A national inquiry into housing construction has found that taking on more work in a boom does not lift how many homes get finished. The detail behind that finding shows where the pressure lands inside a building business.

When the market runs hot, the natural response is to sign more contracts.

A major national inquiry has found that, across the industry, this does not produce more finished homes. It produces more homes stuck in progress.

The finding comes from Overcoming construction constraints for the supply of new detached and high-rise housing, AHURI Final Report No. 461, published on 9 June 2026. The 18 month inquiry was led by Andrea Sharam of RMIT University, with researchers from RMIT, Monash University, the University of Tasmania, the University of New South Wales and the Royal Institution of Chartered Surveyors.

We covered the report’s headline finding when it was released in June. Market volatility, the authors concluded, is the most significant constraint on housing construction in Australia. The detail underneath that headline deserves a closer look, because much of it describes what happens inside a building business when work surges.

Detached housing output has barely moved since 1980

Detached homes made up 70 per cent of Australia’s private dwellings at the 2021 Census and 60 per cent of housing starts in 2025, according to ABS figures cited in the report.

Yet the report finds the rate of detached housing output has been largely static since at least 1980.

The number of homes under construction has swung widely over that period. Completions have not. The gap between the two is what the report calls the work in progress rate, and it treats that gap as a key measure of how productive the system is.

In the detached sector, the report finds, sharp jumps in demand are absorbed by longer build times rather than more completions.

In the detached sector, sharp jumps in demand are absorbed by longer build times rather than more completions.

Why more jobs in a boom means slower builds

The report explains this through queueing. A detached home moves through slab, frame, lock up, fixing and final stages, coordinating more than 50 different subcontractors and trades.

When every builder competes for the same trades and materials at once, those queues break down. A late window delivery holds up the next trade. Delays cascade.

The inquiry’s modelling found that adding more labour or materials does not significantly lift output while those bottlenecks remain. It found the main driver of rising work in progress is builders taking on more projects than they can optimally handle.

Then the problem compounds. After a boom peaks there is a window to clear the backlog. The report finds many detached builders cannot clear it before the next boom arrives, so queueing problems return earlier in each new cycle. That dynamic, the authors argue, limits how far total output can rise.

What is the work in progress rate?

The work in progress rate is the gap between the number of homes under construction and the number completed. The AHURI inquiry uses it as a key indicator of housing construction productivity. A rising rate means more homes are sitting unfinished, which in a boom usually signals longer build times rather than more output.

Deposits as working capital keep the cycle turning

Interviews with builders explain why taking on more work is tempting even when it is risky.

In detached housing, the report notes, deposits form working capital. New contracts bring in deposits and early payments that help carry jobs already underway.

During the pandemic cost surge, interviewees described early stage payments falling well short of real costs. Some reported slab costs above 20 per cent of total project cost while the matching client payment sat around 10 per cent. Fixed price domestic building contracts gave them no way to pass on input cost increases beyond their contingency.

The report finds that signing more work to keep cash moving only holds while sales continue and builds finish on time. When shortages stretched build times, that money stayed locked up, and insolvencies rose dramatically.

Supervision is where quality slips first

The report links overloaded supervision directly to defects.

One participant said supervisors carrying more than 15 to 20 homes are effectively reduced to schedulers rather than site managers. “You’re just scheduling a job. You’re not actually checking it,” they told the researchers.

Defects found late then bring callbacks, by which time trades have moved resources to other sites, adding further delay.

Insurance adds another limit. The report describes how Victoria’s domestic building insurance scheme permits only incremental increases in a builder’s workload unless cover is lifted substantially. That protects consumers from builders who grow too fast. The authors note it also restricts firm growth, which keeps the industry fragmented.

The report argues firm size matters more than red tape

The report’s position on regulation runs against much of the current policy direction.

In October 2025, building ministers agreed to pause further residential changes to the National Construction Code until mid 2029, except for essential safety and quality measures, describing the pause as a step to improve productivity. The Productivity Commission had found earlier that year that the industry is completing half as many homes per hour worked as it did in 1995.

The AHURI authors locate the problem elsewhere. They argue the regulatory burden of the code is less about the extent of regulation than the suboptimal size of the firms being regulated. Larger firms, they find, have greater capacity to build quality assurance systems that translate code requirements into practice.

The report argues that weak enforcement, not excessive regulation, is the bigger issue. Without pressure to comply, it finds, low margins and cashflow strain push toward poor quality work.

It points to the NSW Design and Building Practitioners Act 2020, which requires design practitioners to declare their work complies with the building code, and recommends an equivalent in every state and territory. Interviewees were divided on its effects. Some said it pushed smaller operators out and caused short term capacity strain. A regulator said buildings were going up faster because work now starts with fully resolved documentation.

What are the report’s eight policy options?

The report sets out eight interconnected policy development options for policymakers and industry:

• Develop a national strategy for efficient housing construction
• Address market volatility
• Modernise the regulatory framework
• Attract and retain skilled employees
• Include cost escalation provisions in contracts
• Provide greater support for research and development
• Consider onshoring to reduce supply chain risks
• Reduce market fragmentation

On volatility, the report says stimulating demand should be avoided because it creates a later trough, and that recent stimulus measures assumed capacity in detached building that does not exist. Counter cyclical social housing investment can help smooth demand, though the authors prefer stability across all housing types.

On industry structure, it calls for builders with greater capacity, higher margins and less exposure to cashflow crises, while warning against excessive market concentration.

Where the research leaves builders

Nothing in the report suggests individual builders can fix volatility alone. The authors treat it as a system level problem.

What it does offer is a clear picture of where risk sits inside a business. The report describes rate driven production, which limits starts to hold work in progress steady, as the alternative to the sales driven model that dominates Australian housing. It found house builders rarely restrict workload to their optimal capacity, even though participants in both sectors saw steady production as highly desirable.

One volume builder at the inquiry’s workshop described testing a build then sell approach with its own funds after it could not obtain finance, first with duplexes and then a 12 dwelling project. The homes sold very quickly, and the company reported fewer defects and an improved margin.

The question the research leaves with the industry is not how many contracts the market will support. It is how many homes a business can actually finish well.

The Good Builder Take

The boom instinct is to sign everything. This research gives a clear reason to think twice. The evidence says extra contracts in a hot market mostly turn into longer builds, tighter cash and more callbacks, and the backlog follows the business into the next cycle.

That is not an argument for turning work away. In our view, the businesses that come through cycles in the best shape are the ones that know their real capacity before the upswing, not halfway through it.

Have you managed workload through a boom? We want to hear how. Get in touch with our team, or listen to builders talk through it on The Good Builder Podcast.

Frequently asked questions

Related articles

• Market Volatility Is Breaking the Housing Pipeline. Research Just Proved It.
• Four States Are Rewriting Building Regulation at Once. They Disagree on What the Problem Is

Last updated 12 October 2026. Figures as published in AHURI Final Report No. 461 (June 2026), Productivity Commission (February 2025) and the Building Ministers’ Meeting communiqué (October 2025).

General Information Only: This article is intended for general informational purposes only. It does not constitute legal, financial or professional advice. Readers should seek independent advice relevant to their specific circumstances.

Author: TGB Editorial