State of the City report shines a light on Sydney’s future growth

The State of the City 2026 report, released on 6 February, listed the goals for the economy, resilience, mobility, culture, fairness and equity, and housing. These goals included driving labour productivity, especially since services account for 93 per cent of Sydney’s Gross Regional Product (GRP); enhancing AI and technology innovation through greater investment in data centres and ensuring the associated resources (water and electricity) are enabled through reusing wastewater and enabling land near treatment plants to be allocated to data centres

With a particular focus on housing, transport, night time economy, and energy, LSJ Online spoke to Head of Policy, Jeremy Gill, about the report findings and priorities from this year onwards, along with Todd Neal, Partner in Colin Biggers & Paisley’s Planning, Government, Infrastructure & Environment Group to assess the report findings relating to infrastructure and housing.

Housing goal is ambitious

Last year’s report revealed that the NSW target of 377,000 new homes by 2030, or 75,400 a year is a historic supply level, equating to 18,850 homes built each quarter. The NSW Government announced its target included 3,100 affordable homes and 8,400 social homes. The state’s population growth requires an estimated 5,200 new homes a year. The State of the City 2025 report indicates that the benefit to Sydney of meeting the target would be around $8.2 billion a year by 2029.

Todd Neal, Partner in Colin Biggers & Paisley’s Planning, Government, Infrastructure & Environment Group, refers to last year’s reforms to planning laws, the biggest reforms since 2017, which were the most significant since the Environmental Planning and Assessment Act 1979 (NSW) (EP&A Act) was introduced. Despite this, he says, the structure of NSW planning laws that shape housing remains the same.

“Ultimately the hardware of the 1979 EP&A Act remains the same with some new software being introduced. Even with the aim of simplifying and speeding things up, the amendments rely on human beings assessing development, processing and determining applications. The culture of those administering the planning system is just as, if not more important than, the legislation itself.”

Neal explains that even if approvals caught up with the housing targets, approvals do not necessarily translate to construction. “Other factors can get in the way of physically building what has been approved. The problem calls for a holistic response across law, soft law – being policy, and the bureaucracies involved.”

This year’s report says the NSW Government has forecast a need for Greater Sydney to deliver over 28,800 dwellings per annum until 2041 to meet population growth, which is expected to be exceeded by 2029 through the National Building Reform Blueprint.

Still, the type of housing being prioritised is a concern. Especially in the central Sydney area and surrounds, there has been low growth in three-bedroom dwellings over the past decade compared with one and two-bedroom dwellings. This has resulted in those seeking affordable family housing being further from central amenities. Family-sized apartments across Greater Sydney exceed the affordability threshold in over 116 postcodes, up from 69 in 2021, with households spending more than 30 per cent of median income on rent. This is also increasing the length of commute, adding to traffic and the demand for parking.

Neal says our biodiversity laws pose a particular challenge to new housing in these areas which have not been ‘biocertified’ under the Biodiversity Conservation Act 2016 (NSW) (BC Act). “Under NSW laws, the need to run through the ‘avoid, mitigate, offset’ hierarchy within our biodiversity laws has stopped many greenfield developments from gaining approval,” he says. “We also have matters that have been stopped for five years even after gaining NSW approvals.”

This is because these approvals then have to go through the time and resource-consuming Environment Protection and Biodiversity Conservation Act 1999 (Cth) (EPBC Act) process. “Other land which has been earmarked for new housing requires higher density being built near our transport nodes and town centres. Our environmental laws, as distinct from planning laws, present less of a challenge to urban renewal. However, other issues like heritage can be weaponised to stymy new housing in these existing suburbs,” Neal says.

The Committee’s Head of Policy, Jeremy Gill, says the Committee is focused on “density done well”. He suggests, “Density in well-located, well-serviced areas is a good thing. So many of the cities that Australians love to visit – Paris, Tokyo, New York – are dense. Density brings vibrancy, it creates more opportunities for local businesses, and it makes more efficient use of infrastructure.”

Density must not come at the cost of diversity of the housing and the people living there, he warns. “There is a need for smaller apartments for couples or people moving out on their own. But there’s also a need for larger apartments for raising kids, housing inter-generational families and allowing parents to work from home. Baking affordable housing into this mix is crucial. We also need to expand planning beyond just the homes themselves and into the surrounding neighbourhoods.”

If fewer people have access to a backyard, then Sydney must ensure that public open spaces in these denser communities are built for kids to play independently, support local sports and are places for family and friends to gather.

“Open space is essential infrastructure and must be part of the density process,” he says.

The reality of drawing labour to the task of building new residential projects is a challenge, since there are multi-billion dollar government infrastructure projects that inevitably pay more. Based on anecdotal experience from his firm’s clients in the construction industry, Neal says, “It has been hard to attract labourers and other staff when Government or Government subsidised infrastructure projects pay more.”

The Anti-slavery Commissioner for New South Wales, Dr James Cockayne says, “Construction workforces are often vulnerable to exploitation and in some cases modern slavery, both onsite in New South Wales and in the production of materials and components elsewhere. Construction supply chains in Australia rely heavily on lower skilled and migrant workers.”

As early as December 2023, Cockayne declared construction a high-risk area for NSW public procurement and flagged with all NSW public entities that construction would be a focus of monitoring and oversight by his Office during 2026.

Solar energy is increasingly popular

Over the last six months, NSW has installed nearly twice as many solar batteries as any other state. The average size of installed battery capacity has increased from 18kWh in July 2025 to 26 kWh in October 2025, which the report states: “highlight[s] the increasing appetite and ability for Sydneysiders to meet their own energy needs.”

Gill believes the next challenge we need to address is how to give those who rent, or live in apartments, access to the same cheap energy. “Things like incentives for landlords to install solar or enabling the roll out of community or precinct-scale batteries so that those with solar, who are generating excess, can plug into a community network and share that energy with those who can’t generate it themselves.”

At a commercial and industrial scale, large warehouses in the outer suburbs of Sydney or Melbourne will often have about 10 to15 percent of the rooftop covered in solar panels, according to Gill. That’s an enormous untapped market remaining.

“The reason for that is there is not an incentive mechanism in place for the owners of those larger roofs to feed their excess energy back into the grid,” explains Gill. “Our own research has identified that if we maximised industrial land residential rooftops across Sydney, we could meet 75 per cent of our energy needs – the potential is enormous.”

Data centres a challenge to future city planning

Sydney is home to more data centres than anywhere in Australia, along with more innovation-driven businesses. The report calls for more data centres. Gill says they won’t compete with residential developments for land as they are zoned differently. He emphasises that both infrastructure and housing must be prioritised. “We need to make sure we’re mitigating land use conflicts, ensuring sufficient energy and water supply, and making sure there’s a clear expectation of what data centres should deliver for and contribute to communities and the city more broadly.”

Planning for data centres is tricky, he explains. “Utility suppliers are trying to gauge the size of the pie and understand and plan for the maximum potential energy and water demands. In practice, many data centres may not be drawing that level of need for years to come as they scale, which makes it an incredibly difficult planning challenge. Other cities around the world have faced the consequences that come with approving more data centres than there is water or energy capacity to serve them. Sydney absolutely needs to learn from that.”

Data centres are currently using the water supply also used for public drinking water. Gill says, “The water challenge with data centres is a big one. Sydney is a dry city on a dry continent with around 80 per cent of our water coming from rainwater-dependent dams … Figuring out and understanding how we use data centres as catalysts for investment in alternative water sources is crucial as demand increases. Think things like desalinated water for data centres close to coastal areas or recycled water sources for data centres in western parts of the city.”

The challenge of surging transport demand

Buses account for over 350 million trips, now the leading mode of transport across the city. Metro usage reached 72 million trips in 2025. Gill says, “There is no question the metro has been hugely popular and wildly successful, reshaping the way hundreds of thousands of people move around our city every day – it’s highlighted the power of public transport as city and habit-shaping infrastructure.”

Since the city section opened, car parks at these stations have reached capacity 50 minutes earlier across the network. “Adding more car parks is not the solution,” says Gill. “The answer is three-pronged: better, more frequent and more reliable bus connections from surrounding suburbs into these stations; doing density well around metro stations so more people can walk to the station; and investing in high quality active transport infrastructure, like bike lanes, that give people more options to access stations.”

Sydney leads the world in a thriving night-time economy

Gill says, “The rest of the world is sitting up and taking notice of what Sydney has done over the past five years to breathe life back into activities after dark. We’re the first city to have a 24 Hour Economy Commissioner. We have a Minister for the 24 Hour Economy and established an entire government unit focused on nightlife policy. That is seriously something to be proud of.”

He sees population growth and increased housing as complementary to the night-time economy. “A thriving night-time economy will benefit hugely from new housing and a growing population, because the more people in an area, the more demand there is for entertainment and evening activity.”

The Committee for Sydney’s full report here.