As the median house price surges past $1 million, increasing competition for rental homes is pushing more people to the city's fringes and beyond in search of affordable rents.
This week, in recognition of the growing problem, the government reassigned its key housing delivery agency, Landcom, to concentrate on this specific market: affordable rental housing.
The agency's new agenda effectively places it at the centre of a broiling public debate over density, and the perception in some communities that their suburbs are already full.
Chief executive John Brogden, a former NSW Liberal MP and party leader, said Landcom would be "unashamedly opportunistic" in seeking out development opportunities - on both government and private land - to boost the supply of affordable rental housing.
"There is no easy solution to this. It's about appropriate development. It's also about asking the community where they want to live when they grow older, [and] where they want their children to live," he said in an interview with Fairfax Media.
Affordable renting housing is a technical term, and refers to housing stock which is rented at below-market rate to workers earning very low to middle incomes, usually so rent does not exceed 30 per cent of their household income.
"The market we are looking at are those who are working. Those who earn too much to be in social housing and struggle to pay private rent and save for a deposit to buy."
Caught in this gap are key workers such as nurses, police and teachers, whose industries are rife with anecdotal evidence of long daily commutes from suburbs as far away as the Central Coast to jobs in the city's hospitals, police stations, or schools.
To encourage developers to build this kind of rental stock, supply has been grafted to density, primarily by imposing levies on developers in exchange for bonus floor space they obtain through rezonings.
Such policies require developers to make a contribution - either a monetary payment to a community housing provider or an in-kind contribution of finished homes in their development for affordable homes - on new building projects across the city.
The Greater Sydney Commission, in its 40-year strategy for Sydney released last month, mandated a city-wide affordable rental housing target of 5-10 per cent on new residential floor space obtained through rezonings.
But the Labor opposition has gone further - promising a target of 25 per cent for new developments on government-owned land, and 15 per cent on new properties built on rezoned private land, should it be elected in March 2019.
"If they're the government, and that's the policy, we'll do it. We'll make it happen," Mr Brogden said.
"None of these solutions come for free, they'll all cost money somewhere for someone along the line. Our job is to make sure that we can deliver on the government policy of the day and provide more affordable rental housing."
The dilemma of affordable rental housing is acute for the Berejiklian government, as it tries to champion its vision of Sydney as a 30-minute city, where the majority of the population can live in suburbs close to their jobs.
Community welfare groups, such as the Sydney Alliance, have repeatedly lobbied for a higher target, arguing a 5 per cent minium is insufficient to meet growing demand. Developers lobby groups have pushed back, claiming higher targets will make developments unviable.
Mr Brogden said the agency aimed to have targets by early next year for the number of affordable rental homes needed in Sydney.
The decision to re-task Landcom as an affordable housing delivery agency follows an administrative overhaul earlier this year, in which Landcom split from UrbanGrowth, the government's developer arm.
Among its immediate priorities, Mr Brogden said Landcom would renegotiate the 3 per cent affordable housing levy currently applied to the $8 billion redevelopment of Green Square precinct, a joint project between Landcom and Mirvac, towards a minimum 5 per cent.
To date, the levy has provided $9 million of funding for the construction of 104 affordable rental apartments on the site.
"Clearly the 3 per cent we're going at the moment is not enough. That much we do know."
