The interim report of the Housing Supply Regulation inquiry sets out reform directions, not recommendations. Submissions close 30 September 2026.

The Productivity Commission has released the interim report of its Housing Supply Regulation inquiry, and its central proposition is that state and territory governments should allow up to three storey development across all residential land, with exceptions only where the benefits of those exceptions outweigh the cost of restricting housing supply.

That single line has carried most of the mainstream coverage. There is more in the report worth knowing if you build for a living.

Start with what the document actually is. It is not a set of recommendations, and the Commission says so directly. The report was prepared on an accelerated timeframe set by its terms of reference, and it sets out draft findings and reform directions the Commission is now seeking further input on. Recommendations arrive in the final report, due to the Australian Government in March 2027. Submissions on the interim report close on Wednesday 30 September 2026.

So this is a consultation document with a two month window attached to it. That window is the part builders can act on.

The context the Commission sets out is familiar. It reports that saving a 20 per cent deposit on a typical home now takes the average household around 11 years, up from eight years in 2005. It also notes that Australia is forecast to undershoot the National Housing Accord target by 220,000 or more homes by June 2029, citing the National Housing Supply and Affordability Council.

What the Commission wants to do with land use rules

Chapter 2 carries the reform directions that generated the headlines, and the Commission is clear that relaxing land use controls would do more for supply than anything else within its terms of reference.

The six land use directions cover:

• Up to three storey development across all residential land, with exceptions for environmental protection, hazard overlays and heritage listed buildings only where the benefits of those exceptions outweigh the costs
• Mid rise apartments of four to nine storeys, and high rise of ten or more, in high demand areas with existing or readily expandable transport infrastructure
• Reducing or removing minimum lot size requirements where they cut commercially feasible capacity, supported by permissive subdivision rules so the change actually bites
• Allowing residential development in commercial zones unless there is a clear rationale for excluding it
• Reviewing controls that reduce commercial feasibility, including minimum off street parking requirements, blanket heritage areas and neighbourhood character overlays
• Relaxing built form controls that limit dwelling choice, including maximum floor space ratios, minimum dwelling sizes, minimum balcony sizes and apartment storage requirements

The heritage point has numbers behind it. Drawing on work by the NSW Productivity and Equality Commission, the report notes that heritage protections cover at least 50 per cent of residential land in 50 suburbs across greater Sydney.

Approvals, pattern books and modular

Chapter 3 is where the report gets closest to daily site reality.

The Commission wants fast track assessment pathways expanded to cover more low complexity development, assessed as deemed to comply against codified rules with minimal third party input. It specifically calls for greater use of pattern books, with templates eligible for fast track approval, and a hybrid pathway for proposals that narrowly miss fast track criteria so they are not pushed back into a full assessment. For anyone following the NSW pattern book rollout, this is the federal advisory body treating that model as a national direction rather than a state experiment.

Chapter 3 also reviews how the housing regulatory system can better support prefabricated and modular construction, which is consistent with where several state governments have already moved.

The report is blunt about how the current system fails. It describes a developer told by council to plant native trees and vegetation to support the local environment, and told by the local fire authority to minimise tree canopy around the property to manage bushfire risk. The project could only proceed once the developer obtained approval to be non compliant with the council landscape controls.

To fix that class of problem, the Commission points to coordination bodies with actual decision making power where agency advice conflicts, greater use of technology including AI to help applicants and assessors identify problems early, and public reporting of approval outcomes council by council.

Infrastructure sequencing and developer contributions

Chapter 4 deals with the constraint that bites hardest in greenfield areas.

The report uses Torana Estate in Sydney as its example. The site was rezoned for housing in 2013. Land parcels were purchased in 2020. Construction was then postponed for several years by delayed sewerage connections.

The Commission position is that land release only turns into housing when enabling infrastructure is ready, and that rezoning timelines need to account for infrastructure lead times rather than run ahead of them.

On developer contributions, the directions carry a cash flow dimension worth noting. The Commission wants upfront estimates of contributions available before land release or acquisition, supported by online estimation tools. It wants contributions able to be staged or paid later in the development process, timed to align with development finance. It wants consistency in how charges are calculated and administered across councils within a state, multiple contributions bundled into single levies where possible, and transparent central reporting of what has been collected and what it has delivered.

The Commission ranks its own ideas, and is candid about it

This is the part most coverage skipped.

The report states that reforming land use controls to increase density in cities will have the greatest effect on supply, and that infrastructure coordination should be a high priority, particularly for greenfield sites.

It then says that reducing regulatory burden through faster approvals and better developer contribution frameworks is likely to have less effect on overall supply, and that governments should not rely on those reforms alone to address the supply challenge.

Faster approvals are worth having. They are not, on the Commission own evidence, the lever that closes the gap.

What the inquiry is not looking at

The terms of reference exclude a long list of things that decide whether a project stacks up.

The National Construction Code is out of scope. So are construction costs, labour supply in the construction industry, and demand for housing. So are taxes including stamp duty, interest rate settings and finance. So are supply chains and material costs, and competition for labour and materials from major infrastructure projects. Migration and demographic change are not being examined either.

That is not an oversight. It is the brief the Commission was given, and the report points readers to other work covering some of those areas, including its own February 2025 research paper on housing construction productivity and the Treasury led National Construction Code modernisation project.

But it does set the boundary on what this inquiry can deliver. If your margin problem is materials, labour and finance costs, the Housing Supply Regulation inquiry is not the process that addresses it. Knowing that going in is more useful than being disappointed by the final report in March.

Where the industry landed

Master Builders Australia welcomed the interim findings, saying the report reinforces what builders already know about regulation, infrastructure bottlenecks and housing planning. Chief executive Denita Wawn said Master Builders supports the four best practice principles in the report and joined the Commission in calling for governments to adopt a build mindset, while arguing governments should not wait for the final report before acting.

Those four principles, for the record, are: adopt a build mindset, only regulate where necessary, coordinate with infrastructure, and keep the process simple.

What builders can do with this

Three things.

Submissions close on Wednesday 30 September 2026. The Commission has said it wants to hear from people with direct experience of the regulatory system, and it has published information requests throughout the report on questions such as whether further reform is needed to enable granny flats and other small secondary dwellings, and which land use controls most constrain supply. Those are questions builders can answer from experience rather than theory.

The Commission has also flagged that it plans to run a detailed survey of housing developers about their experience of obtaining approvals, to identify where reform would have the most effect. Being on the list for that survey is worth arranging.

And the Commission is hosting a webinar on the interim report at 11am AEST on Thursday 30 July 2026, with a recording and transcript to follow on its website.

The Good Builder Take

Interim reports are easy to ignore. This one is worth an hour.

Not because three storey upzoning changes what happens on your sites next quarter. It will not. Land use reform of this scale moves through state planning systems over years, and the final report is still eight months away.

It is worth an hour because the direction of travel is now documented, and because there is a real window to shape what gets recommended. Pattern books, fast track pathways, assessment that accommodates prefab, and staged developer contributions are all live directions right now. They will be much firmer by March 2027.

The other thing worth holding onto is the scope. This inquiry was never asked to look at what a house costs to build. It was asked to look at the rules governing where and what you are allowed to build. Both problems are real. Only one of them is on the table here.

If the approvals system has cost you time or money in a way you can document, the Commission has asked for exactly that evidence and given you until 30 September to provide it.

Frequently asked questions

Primary source: Productivity Commission, Housing supply regulation, Interim report, released 27 July 2026.

This article is intended for general information purposes only and does not constitute legal, financial, or professional advice. Laws, regulations, and industry requirements vary by state and territory and change over time. Builders and trades professionals should seek independent advice relevant to their specific circumstances before making business, legal, or financial decisions.

Author: TGB Editorial