The construction industry’s increasing productivity problem has been well-documented. Recent studies suggest half as many houses are being built per hour today compared to 30 years ago. Since 2002, labour productivity in home construction has decreased by 25%. This decrease in productivity has increased the average timeframe required to construct a house. In the last decade, the average build time for a new detached house has increased from 6 months to 10 months. A new report by the Productivity Commission blames this on inefficient and cumbersome planning processes. Regulation is essential to maintain construction safety and quality, as well as environmental protection standards. However, industry advocates believe the right balance is not currently being struck. Lifting the productivity of the construction industry will increase the number of homes that are built, regardless of other factors, including workforce numbers, interest rates and the cost of construction.

So, what are the issues and how can these be addressed?

What are the issues?

Construction industry advocates say that the planning process is too slow, too complex, lacks coordination and contains too many information gaps. This issue has only been exacerbated as more and more government agencies have become involved in the planning process. In some cases, the agencies have limited communication with each other, making navigating the planning process even more challenging.

In recent years, construction approval times have dramatically increased, with some cases exceeding 150 days.

The growing regulatory burden is also impeding the construction industry’s ability to innovate. According to data from the ABS, the construction industry is the least likely sector to innovate apart from primary production. For example, there has been a low take-up of prefabricated construction methods, despite the many benefits these methods offer. Construction companies are also proving slower than other industries at incorporating technology into their work practices.

Experts say over-regulation is a major cause of the lack of innovation in the construction industry. This is because builders and developers place their focus on achieving compliance, with innovation considered too risky.

What has been the government’s response?

The government has realised that planning reform is essential if it is to deliver its ambitious housing targets. Currently, work is underway to reduce planning rules that limit densification. For example, the New South Wales government has recently moved to increase housing density in areas located close to transport hubs.

What can be done?

Experts are encouraged by this progress but say there needs to be changes to the way planning rules are implemented. Advocates have made several recommendations. These include:

• Overhauling the National Construction Code: The National Construction Code should undergo a review to evaluate its objectives and the frequency of updates, with a focus on improving consistency in decision-making
• Improved resourcing: Experts also claim that decision-makers at the local government level need to be better resourced. While regulations are being increasingly delegated by state governments to local councils, this has not been matched by an increase in local government resources.
• Reduce regulatory burden: Currently, the burden is on the construction industry to work out what building approvals are needed and how to obtain them. Experts say the regulatory burden on builders and developers needs to be reduced.
• Remove impediments to innovations: Where possible, governments should remove regulations that impede the construction industry’s ability to innovate.

If Australia is to meet it’s ambitious housing targets, then we must strike the right balance between safety and quality and time and cost.

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Article References

Australian Government Productivity Commission (February 2025) ‘Housing construction productivity: Can we fix it?’, Australian Government Productivity Commission, accessed 18 February 2025.

Mizen, R ( 16 February 2025) ‘‘Deadening effect’ on home building: PC urges slashing red tape, Australian Financial Review, accessed 18 February 2025.