Class 1a vs 1b: What Property Investors Must Know Before Building a Rooming House

  • User By Aus Investment Properties
  • 13 hours ago




Class 1a vs 1b: What Property Investors Must Know Before Building a Rooming House

Navigating Australia's building classes is critical to unlocking high-yield co-living investment returns and avoiding costly compliance mistakes.


What’s the Big Deal About 1a and 1b?

If you're eyeing the booming demand for co-living investment properties or rooming houses across Australia, you’ve likely heard the terms Class 1a and Class 1b or at least you should have.

These aren’t just bureaucratic buzzwords they’re the legal backbone that determines whether your shared accommodation project is compliant, insurable, and even rentable.

Under the National Construction Code (NCC), getting this classification wrong can mean costly retrofit upgrades, invalid insurance, or even council enforcement.

So what’s the difference, and what does it mean for your next investment property?


Understanding Class 1a: The Standard Aussie Dwelling

A Class 1a building is what most of us think of when we picture a home — a detached house, a townhouse, or a duplex. These homes are designed for:

 

  • A single household (such as a family),

  • Or two unrelated occupants on the same lease.

Fire safety requirements are relatively minimal typically smoke alarms and a single point of egress. Investors running dual occupancy properties or typical rentals generally fall into this category.

But here's the catch: once you start renting rooms to more than two unrelated people, things change.



Enter Class 1b: The Rooming and Co-Living Category

A Class 1b building is designed for small-scale shared accommodation — think rooming houses, co-living spaces, or even some Airbnbs. These buildings cater to:

  • Up to 12 unrelated residents, or

  • Any shared living arrangement in a home over 300m² floor space.

Because of the density and potential fire risk, Class 1b properties require stricter fire safety compliance, including:

  • Hardwired smoke detectors in all rooms and hallways,

  • Emergency lighting and illuminated exit signage,

  • Fire-rated walls and doors between rooms,

  • At least one accessible room with disability-compliant facilities.

If your property doesn’t meet these standards and you’re running it like a rooming house you’re risking both safety and liability.



Why This Matters for Investors

The market for cash positive investment properties like rooming houses and co-living builds is growing fast especially in high-demand suburbs near job centres and universities. These properties can return 7–12% gross yields, often with minimal vacancy.



But without Class 1b compliance:

  • Your insurance may be void

  • Councils can issue enforcement orders

  • You could face fines or legal action

  • Financiers may reject funding on the basis of non-compliant usage

That’s why experienced investors ensure their builds are 1b certified from day one or work with specialists who can help them convert or reclassify existing stock.



When Do You Need to Build as 1b?

Generally, you’ll require a Class 1b build if:

  • You rent 3 or more rooms individually to unrelated adults

  • You accommodate more than 5 tenants (varies by state)

  • Each tenant has a separate lease agreement

  • You operate as a rooming house, co-living space, or short-term boarding arrangement

Many councils across Victoria, Queensland, and NSW also require specific planning overlays or operator licensing once a property is classified as 1b.



State-by-State Snapshot

State

1b Trigger

Investor Notes

VIC

Four or more unrelated residents

Must register as a Rooming House

QLD

Shared accommodation under one roof

Requires Class 1b build and fire safety upgrades

NSW

Boarding Houses under SEPP

Subject to planning controls and development consent

SA / WA / TAS

Case-by-case via zoning and council planning

Class 1b strongly advised for rooming or co-living

ACT / NT

Minimal legislation, but NCC still applies

Fire compliance essential



Compliance Is an Investment, Not a Cost

Yes, Class 1b properties involve additional build cost typically $20,000 to $50,000 depending on fire 

compliance and access modifications. But these costs are usually offset by:

 

  • Higher rental income per square metre

  • Strong demand from tenants seeking flexible, affordable living

  • Increased interest from SMSF property investment buyers

  • Reduced vacancy risk due to housing shortages

In today’s tight rental market, co-living and rooming house investments are among the highest-yielding residential strategies in Australia. But they aren’t a set-and-forget asset — they demand precision in planning, building, and compliance.


Getting your building class right — Class 1a vs Class 1b — is the first and most important step in building a legal, insurable, and profitable property portfolio.


Ready to Invest in Co-Living or Rooming Houses?

At Aus Investment Properties, we specialise in high-yield properties, including co-living and rooming house builds across Australia. Our listings are handpicked for investors seeking cash-flow-positive opportunities.

Visit our website to view all our available investment properties: www.ausinvestmentproperties.com.au



Shared Living properties are complex, and the rules and regulations vary by state and council. This blog is for general use only and to give you an overview of the shared living rules and regulations across Australia.

Related Posts

Australia’s Property Listings Slide Further – What This Means for Investors in 2025

As demand surges and stock tightens, investors are turning to high-yield strategies. Australia’s property market continues to tighten, with the latest June 2025 figures from SQM Research revealing an 8.8% monthly drop in total residential property listings. This shift reflects more than just a seasonal trend—it signals a growing imbalance between housing supply and demand across the country.

Continue reading

User By Aus Investment Properties

Aus Investment Properties Quarterly Report – July 2025

Australian Turn-Key Investment Property Building Costs Per Square Metre. Overview: As of July 2025, the national average build cost across all turnkey investment property types has continued to rise, reflecting ongoing supply chain pressures, increased labour costs, and strong investor demand. This report breaks down the average build price per square metre for key investment property types across Australia, compared with March 2025 data.

Continue reading

User By Aus Investment Properties

Vacancy Rates Are Rising: What It Means for Property Investors in Australia

A shift in the rental market could mean opportunity — are you ready to take advantage of it? Australia’s rental market has taken a noticeable turn, with the national vacancy rate rising to 1.3% in April 2025, up from 1.1% in March and April last year. While this may raise eyebrows among landlords, the vacancy rates across Australia are still at a relatively all-time low.

Continue reading

User By Aus Investment Properties

Unlocking High-Yield Opportunities: The Rise of Shared Living Investments in Australia - The Future of Housing Investment

Australia’s property market is evolving, and shared living is emerging as a game-changing investment opportunity. This innovative housing model provides a solution to the nation’s housing affordability crisis while offering investors a lucrative avenue for high rental yields and low vacancy rates.

Continue reading

User By Aus Investment Properties

Why Australian Property Investors Should Consider Non-Bank Lenders for Their Investment Loans

The Australian mortgage market has long been dominated by the big banks, but non-bank lenders are making a strong case for investors looking for more flexibility, better rates, and faster loan approvals. In recent years, non-bank lenders have gained significant market share, creating a more competitive lending environment that benefits borrowers.

Continue reading

User By Aus Investment Properties

How Anticipated Interest Rate Cuts in 2025 Could Shape the Australian Property Market

Unlocking Opportunities for Property Investors with Lower Borrowing Costs The Reserve Bank of Australia (RBA) is poised to cut interest rates in 2025, sparking excitement across the Australian property market. For investors, these anticipated changes offer an opportunity to explore high-yield investment properties, co-living investment properties, and other promising options that align with evolving market dynamics. Lower interest rates could redefine the landscape, providing avenues to enhance rental income properties and secure cash-positive investment properties.

Continue reading

User By Aus Investment Properties

Why Buy With Aus Investment Properties?

  • Dedicated In-house Project Manager.
  • High-yielding properties.
  • Independent rental assessment.
  • Full turnkey properties, 'Ready to Rent'.
  • Brand new properties with builders warranty.
  • High quality, highly specified properties.
  • Tax and depreciation benefits from new properties.
  • Buy direct from the builder.
  • Investor or SMSF.
Buy Property Banner

Search 1000'S Of Off-Market Investment Properties!

SQM Research Logo

SQM Research is an investment research house that specialises in providing accurate research and data to financial institutions, investment professionals and investors.

Aus investment Properties has partnered with SQM Research to provide data across our site to assist investors in making an informed decision.

Capital Growth 12 months, measures the increase in a property’s value over the previous 12 months, indicating how much the investment has appreciated in that timeframe.

Capital Growth 10-year annualised, reflects the average annual increase in a property’s value over the last decade, smoothing out short-term fluctuations to show long-term appreciation trends.

Vacancy Rate, indicates the percentage of properties that are currently unoccupied in that postcode, It’s a key indicator for investors to assess the rental demand.

SMSF Property Investing, when investing inside your SMSF there are some restrictions on how you can purchase investment properties. We use the following information to help navigate the SMSF investment property options.

This property is a single-contract property suitable for an SMSF.

Compare listings

Compare