Australia’s housing industry is preparing to push the federal government to cut billions of dollars in regulatory costs, arguing that red tape is now one of the biggest barriers to building more homes and improving affordability.
Industry leaders say up to $47.5 billion a year is being lost to regulation across housing construction, and they want at least 25 per cent of that burden removed in the lead up to the 2026–27 federal budget.
The call comes as new international and domestic reports again highlight a long running problem for Australian construction: productivity has barely improved for decades, despite rising costs, tighter margins, and growing demand for housing.
Productivity stuck, costs rising
A recent report from the Organisation for Economic Co-operation and Development found that productivity growth in construction has not increased for a “remarkably long period”. The OECD pointed to an expanding regulatory burden as a key reason.
According to the report, builders now face a steadily increasing number of approvals, compliance checks, and administrative steps, many of which sit outside traditional planning processes.
This issue was also a central theme at the government’s economic reform roundtable last year, where housing supply and affordability were flagged as national priorities.
The problem is not theoretical. A December report from the Productivity Commission estimated that regulation is adding as much as $320,000 to the cost of a new house and $175,000 to the cost of a new apartment.
For detached homes, the commission found that between 50 and 80 per cent of regulatory costs come from restrictive zoning and land use rules. For apartments, paperwork and administrative processes make up around a third of the total burden.
Industry pushes for action in the budget
Master Builders Australia says it will formally call for a $12 billion reduction in red tape costs as part of its submission to the 2026–27 federal budget.
The organisation argues that without meaningful reform, Australia has little chance of meeting its National Housing Accord target of 1.2 million new homes over five years.
Master Builders chief executive Denita Wawn said construction productivity needs to return to levels seen a decade ago just to keep pace with demand.
She said targeted budget measures aimed at reducing regulatory friction would be one of the fastest ways to improve housing affordability and lift output across the sector.
Incentives not working as intended
The OECD report was also critical of the government’s progress on housing supply initiatives, describing results so far as only partial.
One program under scrutiny is the New Home Bonus, a $3 billion scheme designed to reward states and territories that exceed their share of the national home building target.
Under the current structure, payments are only made after five years, something critics say weakens the incentive for governments to act now.
Peter Tulip, chief economist at the Centre for Independent Studies, said the delay means the program is failing to influence real world decision making at state and local levels.
He said councils and state governments face immediate funding and capacity pressures when approving new housing, while the reward for doing so sits years away.
In his view, the private sector is ready and willing to build, but is being held back by local planning systems and slow approval pathways. Better designed incentives, he argues, could help unlock supply faster.
What builders are seeing on the ground
For builders, the numbers match lived experience.
Longer approval times, duplicated compliance checks, and inconsistent requirements across councils are now standard features of residential construction. These delays do not just increase costs. They introduce uncertainty into scheduling, labour planning, and client delivery.
Smaller builders are often hit hardest. Unlike larger firms, they have limited capacity to absorb compliance delays or carry prolonged holding costs while waiting for approvals.
Many in the industry say the conversation has moved beyond whether regulation is necessary. The focus now is on whether the system is proportionate, consistent, and fit for purpose.
A test for housing reform credibility
With housing affordability firmly in the national spotlight, the upcoming federal budget is shaping as a key test of whether governments are prepared to tackle structural barriers to supply.
Industry groups argue that cutting red tape is not about lowering standards, but about removing duplication, speeding up decision making, and allowing builders to do what they do best: build homes.
If productivity continues to stall, the risk is clear. Housing targets slip further out of reach, costs keep rising, and the gap between demand and supply continues to widen.
For builders, trades, and suppliers on the ground, the message is simple. The system needs to work better, faster, and with a clearer understanding of how homes are actually delivered.
The question now is whether the 2026–27 budget will reflect that reality.
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