Under the amended planning policy, more townhouse and villa-style dwellings will be encouraged.
The minimum lot size for detached dwellings in low density areas will be just 250 square metres, although this can fall to 225 square metres where certain location conditions are met.
In high density areas near transport or town centres, lot sizes will be as small as 125 square metres, to allow for terrace-style housing.
The government also introduced two new housing types – studio flats and manor homes.
Studio flats refer to single-room apartments located above the garage of an existing house.
The changes allow these apartments to be sold on their own title, provided they have separate access from a side street or laneway.
Manor homes are two-storey houses offering four separate titled units within the same building.
New South Wales planning minister Pru Goward said the changes were necessary to provide affordable accommodation in the increasingly expensive Sydney market.
“The changes mean a western Sydney homebuyer will have more choice of home type, and may also save up to 10 per cent on the cost of their new home,” she said.
According to Ms Goward, the population of Sydney’s western suburbs is rapidly expanding.
“New suburbs in Western Sydney are expected to be home to half a million people over the next 25 years, so it’s crucial for us to get the planning right now,” she said.
Data from the NSW government shows the population of Sydney is expected to increase by 1.6 million people by 2031, requiring 664,300 homes.
Of these, up to 181,000 are expected to be located in western Sydney’s new growth corridors.