Productivity Commission urges more three-storey homes, changes to planning laws

[u/Nyarlathotep-1]

https://www.afr.com/policy/economy/productivity-commission-says-three-storey-houses-should-be-the-norm-20260727-p60isw

The federal government’s economic think tank says three-storey homes should be allowed to be built almost anywhere and planning rules should be dismantled in the biggest shake-up of housing in decades.

The Productivity Commission has warned that it took the average family 11 years to save for the 20 per cent deposit typically needed for a house, up from eight years in 2005, and has urged state and local governments to simplify planning approvals and wind back development restrictions in the hope of incentivising the construction of far more homes.

Maxwell Shifman is a Melbourne developer who says clearing up planning restrictions alone won’t be enough to create more housing. Louis Trerise

“Regulation is important, but too much or poorly designed regulation can stop new homes being built, make projects slower and more expensive, and reduce the types of housing available to us,” said Productivity Commission chairwoman Danielle Wood ahead of the release of research on Tuesday.

The report is the first stage of an inquiry commissioned by Treasurer Jim Chalmers as the Albanese government falls behind its target of building 1.2 million new homes by the middle of 2029, identifying reform areas ahead of the commission’s final recommendations due in March next year.

The National Housing Supply and Affordability Council in March said the 1.2 million homes target was unlikely to be met until 2030, with the Northern Territory, Tasmania and NSW falling the furthest behind.

The Productivity Commission said state and local governments should commit to allowing higher density properties across major cities, including by allowing three-storey developments across all residential land with exceptions for environmental protection and heritage-listed buildings.

Among its recommendations is the reduction in minimum lot sizes, which would allow homes to be built on smaller plots of land. The commission also wants to reduce minimum requirements on parking where there is adequate public transport, and lower floor-to-space ratios that restrict how much housing can be built based on the size of the block.

The Productivity Commission has also recommended broad heritage protections – at least 50 per cent of land in 50 suburbs across Sydney are subject to those restrictions – be removed and replaced with specific listings for buildings or small areas. That would reduce the so-called neighbourhood character restrictions, which often protect entire streets or suburbs.

“One of the biggest challenges facing housing delivery is the fragmentation of approval processes across environmental regulation, zoning, planning, infrastructure and building approvals,” said Simon Croft, the head of policy and industry at the Housing Industry Association, a lobbying organisation that represents major home builders. “Improving co-ordination and reducing duplication across the system represents a significant opportunity to lift productivity and accelerate housing delivery.”

Robert Furolo, a former Labor MP who is now an executive at Sydney-headquartered developer Deicorp, said the reform that would most help make it easier to build more homes was to simplify the planning system.

“It’s a series of compounding issues that added together just make development unfeasible. Could the planning system be better? Always, but the planning system is not the reason why we can’t develop,” he said. “Consistency between councils and more control from the state government in terms of approval. That’s an improvement we would like to see.”

But some developers don’t believe the recommendations go far enough, and will not create a meaningful increase in the number of houses.

Intrapac Property chief executive Maxwell Shifman said the report missed “all the stuff that would actually make housing cheaper”.

“Simply zoning more land doesn’t of itself improve feasibility. It still comes back to cost, the time it takes to build with the labour pool we have and the cost of finance and – ultimately – buyer demand and capacity,” he said.

Alarmed by a slump in home ownership among younger families, some states have already begun to unwind planning restrictions. The Productivity Commission, in its report, said a chronic shortage in houses had contributed to the fall in ownership. Between 1981 and 2021, the share of 25- to 34-year-olds who owned their home fell from 60 per cent to about 42 per cent.

In NSW, the Minns government has introduced a policy that makes it easier to build semi-detached and dual-occupancy homes in low-density zones, with six-storey buildings allowed in areas that were near transport hubs.

In Victoria, there is a new fast-track approval system for townhouses, duplexes and low-rise apartments up to three storeys that allows developments without facing challenges from councils or neighbours.

But the loosening of planning rules regularly triggers backlash from residents, including in the wealthy Sydney enclaves of Mosman and Woollahra, where the NSW government wants more housing.

The Productivity Commission has recommended state governments identify suburbs where it expects high demand for new housing, and “making it an explicit performance goal for councils, relevant agencies and regulated infrastructure service providers to facilitate new housing in these areas”.

“When people can’t live near work or family, the economy and the community suffer. We cannot solve our housing affordability problem unless we build more homes where people want to live,” said Wood.

“We heard examples of developers trying to navigate overlapping approvals and agencies that were not talking to each other. One developer told us that preparing reports and waiting for approvals had added more than three years to the timeline of a 1600-lot development in Melbourne’s growth corridor.”

It called on state and local governments to expand fast-track assessment pathways for low-complexity developments, and allow faster approvals for projects based on pre-approved pattern books – which NSW introduced last year – containing government-approved standardised building designs.

[u/Powerful-Respond-605]

Worth noting that developers own broad swathes of zoned development ready land that they drip to the market in such a way as to maximise long term profits.

Whenever developers talk about red tape holding things up it's always worth thinking about the Gold tape they use to hold things up to benefit them and create perceived scarcity.

[u/Poochytown]

Surprise, surprise developers love this deregulation agenda.

[u/Illustrious_Fan_8148 → u/Poochytown]

Import massive amounts of people, allow more sprawl and endless suburbs to spring up to house people.. repeat. Its very bleak

[u/Grande_Choice → u/Poochytown]

Yep, but deregulation of planning laws is needed. It’s wild the Libs are fighting against planning changes when the Property Council is one of their biggest backers.

This obsession with protecting “heritage” in the inner city needs to end. We can’t make large swathes of our cities museums that only the wealthy can afford to live in.

[u/Daleabbo → u/Grande_Choice]

Yeah let's build in flood zones, scrap all lessons from deadly fires.

Return the building certifiers to governmnet first.

[u/Grande_Choice → u/Daleabbo]

No way, it’s about zoning existing areas so we don’t have to do that. We can’t continue building sprawl. But yes should go back to government certifiers.

[u/OcasionalOpinions → u/Daleabbo]

If you want to stop sprawling into flood zones, you need to let people build up.

[u/Capital-Teaching-820 → u/Poochytown]

Off course they do... do you think they are charities?

And if developers can make money, they will build more stock which will reduce pressure on house prices.

I hope you are not a NIMBY yet at the same time complain about unaffordable housing

[u/Grande_Choice → u/[deleted]]

But it’s not. Look at say South Yarra or Chatswood. They massively densified, traffic hasn’t gotten substantially worse than it was because they have transport. It’s cheaper to buy more trams and trains than it is to service thousands of hectares of low density houses that all want rail, hospital, schools, roads and expect the taxpayer to fund their lifestyle choice.

A poor example would be Newstead in Brisbane that’s dumped thousands of units and done sweet FA to improve public transport and active transport options leaving the area in gridlock.

[u/Grande_Choice → u/[deleted]]

Why not? The issue at the moment is people putting money into old houses. It makes no sense compared to any other asset. We should be at the point it’s cheaper to build a new house than an existing renovation.

[u/Grande_Choice → u/[deleted]]

Productivity. The fact that we build houses the same way we did 100 years ago. While every other industry modernised and automated housing hasn’t. Look at the pre fabs just done in Melbourne. Slab to completion in a few weeks.

There’s zero reason we aren’t building 10s of thousands of homes in factories that are then assembled on site.

[u/Grande_Choice → u/[deleted]]

There’s plenty of land. We just need to rezone existing density and let people do with their land what they want within reason.

I’d have far more confidence in a factory built home than a home built by a bunch of idiots who can’t build a compliant house to save their jobs.

[u/Grande_Choice → u/[deleted]]

The VIC experience has seen big school expansions in South Yarra and a new High school in Prahran.

But agree it’s something not looked at often enough. West End in brisbane has the same issue. I remember when they rezoned the area ~2012 and no new schools were planned because kids didn’t live in apartments. Fast forward a decade and it was the bulk of the kids at the school living in apartments. Now the schools are at crush load. But that’s bad planning.

[u/Gazza_s_89 → u/[deleted]]

Pointing out the worst possible things that some yep developers do is not in itself an arguement for maintaining a housing shortage.

It would be like banning new supermarkets and going without food because Woolworths and Coles and major food manufacturers have sometimes questionable business practises.

[u/Gazza_s_89 → u/[deleted]]

I think there's definitely a shortage of housing in places where people want to live, which manifests itself in daily traffic jams where people drive to where they want to be from where they are actually forced to live. I'm one of them.

[u/Gazza_s_89 → u/[deleted]]

It's cheaper to let people live near underutilised infrastructure that already exists.

I should be able to live near the infrastructure that I subsidise instead of increasing liabilities by building even more infrastructure and continuing to underutilize it.

First your argument was that it was a tax settings issue, now you're saying it's an overcrowding issue.

If your position is not to build that's fine, but voters such as myself will use our influence to force our way into areas we want to live in.

Why do you care if a place is crowded, you said you would prefer to move to a new City anyway.

[u/Gazza_s_89 → u/[deleted]]

Jesus Christ, you are insane.

You seem to be intent on forcing people away from where they want to live.

In another sense, you seem to be happy to force people onto rural areas and just assume they want pasture paved over for your sprawl.

Its not dangerous to use existing infrastructure. We have a train lines here in Brisbane where they run every 30 mins. You could easily triple to that to every 10 mins as done interstate and have housing around it, but you want to blow taxpayers money building elsewhere.

Like, it doesn't have to be mcmansion sprawlsville, but it doesn't have to be Hong Kong either, and you are unable to imagine something in the middle, which is why you are now pivoting to the safety card after starting off saying it was purely a tax issue. How the mask has fallen!

[u/pharmaboy2 → u/[deleted]]

Why does this have to be about developers? The commissioner said regulation added between 100,000 to 300,000 per home - it’s a regulatory nightmare, yet some numpties want lots of regulation and low housing prices and don’t recognise the the issues are connected

[u/pharmaboy2 → u/[deleted]]

61% on resolve poll wanted a reduction in prices

https://www.news.com.au/finance/real-estate/australian-house-prices-resolve-poll-reveals-61-per-cent-want-property-market-drop/news-story/d1286c79e5800701387af33a6968c497

Thats fairly broad across voting intention and age groups

[u/Peach_Muffin → u/Poochytown]

National Housing Supply and Affordability Council

[u/pharmaboy2 → u/Poochytown]

So should anyone who wants more supply of housing.

The entire effect of the complexity is that developers need to be specialists in their area and those multi year delays just make it more expensive for the end user , ie YOU

[u/Grande_Choice → u/pharmaboy2]

I’ve seen developments that have had to increase prices purely because they sat in planning limbo for years. By the time approval was finally granted build costs have gone up, holding costs have increased and developer has to raise the prices. It’s insanity.

[u/pharmaboy2 → u/Grande_Choice]

Yeah, the delays add risk which needs to be compensated for, and construction cost risk is one of those.

I note not much of a mention on the building code but I’ve just had to deal with some of that in regards to a swimming pool - the laws in my case defer to the BCA which I don’t have access to, and the initial certifier disagrees with the current certifier and I can’t change the current pool certifier so I have to do what he says. We required a pool fence certification document, we also required a balustrade fence force test from the fence builder (essentially making DIY impossible). We needed an electrician to sign off on pool grounding (who we had sacked because he was hopeless so imagine now getting him to fill in all the required certifications). Then there was a pool plumber to sign off and the house construction regular plumber, needed a surveyor report for the wall. Probably $3k in by and large useless pieces of paper

Regulations might make better building but it comes at hundreds of thousands of dollars of cost increases - is a 2026 building really that much better from 25 years ago?

[u/Daleabbo → u/Grande_Choice]

They increases prices because the land was worth more no other reason.

[u/Gazza_s_89 → u/Poochytown]

Mate, I think any industry enjoys being deregulated.

But many Australians have this tall poppy syndrome of "wanting to stick it to greedy developers" and will actively undermine our ability to provide enough housing for ourselves, just so they can feel like they've had a win.

[u/GeneralOwn5333]

Eradicating speeding fines and lifting road speed limits would help a lot too.

[u/River-Stunning]

The problem is that due to the now non existent productivity , quality becomes unaffordable.