A failure by the NSW state government to increase height restrictions in line with its push for higher densities could result in low-income earners living in ‘shoe boxes’ without enough sunlight or communal space.

Under this week’s changes to the Affordable Rental Housing State Environmental Planning Policy (SEPP), the state government has made a “sliding scale” of floor space available for affordable units. However, no changes have been permitted for height restrictions.

“Where land is already zoned for units, a sliding scale of additional floor space can be permitted within height controls. It must also include between 20 per cent and 50 per cent affordable housing,” planning minister Kristina Keneally said.

However, increasing the density but capping the height can lead to problems, in particular with a lack of sunlight, reduced communal spaces and fewer opportunities for cross ventilation, director at Habitation, Peter Smith, said.

“Although the community is often opposed to extra height, it can lead to a better outcome. Density has got to go somewhere … These buildings are just going to get wider and fatter.”

The changes to the Affordable Rental Housing State Environmental Planning Policy (SEPP) include streamlining the approvals process for low rental properties and secondary dwellings or ‘granny flats’.

Low-rise developments, such as townhouses and villas, which will be allowed in all residential zones providing more than 50 per cent of the dwellings are offered at 20 per cent below the market rate for 10 years.

Secondary dwellings are now permitted in all residential zones and can be approved within 10 days under the NSW Housing Code.

The changes will also allow the Department of Aging, Disability and Home Care to approve disability group homes of up to 10 bedrooms, and proposals from non-government organisations can get 10-day approval under a ‘checklist-style’ compliance scheme.

Boarding houses will be easier to approve in residential areas and some business zones, incentives will encourage construction of boarding houses, and new standards will allow rooms in boarding houses to include kitchen and bathroom facilities.

“The new rules are an incentive for developers across the state to invest in projects that include cheaper rental dwellings,” premier Nathan Rees said.

“A good planning system should invite investment and provide a home and support if it needed for the most vulnerable,” Rees said.

While the affordable housing components will be managed by a registered community-housing provider, the private component can be strata titled and sold.

“Neighbourhood amenity will be protected with proposed plans publicly exhibited and assessed by councils,” Keneally said.

While the policy was let down by the caps to height, the rest of the changes were “very encouraging”, Smith said, particularly in offering a more diverse range of housing close to public transport.