Sydney’s ongoing housing affordability crisis has hit low income and vulnerable groups with particular severity. The chronic shortage of social and affordable housing has forced many to seek alternative, often informal arrangements, ranging from share accommodation, often in severely overcrowded conditions, through to living in dwellings which may contravene planning or building regulations. This report explores these informal, sometimes illegal, arrangements which are emerging in parts of Sydney in response to unmet housing needs.

Those at the frontline in local government and advocacy have unique insights into the nature and scale of Sydney’s ‘hidden’ housing problems which are not easily captured in standard housing supply and residential tenancy data. This scoping study was developed in collaboration with Fairfield City Council, Waverley Council and the Tenants Union of NSW and funded by the University of Sydney’s Policy Lab. It draws from qualitative data collected through interviews and focus groups with building inspectors, planners and housing advocates to cast light on the production and occupation of informal housing in Sydney.

Existing demographic and housing market data provide useful context to understand the market for informal housing. Over 14% of households in Sydney, and over 18% of households in Waverley and Fairfield LGAs, spend 30% or more of their income on rent. Affordability pressures are compounded by the loss of traditional sources of low cost rental accommodation, such as boarding houses. Low income earners and those without a rental history, such as recent migrants, face particular barriers to accessing affordable rental accommodation through the private market. With more people increasingly unable to access the private rental sector, the market for informal housing arrangements has burgeoned.

The informal dwelling types being produced take different forms in different parts of Sydney, ranging from subdivision of apartments and houses to create multiple dwellings, to the construction of secondary dwellings such as “granny flats”. Some of these dwellings comply with planning system and building requirements, but many do not. Illegal dwellings in particular pose significant health and safety risks to occupants and amenity risks to the wider neighbourhood.

Informal housing tenures range from private agreements between residents and property owners, through to the sharing arrangements becoming more common across all age groups which increasingly involve individual room rental rather than groups of friends who have chosen to share. The resultant risks for those living in the informal sector relate to reduced or unclear legal protections, and high rental and other costs compounded by the prevalence of unscrupulous practices. Conflicts abound, as a result of overcrowding, between individual residents of share houses, or due to households living in close proximity to one another in secondary dwellings. Housing advocates stress their clients tolerate these issues due to the barriers they face when seeking to access the formal rental market. As well as insecure tenure, many informal rental arrangements involve substandard and inappropriate housing.

The typology of informal housing developed through this study identifies a range of informal dwelling types and forms of tenure, as well as outlining key concerns in terms of household needs and risks to health and safety. A key finding is that the many of the informal accommodation types identified in this study present unacceptable risks to vulnerable tenants or are unsuitable for longterm occupation. As increasing numbers of lower income earners become unable to enter the private rental market without assistance, and are forced into share or other alternative arrangements, it has become more important to better understand the existing and potential role of the informal sector in addressing these needs.

Future research efforts should measure the scale of and trends in informal housing provision across Sydney and non-metropolitan regions, and develop a basis for monitoring and improving the quality and security of low cost housing provided within the private rental sector. In addition to establishing baseline data on informal housing supply and demand, perspectives from residents and providers of different informal housing arrangements are needed to inform policy development.

Informal housing may make an important contribution to Australia’s housing system. But previous planning reforms designed to boost and diversify housing supply need to be evaluated in terms of the extent to which they deliver anticipated benefits to those in need. Specific measures currently being deployed and which could be extended seek to raise awareness about the problems of illegal dwelling production, and the wider issues affecting residents living in informal housing arrangements. However, without a sufficient supply of alternative housing to serve the needs of low income and vulnerable groups, there will continue to be a market for illegal dwelling production in Sydney. This places local government compliance officers and housing support workers who become aware of illegal dwellings in a very difficult position. Structurally, major policy reform is needed to reduce demand for informal housing by increasing the supply of affordable rental accommodation, and addressing the barriers to accessing the formal system experienced by lower income and vulnerable groups.