Why affordability won’t shift until governments fix their side of the equation

The conversation we’re not having

There’s no shortage of talk about productivity in construction. Industry panels, government taskforces, and think tanks keep asking the same question: how do we make builders faster, smarter, and more efficient?

But here’s the truth that doesn’t get enough airtime: productivity gains alone won’t solve the housing affordability crisis. You can shave weeks off a build, introduce prefabrication, or digitise site workflows but when almost half the cost of a new home is swallowed by taxes, levies, and red tape, those efficiency wins are just tinkering at the edges.

The latest research from the Housing Industry Association (HIA) and the Centre for International Economics (CIE)shows just how much government costs dominate the price of a new home. And the numbers are staggering.

The hidden tax bill in every new home

According to the HIA;

 In Sydney nearly 49% of the cost of a greenfield house-and-land package  around $576,000 is tied up in government taxes, charges, and regulatory costs. That’s not money going to a builder, trades, or suppliers. It’s not bricks, concrete, or roofing. It’s the government.

In Melbourne, the figure is 43%, or about $373,000.

In Brisbane, it’s 41%, roughly $348,000 and that number has more than doubled in just five years.

Even in smaller markets like Adelaide (37%), Hobart (37%), and Perth (36%), government costs make up well over a third of the final price.

To put it another way: if you take out a standard 30-year mortgage, the first 15 years are essentially paying off government charges, not your home.

Where does the money go?

It’s not just the obvious costs like GST or stamp duty. Here’s what sits inside that 35–50% government take:

• Infrastructure charges and developer levies – fees for connecting water, sewer, roads, and community infrastructure.
• Stamp duty – applied when purchasing the land.
• GST – on the construction component.
• Regulatory compliance – costs linked to energy standards, National Construction Code changes, building approvals, and mandatory assessments.
• Planning delays – the hidden cost of time. Development approvals can take more than a year, with up to seven months lost to unnecessary red tape. That delay adds directly to land and finance costs, which are then passed on to the buyer.

When governments talk about “housing supply”, these are the bottlenecks they rarely admit to owning.

What clients don’t know

One of the biggest misconceptions among new home buyers is where their money actually goes.

Ask the average client and they’ll tell you: “We paid the builder half a million dollars to build our house.” In their mind, every dollar is going straight into the builder’s pocket.

The HIA data proves otherwise. In many cases, nearly half of that money is siphoned off before the builder even steps onto site.

This matters for two reasons:

1. Perception: Builders wear the blame for high prices, when in reality they’re operating on slim margins squeezed between client expectations and government charges.
2. Policy: Without public understanding of how much governments are taking, there’s little pressure on decision-makers to reform the system.
   

Productivity vs affordability

Yes, boosting productivity matters. Faster builds reduce holding costs for developers and clients. Better systems reduce waste. Smarter scheduling improves labour output. All of this can shave costs off the final home.

But here’s the reality: if governments are taking $300,000–$500,000 per home, even a 10% productivity gain on site barely dents affordability.

In fact, pushing builders to be “more productive” without tackling the systemic costs just shifts more pressure onto already strained margins. Builders are expected to deliver cheaper, faster homes while operating inside a system that inflates costs before the first slab is poured.

True affordability won’t come from productivity alone. It comes from a system that doesn’t saddle every new homeowner with hundreds of thousands in government-imposed costs.

Why red tape is the real productivity killer

If governments are serious about improving housing supply and affordability, they need to stop looking only at the builder’s side of the ledger and start reforming their own processes.

The HIA research found:

• Development approval timelines average more than 12 months, with seven months of unnecessary delay.
• Planning restrictions and limited land release add billions to the end cost of housing.
• Infrastructure levies often exceed $80,000 per lot in some jurisdictions.

These aren’t builder inefficiencies. They’re structural barriers that make the system itself unproductive.

Cutting red tape isn’t just about saving time. It’s about shifting affordability back into reach for thousands of Australians.

The bigger picture

The HIA’s findings land at a critical time. Interest rates remain high, household budgets are under pressure, and younger Australians are increasingly locked out of home ownership. At the same time, governments continue to roll out housing targets and affordability promises without tackling the taxes and charges baked into the system.

If nearly half the cost of a new home is government, the solution isn’t asking builders to work harder. It’s asking governments to work smarter.

Where do we go from here?

For builders:

• Be transparent with clients about where their money is going. Many assume the builder is pocketing the full amount, when the reality is very different.
• Join the conversation. Industry advocacy only works when builders, trades, and suppliers speak up about the systemic pressures.

For policymakers:

• Streamline planning and approvals to reduce unnecessary delay.
• Reassess infrastructure levies and developer charges that push affordability out of reach.
• Recognise that true productivity reform starts with government systems, not just builder practices.
  

The Good Builder’s Take

Productivity and affordability aren’t separate debates. They’re intertwined. A more efficient builder can deliver faster and better but if half the client’s mortgage is paying for government costs, the affordability crisis won’t shift.

The system has to change. And until it does, builders will keep copping the blame for a problem they don’t control.

Author: TGB Editorial