Why a divisive plan to build 227 homes on the old Balmain Leagues site will be fast-tracked

Construction of more than 200 homes on the languishing former Balmain Leagues Club site in Sydney’s inner west will be sped up after the developer became the first beneficiary of a $1 billion state government scheme to guarantee pre-sales of thousands of new apartments.

The government last year said it would act as guarantor for up to 50 per cent of off-the-plan homes in some approved projects to help developers meet pre-sale hurdles and build homes more quickly.

Planning and Public Spaces Minister Paul Scully on Wednesday said Sydney developer Perifa Group would be the first beneficiary of the scheme to help deliver its $285 million mixed-use Rozelle Village development comprising 227 units on the old leagues club site on Victoria Road. The project, approved last May, includes 59 so-called “affordable housing” dwellings in three towers of between 14 and 16 storeys.

“The pre-sale finance guarantee uses the government’s strong credit standing to help bring to life prime housing developments, including sites like this one in Rozelle that sat dormant for years,” Scully said.

“By removing planning and financial roadblocks, we’re giving developers and lenders certainty, boosting housing supply, and creating vibrant communities where people want to live, which means more people in more new homes quicker.”

The government’s decision to underwrite private developments reduces the number of homes a developer needs to have pre-sold before a bank is prepared to make a loan available for them to start construction.

It has become a critical hurdle for developers, who can typically only get lending approval for a project once they hit about 80 per cent of pre-sales.

Perifa plans to use the scheme to secure financing for the Rozelle Village development’s affordable homes, providing time to secure a community housing provider to buy and manage the apartments.

Scully said it meant the government would purchase the 32 affordable housing units if the level of qualifying pre-sale requirements was not met before the project was completed, likely to be in 2028.

Perifa Group managing director Fabrizio Perilli said: “We are now able to accelerate construction of these much-needed homes, while working to secure the right community housing provider, ensuring long-term social impact and community benefit.”

The Rozelle redevelopment sparked controversy last year when the developer sought to leverage the government’s affordable housing incentives to add four floors to an earlier 12-storey proposal.

One local critic had argued 16 storeys would be “as workable in Rozelle as a snowflake is in hell”. The government approved the plan for the site, which has been deserted and derelict since 2010, in May.

The Minns government used last year’s budget to announce, in an Australian first, it would create a revolving fund to allow developers to borrow to construct mostly mid-rise housing projects with the certainty the government would buy any unsold homes, up to the value of $50 million per project.

Since October, eligible developers with approval for low- to medium-density developments and some initial pre-sales have been able to submit an expression of interest to have the government act as guarantor on up to half of the dwellings in each project. If approved, the developer must start building within six months. Eligible dwellings will be valued at up to $2 million each.

Developers across the state have submitted 31 expressions of interest, with about one-third of those invited to prepare full applications. The government said it was still assessing about $100 million worth of pre-sale commitment requests which, if approved, would unlock 350 new homes in NSW.

It expects to underwrite about 5000 dwellings, which it says would allow developers to get finance to construct 15,000 homes over five years. NSW is already lagging on its target to build 377,000 new homes by mid-2029 under the federal government’s National Housing Accord.

If the developers do not pre-sell the homes, they can call on the guarantee, and the government will purchase the completed dwellings at a discounted rate before selling them on the private market to buy or rent or using them for social or affordable housing. If the developer secures the pre-sales, the guarantee is extinguished and the funds will go back into the $1 billion fund for another project.

Treasurer Daniel Mookhey previously said Treasury modelling showed the state’s property market would need to slump by 15 per cent before the government would lose money on the scheme.

The NSW opposition previously criticised the scheme as a “very modest proposal” to boost housing.

The Morning Edition newsletter is our guide to the day’s most important stories, analysis and insights. Sign up here.