The impacts of changes to environmental planning policy in NSW

Part 2: residential buildings
Pangolin Associates, July 2023

The recently announced changes to NSW’s environmental planning policy will have significant implications for builders in the state and around Australia. In Part 1 we looked at what the changes mean for non-residential buildings, now in Part 2 of this two-part series, we explain how the upcoming changes impact residential properties.

There are currently more than 3.36 million residential buildings in NSW[1], a number that is expected to grow by 904,000 homes over the next 20 years[2]. It is essential that NSW reduces embodied emissions from the residential construction sector if the state is to meet its goal of a 70 per cent reduction in greenhouse gas emissions by 2035 and net-zero emissions by 2050.

The state has already made significant progress on this front, however, as NSW has one of Australia’s most stringent sustainable planning policies: the Building Sustainability Index (BASIX).

BASIX assesses the energy consumption, water use, and thermal comfort of all new residential buildings. The policy then requires that buildings fall under a state-wide baseline which, depending on the type and location of the dwelling, proscribes a value for each category.

More than 500,000 homes have been built under the BASIX standards since its introduction in July 2004, saving an estimated 340 billion litres of potable water, and reducing carbon emissions by approximately 12.3 million tonnes.

With the introduction of the State Environmental Planning Policy (Sustainable Buildings) 2022 (known as the Sustainable Buildings SEPP), the NSW Government will tighten BASIX to further reduce embodied emissions from residential construction.

From 1 October 2023, this policy requires developers and builders of all structures to calculate and report on the embodied emissions of the materials used in construction. Beyond the embodied carbon, the requirements of the new policy depend on whether the project is residential or non-residential.

Sustainable Buildings SEPP for residential buildings

Sustainable Buildings SEPP is NSW’s response to the Trajectory for Low Energy Buildings, a national plan that was agreed to by all state and territory energy ministers in 2019. While NSW moved first with the Sustainable Buildings SEPP, the other states and territories must also introduce policies to meet the requirements of the national

plan. They will likely utilise energy efficiency provisions in the updated National Construction Code, andCode and borrow elements from the Sustainable Buildings SEPP and BASIX policies to reduce embodied emissions in the built environment.

Prudent builders around Australia will acquaint themselves with the provisions of Sustainable Buildings SEPP and BASIX to better prepare for changes to the sector’s standards.

What will Sustainable Buildings SEPP mean for residential buildings in NSW?

Under Sustainable Buildings SEPP, all new residential buildings or renovations with a value of $50,000 or more (excluding apartment blocks of less than five storeys) are subject to new, stricter BASIX standards across three categories:

  1. Thermal performance,
  2. Energy,
  3. Water.

Thermal performance

Under Sustainable Buildings SEPP, residential builders and developers must ensure that all new builds and renovations with a value over $50,000 have a Nationwide House Energy Rating Scheme (NatHERS) rating of at least 7 stars. This is an increase on the average rating of 5.5-6 stars under the previous BASIX requirements.

Builders and developers can achieve a 7-star rating by improving wall, floor, and ceiling insulation; optimising the performance and location of windows and glass doors; and incorporating eaves into a property’s design.


Previously, BASIX energy standards required new builds to fall 10–50 per cent below a baseline of 3,292 kg of CO2e per person per year (depending on the building’s location in NSW).

The new energy standards require reductions in greenhouse gas emissions by an additional 7-11 per cent. These requirements also vary according to the total floor area for detached houses or the number of storeys for high-rise apartment buildings. To achieve greenhouse gas reductions, residential designs can include energy efficient electrical appliances such as cooktops, ovens, and hot water systems; energy efficient reverse cycle air conditioners; energy efficient lighting; covers and pump timers for heated swimming pools and spas; and rooftop solar and household batteries.


The water standards under Sustainable Buildings SEPP remain the same as those in the previous BASIX requirements, which specified water use at 0–40 per cent below a baseline of 90,340 L potable water per person per year (depending on where in the state the building was is located). However, the new specifications require builders to install water-saving toilets, showers, and taps, and in some instances rainwater tanks for refilling or replenishing pools or spas.

The other major change is the introduction of a materials index to BASIX to calculate the embodied emissions of materials used to build the property and to compare those emissions against a benchmark. While at this stage the index only provides an indicative measure of a property’s embodied emissions, it is likely that the state government will introduce a threshold in the future to meet NSW’s net-zero commitments.

What will this mean for residential builders and developers in NSW?

According to the NSW Government, the changes under the Sustainable Buildings SEPP will result in sustainability and cost benefits for NSW homeowners.

On the sustainability side, the changes to energy and thermal performance standards are expected to reduce residential greenhouse gas emissions by an additional 150,000 tonnes of CO2e per year when compared to the previous BASIX standards. Fitting out new homes with energy efficient electric appliances will result in further emissions cuts in the future as the increasing proportion of renewable energy makes grid electricity less carbon intensive.

Cost implications

The new construction standards are expected to add an estimated $7,152 to the average home build. However, this additional cost will be recouped over a 10-year period, with energy bill savings of up to $1,070 per year for metropolitan homes and $1,260 per year for homes in rural areas.

Given that NSW has operated under the BASIX policy for almost 20 years, Sustainable Buildings SEPP does not mean dramatic changes to existing residential building practices, but will result in more comfortable homes that are less expensive to run.

[1] Australian Bureau of Statistics. (2021). Housing: Census.
[2] Planning – NSW Government. (2023). Demand for housing in NSW.

If you are a developer of non-residential buildings in NSW and would like more information on the Sustainable Buildings SEPP, assistance in meeting the requirements of the new policy, or would like to find out more about reducing your emissions, contact Pangolin Associates and speak to one of our expert consultants.