A landmark 18-month AHURI report from seven universities has confirmed what many builders have lived through: it is not the planning system killing housing supply. It is the boom-bust cycle destroying the industry from the inside.
There is a version of the housing supply debate that gets repeated so often it has started to feel like fact.
Planning is broken. Councils are slow. Red tape is strangling construction.
Some of that is true in parts. But a major new piece of research suggests that framing misses the deeper structural problem entirely.
A new report from the Australian Housing and Urban Research Institute, led by RMIT University Associate Professor Andrea Sharam and drawing on 19 researchers across seven universities, has landed a significant finding: market volatility is the single biggest barrier to lifting housing construction in Australia.
Not approvals. Not trades shortages. Not the building code.
The cycle itself.
Forty-Five Years of Going Nowhere
Here is the number that should stop the housing supply debate in its tracks.
The rate at which Australia builds detached homes has barely changed in 45 years.
Despite population growth. Despite multiple boom periods. Despite policy after policy aimed at lifting supply. The underlying production capacity of the detached housing sector has remained essentially flat.
The AHURI report, which examined both detached and high-rise construction across an 18-month research period, traces that stagnation directly to the boom-and-bust dynamic that has characterised Australian residential construction for decades.
In a boom year, the number of detached homes under construction can jump by around 50,000. In a downturn, that number can fall by 20,000. The swings are enormous. And every swing takes something from the industry that does not fully come back.
The rate at which Australia builds detached homes has barely changed in 45 years. The swings are enormous. And every swing takes something from the industry that does not fully come back.
What Booms Actually Cost
The instinct is to think of construction booms as good for builders. More work. Higher demand. Bigger pipelines.
That is partly true. But the research documents what the upswing also does to an industry that is not structured to absorb sudden volume.
During booms, costs spike sharply as demand chases a fixed supply of labour and materials. Supply chains stretch and disrupt. Timelines blow out. And critically, the sector draws in marginal operators and workers who lack the skills and systems to deliver consistently.
“Booms also draw in marginal operators and under-skilled workers, increase pressure to cut corners, and disrupt work scheduling creating task queues,” the report notes.
Experienced builders know this from the ground. The COVID period and the HomeBuilder grant surge brought it into sharp focus. Builders who had operated responsibly for years suddenly found themselves competing against operators who had arrived for the boom and were gone before the defects were discovered.
Quality suffers. Reputations suffer. And when the cycle turns, the damage is not evenly distributed.
What Busts Cost Even More
If booms are bad for quality, downturns are bad for capacity.
When the pipeline contracts, skilled workers leave. Some find other industries. Some retire earlier than planned. Some move interstate or overseas. Unlike materials, they do not come back on demand.
The research identifies wage suppression, loss of institutional knowledge and innovation, and businesses exiting the sector as consistent features of construction downturns. That is not a temporary pain. It is permanent loss.
When the next upturn arrives, the industry is smaller and less capable than it was before. It cannot respond at speed. Costs spike again. The cycle compounds itself.
“Downturns meanwhile cause some permanent loss of labour, wage suppression, loss of knowledge and innovation, and businesses leaving the sector,” the report states.
For the people inside those businesses, this is not an abstraction. It is a career decision, often made under financial pressure, that changes the industry’s capacity for years.
When the pipeline contracts, skilled workers leave. Unlike materials, they do not come back on demand. That is not a temporary pain. It is permanent loss.
The Fragmentation Problem
The cycle is damaging enough on its own. The report finds it is compounded by the structure of the industry itself.
Australian housing construction relies heavily on temporary contractor teams that disband after each project. Skills transfer between projects is limited. The ability to retain workers, build organisational capability and invest in training is constrained when teams are assembled and dispersed job by job.
Small and medium builders currently deliver most detached homes and roughly half of all apartment construction. These businesses are the backbone of the industry. They are also the most exposed to volatility, with limited financial buffers, thin margins and less capacity to invest in systems, training or innovation when market conditions shift.
The report describes a structural paradox that builders will recognise immediately: too busy to invest during booms, too uncertain to invest during busts. The window for productive investment never quite opens.
“This paradox of being too busy to invest during booms, and too uncertain to invest during busts, creates a persistent barrier to industry-level improvement,” the research states.
The 1.2 Million Homes Problem
All of this sits behind a housing target that requires the industry to operate at a scale it has never consistently reached.
The National Housing Accord set a target of 1.2 million new homes over five years to June 2029. The research is unambiguous about what it will take to get anywhere near that number.
It will not happen by tinkering with planning processes alone. Faster approvals are useful. They are not sufficient.
Associate Professor Sharam put it plainly: “Blaming individual factors, like the planning system, is the biggest myth we need to quash. The National Housing Accord aims to build 1.2 million homes by 2029, it will take significant system-level reforms to get us there.”
Three areas of reform are identified as essential: reducing market volatility itself, strengthening workforce development to build long-term industry capacity, and improving consistency and enforcement in the building code.
Smoothing the Cycle
The most structurally significant recommendation in the report concerns how governments think about construction demand.
Policies that stimulate demand can replicate boom conditions. They can accelerate the same volatility that damages the industry’s capacity. The research suggests governments should instead consider approaches that smooth the cycle rather than amplify it.
Social housing investment during downturns is cited as an example. Directing public capital into housing construction when the private market contracts could maintain pipeline consistency, preserve workforce capacity and prevent the permanent loss of skills that a cold downturn produces.
That is a significant shift in how housing policy is typically framed. The instinct is to stimulate demand when the market slows. The research suggests that may do more damage than good.
What This Means for Builders
Builders reading this research will not need convincing on the fundamentals. Most have lived through at least one of these cycles, sometimes several.
What the report offers is something different. It is a serious, evidence-based account of why the industry behaves as it does, and why well-run businesses can be undermined by forces that have nothing to do with how they operate.
The boom-bust cycle is not a personal failure of individual builders. It is a structural feature of the market that systematically destroys capacity, suppresses investment and produces the quality problems that tarnish the whole industry.
For builders who have managed their businesses carefully through cycles, resisted overtrading, maintained teams and invested in systems, this research validates the approach. Discipline during booms is not leaving money on the table. It is protecting the business when conditions inevitably change.
For the industry as a whole, the report is a credible argument for reforms that go well beyond planning. Workforce development, code consistency and policies that smooth rather than amplify demand cycles are not peripheral concerns. They are the core of any serious strategy to lift housing supply sustainably.
The Good Builder Take
This is one of the most substantive pieces of construction industry research to land in years. It does not pretend the planning system is fine. But it does put the volatility problem front and centre, where it belongs.
Builders who have survived downturns know what the data shows. Skills leave and do not fully return. Good businesses get squeezed by the same conditions that reward corner-cutting during a boom. The cycle is the problem.
The policy implications are real. If governments want more homes, the answer is not another demand stimulus that recreates the surge-and-crash pattern. It is consistent, long-term investment in industry capacity, workforce development and code enforcement that does not depend on where the private market currently sits.
Overcoming construction constraints for the supply of new detached and high-rise housing is published by the Australian Housing and Urban Research Institute, with RMIT University co-authors Andrea Sharam, Ali Zolghadr, Louise Dorignon, Ron Wakefield and Ehsan Gharaie. (DOI: 10.18408/ahuri5334001)
General Information: This article is intended for general informational purposes only. It does not constitute professional advice. Readers should seek independent advice relevant to their specific circumstances.
Author: TGB Editorial
0 Comments