existing homeowners choosing to move.
The proposals also come as NSW works towards its National Housing Accord target of approximately 77,000 new homes annually, with UDIA NSW arguing that seniors housing could contribute both through new construction and by enabling more efficient use of existing homes.
“Incentivising investment in seniors living is a win-win situation. It will create new housing for older Australians and free up existing stock to be better allocated for growing families,” Mr Ayres said.
The organisation is urging the NSW Government to recognise seniors housing as an important part of its broader housing supply strategy, arguing that planning incentives and approval processes need to reflect both the additional costs of development and the potential benefits for the wider property market.