Governments Called Out for Red Tape’s ‘Deadening’ Impact on Home Building

New evidence from the Productivity Commission has prompted calls for governments to “think harder” on solutions to red tape delays. 

The Productivity Commission has released its much-anticipated research into home building, providing clear data on how residential dwelling construction has changed over the course of three decades. 

‘Housing construction productivity: Can we fix it?’ states that productivity in home building has “fallen well behind” the economy, leading to less supply of new homes and contributing to unaffordable housing.

The report found while economy-wide productivity has increased by 49% over the past 30 years, in contrast, physical productivity has declined by 53% in the same period. This means that based on the number of new homes built compared to the number of hours worked within the sector, fewer houses are being built for the same output.  

In essence, the Australian residential construction sector is completing roughly half as many homes per hour worked as it did in 1995.

Over the past 30 years, physical productivity in housing construction has declined by 53%. Picture: Getty

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Looking at another measure, which accounts for quality improvements over the three decades as well as increases in home sizes, the Productivity Commission determined that there was still a 12% decline in building productivity.  

Julie Abramson, commissioner of the independent agency that provides advice to government, said “there is no single thing to blame” for the numbers but noted there are steps governments can make to ease regulatory bottlenecks and “encourage innovation” within the industry.  

Productivity Commission chair Danielle Wood further stressed the importance of governments addressing productivity blockers.  

“Governments are rightly focused on changing planning rules to boost the supply of new homes, but the speed and cost of new builds also matters,” Ms Wood said. 

“Lifting the productivity of homebuilding will deliver more homes, regardless of what is happening with the workforce, interest rates or costs.”

What needs to be done?  

The report outlines seven reform directions focused on four pain points across the sector – slow approval processes, lack of scale, innovation and workforce issues.  

To address these challenges, the report recommends:  

• Establishing coordination bodies to address delays and speed up construction processes. 

• Commissioning an independent review of building regulations – particularly on the National Construction Code (NCC) and how it is implemented at state and territory government levels. 

• Removing barriers to innovation by considering public research and development funding for housing construction. 

• Improving workforce mobility and flexibility by governments conducting regular reviews of occupational licensing systems and addressing labour supply barriers.  

“The sheer volume of regulation has a deadening effect on productivity,” Ms Wood said. 

“If governments are serious about getting more homes built, then they need to think harder about how their decisions unnecessarily restrict housing development and slow down the rate of new home building.”

The report recommended seven reforms focused on four challenges the sector is facing. Picture: Getty

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Master Builders Australia welcomed the report and noted it confirmed what the industry has called for.  

“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,” Master Builders Australia CEO Denita Wawn said.  

“The Commission has put forward sensible recommendations that should be strongly considered by governments.” 

In addition to the recommendations, Master Builders Australia launched its Construct Your Career Guide, in an effort to attract workers across the sector.   

The Housing Industry Association also welcomed the reforms and proposed its own set of reforms to reduce red tape including, introducing a housing supply minister to lead the reforms, free access to the top 10 Australian Standards to cut costs for practitioners, increased funding to streamline the NCC and a five-year amendment cycle for the code.  

“It is vital that reforms are made now that can support the goal of delivering 1.2 million homes,” Housing Industry Association executive director building policy Shane Keating said. 

“Moving on the recommendations of this report before the election would be a valuable step forward.” 

Both the Property Council of Australia and the Urban Development Institute of Australia welcomed the recommendations and called on reviewing the NCC.  

Property Council chief executive Mike Zorbas said the report “reads like a love letter to better housing supply”. He also noted that while Australia has a good construction code, it can be improved through resourcing.  

“States are starting to improve project timelines but much more needs to be done to coordinate more efficient planning outcomes for residential and commercial projects that benefit our cities,” Mr Zorbas said.  

“We must build our way out of the housing crisis, and every lever we can pull to boost the construction of new housing is essential.”  

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