The developers of a planned apartment building in Subiaco are looking to walk away from a commitment to include social housing units inside the complex, blaming accelerating building costs.

Welink Group has approved to build a nine-storey, 50-unit apartment complex with retail on the ground floor in a backstreet of Subiaco's main entertainment and commercial precinct.

That approval in August last year hinged on a condition that six of those units be set aside for affordable housing.

Those units would be sold to either the government for social housing or independent social housing providers at 'construction cost'.

But the developer has now applied to the local council to amend that planning approval and delete that requirement.

Digging into the numbers

Welink is arguing selling the units at construction cost would leave it with a loss of $740,000 and put the financial viability of the whole project in jeopardy.

Construction cost is not the actual cost of construction to the developer, but rather a rate specified by the state government development body, DevelopmentWA.

The government's construction cost rate has increased each year in accordance with the consumer price index (CPI).

According to their method, the construction cost of each of the six one-bedroom, 50-square-metre apartments is $273,520 — or more than $1.6 million for the six.

But WeLink said puts the actual cost of building each affordable apartment at almost $400,000, arguing labour and materials costs in the building sector have increased significantly more than CPI in recent years.

The company said that means the real cost will be closer to $2.4 million and the compulsory sale of the units at the lower cost will leave them with a $740,00 loss.

And that just isn't feasible, WeLink says, and will put the whole project at risk.

A tough balance

Debra Zanella, chief executive of community support service Ruah, said mandating social and affordable housing in new development was a valuable policy.

The Hood Street site is located in the heart of the Subiaco Station precinct, just 300 metres from the train station.

"If we think about inner suburban areas, it's probably the easiest places to have access to transport and services and work, if you don't have a car or it's too expensive."

Ms Zanella said she understood the issue of escalating construction costs.

But she didn't think the solution lay in dropping the affordable housing quotas.

"I'd be encouraging [the developer] to go back to the government to talk about that escalation of cost," she said.

"I don't think the answer is to scrap a really good policy that ensures that the appropriate diverse housing mix occur in any development going forward.

"I think it's really important that we think about what the long-term benefit is for all our communities by having a diversity of housing mix."

Government to fight request

DevelopmentWA confirmed it would oppose the submission to remove the social housing clause.

"Contributions towards social and affordable housing ... are reasonable given the benefit obtained by developers in these areas," the agency said in a statement.

"DevelopmentWA will reach out to the city to provide any potential support in ensuring the policy is applied and a solution achieved.

"DevelopmentWA and other government agencies ... will work together to provide a submission opposing removal of condition 11."

The application is open for public comment at the City of Subiaco until September 27.

Welink and WA housing minister John Carey have been contacted for comment.