The Impact of Bureaucracy on Australia's Home Building Process

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The nation’s supply of new housing has been restricted for 30 years due to falling productivity which is contributing to the issue of unaffordable housing, a report by the Productivity Commission says.

The body estimates physical productivity in housing construction has sunk to the point where the nation is completing half as many homes per hour worked as it was in 1995.

Federal and state governments have committed to building 1.2 million homes across five years — about 240,000 homes each year — but in the 12 months to June 2024, only 176,000 homes were built.

An aerial view of houses in a residential suburb.

Timelines for major housing projects can stretch beyond a decade, the report says. Source: AAP / Sam Mooy

Productivity is being stifled by complicated and slow approval processes, a lack of innovation, an industry dominated by smaller players and difficulty attracting and retaining workers, the report says.

Timelines for major housing projects can stretch beyond a decade and delays can continue as developers seek construction certificates.

Productivity Commission chair Danielle Wood said governments were right to focus on changing planning rules to increase the supply of new homes.

“But the speed and cost of new builds also matter,” she said.

“The sheer volume of regulation has a deadening effect on productivity.”

Three levels of government make rules on where, how and what the building should look like before industry groups and the community even get involved.

Master Builders Australia, the nation’s peak building and construction body, welcomed the commission’s “sensible” recommendations.

CEO Denita Wawn said: “Just like the housing crisis, there is no silver bullet to solving woeful productivity in the industry, and it requires a coordinated and comprehensive approach by all levels of government.”

Wawn noted construction costs have increased by 40 per cent in the last five years, and the time taken to build residential homes has increased by up to 80 per cent over the last 15 years.

“Every day we drag our heels on tackling the challenges faced in the industry, the longer we drag out the housing crisis,” she said.

Labor has promised to ban foreign investors from purchasing existing homes for at least two years, in a policy similar to one proposed by the Opposition in 2024.

The government will also crack down on land banking by forcing foreign investors to develop vacant land within a reasonable time frame, Housing Minister Clare O’Neil said on Sunday.