Granny flats and small units in the backyards of Sydney homes are being touted as the answer to the rental crisis.
Under the overhaul to state planning laws, homeowners who build granny flats and units in their backyards and rent them out, will escape capital gains tax.
The initiative is expected to bring an additional 30-thousand residences on to the market and give people struggling to find rental properties a home.
The new dwellings would not be allowed to be sold but would provide additional income to struggling mortgage holders.
Western Sydney minister Barbara Perry says it's a proven strategy.
“It’s clear that this has worked in other areas, for example in Vancouver, Canada - over 20 percent of the rental market is supplied by secondary dwellings.
“Already in NSW it’s happening selectively.”
Premier Morris Iemma is expected to flag the idea with local councils, building industry and the public today.