If you have followed the housing debate over the past few years, you will have heard some version of this argument: too many migrants, not enough homes. It is a simple story. More people means more demand. More demand means higher prices. Cut immigration, fix housing.

A new research paper from the Centre for Independent Studies challenges that framing directly, and the implications for the building industry are significant.

The paper, authored by economist Simon Tupy, does not dismiss the demand effect of population growth. It is more precise than that. The argument is that demand shocks only translate into sustained price increases when supply cannot respond. And in Australia, supply cannot respond because planning systems prevent it.

In other words, Australia does not have an immigration problem. It has a planning problem. And builders have been living with the consequences for years.

What the Research Actually Says

The report opens by acknowledging what critics of immigration get right. Population growth does increase demand for housing. Research from the United States finds that an inflow equal to one percent of a city’s population raises rents and housing values by roughly one percent. That is a real demand effect.

But the same body of research shows that the price impact depends on how quickly housing supply can respond. In cities where planning rules restrict land use, cap density and delay approvals, demand shocks become price shocks quickly. In cities where supply is flexible, the same population growth generates construction rather than price inflation.

The research is straightforward on this point: the problem is not the number of people. The problem is a planning system that prevents building from responding when demand rises.

Auckland Did the Experiment. The Results Are In.

The paper uses Auckland as a case study in what happens when a city actually loosens the rules.

In 2016, Auckland upzoned approximately three quarters of its residential land, allowing more intensive housing across a large share of the city rather than in isolated pockets. Researchers built a model to estimate what would have happened if the reform had not occurred.

The comparison found that the reform led to more homes being built and lower rents. One study found that, six years on, rents for three-bedroom dwellings were materially lower than comparable New Zealand cities, with estimates suggesting reductions in the range of twenty-two to thirty-five percent. A later review of the evidence described the findings as remarkably robust.

For Australian builders, this is worth sitting with. Auckland did not reduce immigration. It changed its land use rules. And rents fell.

Australia Is Manufacturing Its Own Scarcity

The report draws on work by economist Peter Tulip, whose research with Ross Kendall estimated that zoning and related restrictions raise housing prices in Australia’s major cities well above the physical cost of construction. In heavily regulated markets, land sells for far more than its inherent worth would justify. The gap is not natural. It is created by policy.

This matters because Australia is already well short of its own housing targets. The National Housing Supply and Affordability Council projects roughly 938,000 new homes over five years against a national target of 1.2 million. That shortfall exists before any discussion of immigration. Restricting migration while leaving planning systems unchanged would not solve the problem. It would simply manage the optics.

The supply failure is structural. Builders know this because they live inside it every day. Development applications that take months. Density limits that bear no relationship to demand. Infrastructure charges that front-load cost before a single slab is poured. These are policy choices, not natural conditions.

The Skills Angle Builders Often Miss

Here is where the report gets genuinely interesting for the construction industry.

Skilled migration is not just a demand variable. It is also a supply variable. And right now, supply is severely constrained by labour bottlenecks in the very occupations needed to build more homes.

Jobs and Skills Australia data cited in the report identifies persistent shortages across construction project managers, project builders, architects, surveyors, civil engineers, quantity surveyors, structural engineers and urban and regional planners. These are not incidental to the housing problem. They are central to it.

A planning system already under pressure cannot process more applications if there are not enough planners to assess them. A construction industry trying to scale cannot deliver more homes without qualified project managers, engineers and site supervisors. The labour shortage is embedded in the supply chain, at every stage from approval to completion.

The report argues that targeted skilled migration, aimed directly at occupations linked to housing delivery, can increase supply capacity even while adding some demand. It is not a simple equation, but it is a more accurate one than the version that treats all migrants as identical units of demand pressure.

What This Means for Builders

The policy implications the report outlines are worth reading as a practical checklist.

First, protect and expand skilled migration pathways for occupations directly tied to housing delivery. Builders who have been quoting long lead times on engineers and project managers will understand why this matters.

Second, reform state and local planning systems to reduce artificial land scarcity, ease density restrictions and shorten approval times. This is the structural fix. Without it, every demand lever, whether migration, interest rates or population projections, just pushes against the same ceiling.

Third, align migration settings with construction capacity goals rather than using migration restrictions as a substitute for housing reform. These are different problems with different solutions.

Fourth, measure outcomes by what actually matters: housing completions, rental growth and time to approval. Not headline migration numbers.

For the industry, this reinforces what builders have been saying for years. The constraint is not demand. The constraint is the system’s ability to respond to demand. Faster approvals, more flexible zoning and a deeper skills base would do more for housing affordability than population caps.

The Broader Point

The report closes with a line worth quoting directly: Australia does not need a false choice between innovation, skilled talent and affordable housing. It needs to stop treating a supply problem as if it were merely a headcount problem.

That framing matters for how builders engage with the public debate around housing. Every time the conversation defaults to immigration as the primary cause, it shifts attention away from the planning systems, infrastructure delays and skills shortages that the industry has been pushing to fix for years.

The Centre for Independent Studies is not the first to make this argument. Economists, industry bodies and builder associations have been making versions of it for a long time. But the report brings together a coherent body of evidence at a moment when the political debate is pulling in the opposite direction.

If Australia is serious about closing the gap between housing targets and housing completions, the answer lies in building more homes, faster, with the skills and systems to do it. That is a construction industry argument. It turns out it is also the economics.

Author: TGB Editorial