Housing supply regulation

Australian governments should reform housing regulation to build more homes in the places people want to live, according to the interim report of a Productivity Commission inquiry released today.

The interim report finds that regulation has become a handbrake on new housing supply. 

‘Australia’s housing affordability problem is putting housing out of reach for too many people. It now takes the average household around 11 years to save a 20% deposit on a typical home, up from 8 years in 2005,’ said PC Chair Danielle Wood.

‘When people can’t live near work or family the economy and the community suffers. We cannot solve our housing affordability problem unless we build more homes where people want to live,’ said Ms Wood.

The interim report of the inquiry was developed on an accelerated timeframe consistent with the review’s terms of reference. It does not make recommendations – it highlights reform areas the PC is seeking further input on before making recommendations in the final report due in March 2027. 

The report sets out 4 principles for a better housing regulatory system: adopt a build mindset, regulate only where necessary, coordinate housing with infrastructure, and keep the process simple.

‘Regulation is important, but too much or poorly designed regulation can stop new homes being built, make projects slower and more expensive, and reduce the types of housing available to us,’ said Ms Wood. 

‘The rules should allow us to build enough housing in the right places, while still protecting the things Australians value.’

Land-use rules are the biggest opportunity for reform

Land-use controls determine where housing can be built, how much can be built, and what form it can take. The report finds that relaxing land use controls is one of the most important things governments can do to boost housing supply.

The interim report says governments should consider broad-based upzoning in cities, including allowing three-storey development on most residential land, reducing minimum lot sizes, enabling more mixed residential and commercial areas, and allowing more mid-rise and high-rise apartments in high-demand, well-serviced locations.

‘Regulation is essential – particularly where it ensures buildings are safe and built to a high standard. But too often, other rules are making it illegal or unviable to build the kinds of homes people need in the places they want to live,’ said Commissioner Alison Roberts.

‘The kind of rules that stop you adding a granny flat in your garden or replacing a single home with townhouses are at the core of our housing challenge,’ said Dr Roberts. 

Housing and infrastructure need to be planned together

Poorly coordinated infrastructure can also prevent new housing from being delivered, particularly in greenfield areas where roads, utilities and sewerage connections are often essential before homes can be built.

‘You cannot build homes without the infrastructure that supports them,’ said Dr Roberts.

‘Housing plans and infrastructure plans need to work together. When they do not, land that has been rezoned for housing can sit unused for years,’ said Dr Roberts.

The report recommends that governments better align infrastructure plans with housing objectives, show how infrastructure will be funded and sequenced with land release, and improve consistency across levels of government, councils and utility providers.

Slow approvals and poor coordination delay new homes

The report also finds that slow and complex approval processes delay new housing and can make some developments unviable. 

Approvals often involve multiple decision-makers across different levels of government, referral agencies and infrastructure providers. Poor coordination between these bodies can add months or years to projects.

‘We heard examples of developers trying to navigate overlapping approvals and agencies that were not talking to each other,’ said Ms Wood.

‘One developer told us that preparing reports and waiting for approvals had added more than 3 years to the timeline of a 1,600 lot development in Melbourne’s growth corridor,’ said Ms Wood.

‘Making approvals more efficient won’t be enough to shift the dial on housing supply by itself, but it will help when combined with other reforms,’ said Ms Wood.

The interim report says governments should make greater use of fast-track pathways for simple developments, state-significant pathways where state-led assessment is needed, coordination bodies with the power to resolve disputes, better technology, and transparent reporting of approval outcomes.

Further feedback sought

The PC is seeking feedback to inform the recommendations in its final report, which is due to be delivered to the Australian Government in March 2027.

‘We want to hear from people who have experience with the housing regulatory system – what is working, what is not, and where reform would make the biggest difference,’ said Ms Wood.

The interim report is available from the PC website.

Media requests

02 6240 3330 / media@pc.gov.au

• Preliminaries: Cover, Copyright and publication detail, Opportunity for comment, Terms of reference, Disclosure of interests, Acknowledgements, HILDA disclaimer, AI transparency statement and Contents
• Overview
  • Australia needs more homes in the right places
  • Reforming regulation to build more homes, faster
• Information requests
• 1. Best practice for housing regulatory systems
  • 1.1 Government regulation affects housing supply
  • 1.2 Principles of a best practice regulatory system for housing
  • 1.3 What the principles mean in practice
  • 1.4 Using best practice principles to assess reform directions
• 2. Unlocking more homes through better land-use regulation
  • 2.1 How do land-use controls operate in Australia?
  • 2.2 Land-use controls limit housing supply
  • 2.3 Land release only matters if land is ready for development
  • 2.4 Reform directions for land-use controls
  • 2.5 Inquiry next steps on land-use regulation
• 3. Reducing the burden of approvals
  • 3.1 The process for approval can be challenging and costly for developers
  • 3.2 Regulatory burden tends to be highest for planning approvals to release land or develop housing
  • 3.3 Rigid processes may discourage innovation
  • 3.4 Recent reforms offer examples of best practice
  • 3.5 Governments should make approvals simple, fast and predictable
  • 3.6 Inquiry next steps on housing approvals regulation
• 4. Delivering housing-enabling infrastructure
  • 4.1 Housing-enabling infrastructure is essential to support housing supply
  • 4.2 Improving infrastructure planning and coordination
  • 4.3 Who pays for housing-enabling infrastructure?
  • 4.4 Supporting housing supply through developer contributions
  • 4.5 Inquiry next steps on housing-enabling infrastructure
• 5. Toward more homes, faster
  • 5.1 Reform priorities to increase housing supply
  • 5.2 Inquiry next steps
• A. Public consultation
• Abbreviations
• References

Printed copies of this report can be purchased from Canprint Communications.