Shellharbour Tiny Homes Pilot: NSW's First Council to Fast-Track Tiny House Approvals

If you've been watching the housing crisis unfold from your rental inspection queue—standing among 60-70 people competing for a single property—this might be the first real sign of hope. On September 23, 2025, [Shellharbour City Council](https://www.shellharbour.nsw.gov.au/) became **the first NSW council** to approve a two-year pilot program that allows mobile tiny homes on residential properties **without development applications**. No DA fees. No months-long assessments. No bureaucratic limbo. In a region where median house prices hit **$1.3 million** and renters pay 43% of their income on housing, Shellharbour just rewrote the rules. Here's what this means for buyers, investors, and property owners across NSW—and whether other councils will follow. --- ### **1. What Makes Shellharbour's Pilot Different from Anything Else in NSW** Under current [NSW planning regulations](https://legislation.nsw.gov.au/view/html/inforce/current/sl-2021-0461), you can technically have a mobile tiny home on your property under existing exemptions—but only if it's used by you or a household member. Want to rent it out? That requires a development application (DA): thousands in fees, months of waiting, zero guarantees. **Shellharbour removes that barrier entirely.** Property owners can install a mobile tiny home registered as a vehicle under the [Road Transport Act 2013](https://legislation.nsw.gov.au/view/html/inforce/current/act-2013-018) and rent it to anyone—no DA, no development fees, no assessment delays. As [Region Illawarra reported](https://regionillawarra.com.au/tiny-homes-set-to-make-a-big-impact-as-shellharbour-backs-two-year-trial/73025/), the council worked with the NSW Department of Planning for over a year to create this framework. The result? A legal pathway for property owners to add rental housing without breaking the bank or waiting 12 months for approval. The council vote was 5-3 in favor—decisive, not unanimous, and the debate revealed valid concerns we'll cover later. --- ### **2. The Housing Crisis Numbers That Forced Council's Hand** Mayor Chris Homer calls the housing crisis "diabolical." The data proves him right. **Current Shellharbour Market Reality:** - Median house price: **$1.315 million** ([CoreLogic data](https://housing.id.com.au/shellharbour/housing-market)) - Median household income: **$85,644/year** - Affordability ratio: **15.4x annual income** (healthy ratio is 3-5x) - Rental stress: **22,000+ Illawarra households** paying over 30% of income - Warilla residents: Paying **43% of income on rent** ([Illawarra Mercury](https://www.illawarramercury.com.au/story/8569905/tiny-homes-get-big-boost-with-shellharbour-council-trial/)) **The Rental Collapse:** - Current median rent: **$700/week (houses), $600/week (units)** - That's up **67% from $420/week in 2021** - Vacancy rate: **Below 1%** (crisis-level tight) - Rental inspections: **60-70 people turning up** to compete for properties According to [ABS Census data](https://abs.gov.au/census/find-census-data/quickstats/2021/LGA16900), Shellharbour's population is growing 1.11% annually and needs **3,800 new homes by 2029** to meet [NSW government targets](https://www.planning.nsw.gov.au/policy-and-legislation/housing/housing-targets). Traditional housing development isn't keeping pace. Deputy Mayor Kellie Marsh summarized it: "Rents are rising, vacancy rates are falling, and many local families, workers and young people are being priced out of the very community they call home." --- ### **3. How the Pilot Actually Works (The Practical Details)** Property owners in Shellharbour can participate under these conditions: **What's Permitted:** - **One mobile tiny home per residential property** (must already have principal dwelling) - Registered as a vehicle under Road Transport Act 2013 - **Can be rented to tenants** (not restricted to family—key innovation) - No development application required - Must connect to existing essential services (water, sewer, power) **The Requirements:** - Minimum setbacks from property boundaries - Fire safety and construction standards compliance - **Not permitted in front yards** in densely-populated areas - Must respect neighborhood character - Low-profile, environmentally friendly design Mayor Homer emphasized to the [Illawarra Mercury](https://www.illawarramercury.com.au/story/8566651/shellharbours-tiny-home-solution-to-housing-crisis/) that high-spec tiny homes costing $140,000-$170,000 are "basically a slice of a brand new modern home" worth $800,000+ in areas like Shell Cove. **The cost comparison: $140,000-$170,000 fully-fitted versus $1.3 million for a house.** That's not just affordable—it's transformative for first-time buyers and investors alike. --- ### **4. The Timeline: When This Actually Happens** The pilot was approved September 23, 2025, but implementation follows a process. **What Happens Next:** 1. **Now (October 2025):** Council prepares formal Planning Proposal 2. **Q1 2026:** Submission to NSW Government for review and approval 3. **Mid-2026:** State government approval (takes up to 6 months) 4. **Late 2026:** Public exhibition period for community feedback 5. **Early 2027:** Final council planning amendment adopted 6. **2027-2029:** Two-year pilot implementation and monitoring 7. **2029:** Review and decision to expand, modify, or discontinue [Government News reported](https://www.governmentnews.com.au/council-to-fast-track-approvals-for-tiny-homes/) that Real Estate Institute of NSW CEO Tim McKibbin praised this as "an example of a local council understanding it has an important role to play for its community and taking innovative action." You can't install a tiny home under these rules tomorrow—but property owners should start planning now. Quality tiny homes take 10-12 weeks to manufacture, so timing your purchase for 2027 implementation means starting research today. --- ### **5. Why Shellharbour Acts While Other Councils Wait** NSW has 128 local councils. Shellharbour is the first to take this leap for specific reasons. **The Key Worker Crisis:** Shellharbour has a **$729 million hospital** under construction. Where will nurses, teachers, and hospital workers earning $39,000-$94,000 live when houses cost $1.3 million? Mayor Homer identified this gap early and acted. **How Other NSW Councils Compare:** - **Byron Shire Council:** Provides [guidance within existing state framework](https://www.byron.nsw.gov.au/Development-Business/Building-Plans-Guidelines/Development-Building-Fact-Sheets/Tiny-home) but hasn't pursued planning changes - **Eurobodalla Shire Council:** Supportive with [streamlined processes](https://www.esc.nsw.gov.au/property/development/tiny-homes) but works within existing rules - **Bega Valley Shire Council:** Currently facing [controversies and eviction notices](https://begavalley.nsw.gov.au/council/tiny-homes-granny-flats-caravans-manufactured-homes) for tiny home owners, calling for state clarity for "over 2 years" with no response Shellharbour isn't waiting for state government action. They're creating a template other councils can adopt if the pilot succeeds. --- ### **6. The Debate: Valid Concerns Raised by Councillors** The 5-3 vote wasn't unanimous, and the concerns raised matter. **Councillor Lou Stefanovski** supported the pilot but flagged revenue concerns: granny flats require development applications and generate council fees, but tiny homes bypass that entirely while generating rental income for owners. **Councillor Maree Duffy-Moon** called it "policy on the run" and noted that $100,000-$160,000 tiny homes aren't accessible to people experiencing homelessness—the demographic most affected by the crisis. **Councillor John Davey** supported it reluctantly: "It should not be the responsibility of local government to solve the housing crisis. It should be solved by the federal government and the state government." These are legitimate concerns. The pilot doesn't solve homelessness. It doesn't generate traditional council revenue. And local government shouldn't carry the entire burden of a national crisis. But Councillor Mitch Ellis countered: the pros outweighed the cons—reduced energy usage, no impact on resale value (removable dwelling), and real options for people priced out of the market. In plain terms: this isn't a perfect solution, but it's a real solution that can be implemented quickly while governments debate larger reforms. --- ### **7. What This Means for NSW Tiny House Regulations** Shellharbour's pilot exists within a confusing state regulatory framework that desperately needs clarification. **Current NSW Position:** The [State Environmental Planning Policy (Housing) 2021](https://www.planning.nsw.gov.au/policy-and-legislation/housing/housing-sepp) treats: - **Fixed tiny homes** as "secondary dwellings" (require development approval, 450m² minimum lot, 60m² max floor area) - **Mobile tiny homes** as "caravans" under [Local Government Regulation 2021](https://legislation.nsw.gov.au/view/html/inforce/current/sl-2021-0461) (limited to household members only) **The problem:** Despite multiple councils requesting clarification for over 2 years, NSW has no comprehensive state-level tiny home policy as of October 2025. While NSW recently introduced major housing reforms—the [Low and Mid-Rise Housing Policy](https://www.planning.nsw.gov.au/policy-and-legislation/housing/low-and-mid-rise-housing-policy) targeting 112,000 homes over 5 years and the Planning System Reforms Bill 2025—**none specifically address mobile dwellings or tiny home approval exemptions**. Shellharbour's pilot creates evidence. If it works, it gives the state government a tested template for broader reform. The two-year monitoring period identifies what needs adjustment before statewide rollout. --- ### **8. Investment Opportunities and Property Owner Implications** Property owners are asking about rental income potential. Here's the math. **Current Shellharbour Rental Market:** - Houses: **$700/week median** - Units: **$600/week median** - Tiny home potential: **$400-$500/week** (estimated) **Investment Analysis for Property Owners:** - Tiny home investment: **$140,000-$170,000** - Potential annual rental income: **$20,800-$26,000** (at $400-$500/week) - Annual yield: **12.2-18.6%** (before expenses) - Compare to: Buy a $802,500 unit, rent for $600/week = **3.9% yield** The yield on a backyard tiny home significantly outperforms traditional property investment in the area. **Reality check:** This isn't passive income. You're a landlord with responsibilities under NSW residential tenancy legislation. You need proper rental agreements, landlord insurance, maintenance capacity, and compliance knowledge. At [Tiny House Agency](https://tinyhouseagency.com.au/), we work with buyers evaluating tiny homes as both primary residences and investment properties. The Shellharbour pilot creates a new category: backyard rental housing that's legal, regulated, and potentially profitable. **Want help running the numbers for your property?** Our [buyer's advocacy service](https://tinyhouseagency.com.au/services) can assess your site for pilot eligibility, connect you with quality builders, and help you understand the full investment picture before you commit capital. --- ### **9. How This Compares to Granny Flats (and Why It Matters)** The most common question: "Why not just build a granny flat?" **Granny Flat Route:** - Requires development certificate or full council approval - Construction costs: **$150,000-$250,000+** - Permanent structure (affects property value/land tax) - 60m² maximum floor area per [NSW housing regulations](https://www.planning.nsw.gov.au/policy-and-legislation/housing/housing-sepp/secondary-dwellings) - Connection fees can add $10,000+ - Timeline: 6-12 months from planning to completion **Tiny Home Route Under Pilot:** - No council approval required - Costs: **$140,000-$170,000** (fully fitted, delivered) - Removable structure (registered as vehicle) - Can relocate if you move - Uses existing service connections - Delivered within 10-12 weeks typically - No impact on primary dwelling value The flexibility is everything. A granny flat is permanent infrastructure. A tiny home adapts to changing needs, moves with you, or sells separately from your property. For retirees downsizing, families needing multi-generational housing, or investors seeking rental income, that flexibility changes the equation entirely. --- ### **10. What Happens If This Pilot Succeeds (The Bigger Picture)** If this two-year pilot demonstrates that mobile tiny homes provide affordable rental housing without degrading neighborhoods, creating safety issues, or overwhelming council services, it sets a precedent for 127 other NSW councils. **The Potential Ripple Effect:** According to [NSW Planning Portal data](https://www.planning.nsw.gov.au/policy-and-legislation/housing/housing-targets), NSW is falling 2,000+ approvals short per month statewide. If just 10% of NSW councils adopted similar affordable housing trial programs, and 5% of residential properties added a backyard tiny home, that could create: - **50,000+ new rental dwellings** statewide - Zero additional land consumption - Minimal infrastructure strain (existing services) - Housing diversity in established suburbs - Affordable options for key workers earning $39k-$94k [The Conversation](https://theconversation.com/tiny-homes-could-help-ease-the-housing-crisis-but-councils-are-dragging-their-feet-261664) noted that councils have been "dragging their feet" on tiny homes despite their potential. Shellharbour is doing the opposite. Mayor Homer stated: "This housing crisis is probably beyond 20 years in the making. We're in a housing crisis right now and all levels of government have to come on board with this. Shellharbour local government is doing some heavy lifting here." Other councils will watch this pilot closely. Data collection over the next two years either proves or disproves tiny homes as a viable housing solution at scale. --- **Conclusion: What This Means for You** Shellharbour's tiny home pilot won't solve Australia's housing crisis overnight. It won't eliminate homelessness. It won't bring median house prices back to 3x annual income. But it does something that matters: it creates a legal pathway for ordinary property owners to contribute to housing supply without massive capital, planning delays, or regulatory uncertainty. **For buyers** considering tiny homes as primary residences, this signals that local government attitudes are shifting. What was regulatory grey area is becoming legitimate housing policy. **For property owners** with backyards and spare capacity, this creates an income opportunity that didn't legally exist before—if you're prepared for landlord responsibilities. **For investors** evaluating tiny homes as an asset class, this pilot creates a test case worth monitoring. If Shellharbour succeeds, similar opportunities may emerge across NSW. The timeline means implementation won't happen until 2027, but planning starts now. Quality tiny homes from reputable builders take 10-12 weeks to manufacture. Buyers wanting to be ready for pilot launch should start researching builders and financing options today. At [Tiny House Agency](https://tinyhouseagency.com.au/), we're tracking this pilot from state government approval through public consultation and final implementation. Our [buyer's advocacy service](https://tinyhouseagency.com.au/services) includes staying current on regulatory changes and connecting clients with tiny homes that meet evolving compliance standards across NSW. In two years, we'll know if Australia finally has a scalable, affordable housing model that works—and Shellharbour might just be where the solution begins. --- **Stay Updated on Shellharbour's Tiny Home Pilot** Subscribe to our newsletter for regulatory updates, market analysis, and tiny house buying guides for NSW buyers. We'll track this pilot from approval through public consultation and implementation. [Explore Available Tiny Homes on THA Marketplace](https://tinyhouseagency.com.au/marketplace) | [Learn About Buyer's Advocacy](https://tinyhouseagency.com.au/buyer-agency) | [Read More Guides](https://tinyhouseagency.com.au/blog) --- **Sources:** - [Shellharbour City Council](https://www.shellharbour.nsw.gov.au/) - [Region Illawarra: "Tiny homes set to make a big impact"](https://regionillawarra.com.au/tiny-homes-set-to-make-a-big-impact-as-shellharbour-backs-two-year-trial/73025/) - [Illawarra Mercury: "Shellharbour's tiny home solution"](https://www.illawarramercury.com.au/story/8566651/shellharbours-tiny-home-solution-to-housing-crisis/) - [Government News: "Council fast-tracks tiny homes"](https://www.governmentnews.com.au/council-to-fast-track-approvals-for-tiny-homes/) - [NSW Planning Portal - Housing SEPP](https://www.planning.nsw.gov.au/policy-and-legislation/housing/housing-sepp) - [ABS Census 2021 - Shellharbour](https://abs.gov.au/census/find-census-data/quickstats/2021/LGA16900) - [CoreLogic Housing Data](https://housing.id.com.au/shellharbour/housing-market) - [NSW Planning Portal - Housing Targets](https://www.planning.nsw.gov.au/policy-and-legislation/housing/housing-targets)