A new report from the Productivity Commission has raised concerns about the growing impact of red tape on Australia’s housing construction industry, calling for governments to take more decisive action to reduce delays and boost productivity. The report, ‘Housing Construction Productivity: Can We Fix It?’ highlights the significant gap between the country’s economic productivity and the performance of the housing sector.
Over the past three decades, while overall economy-wide productivity has increased by 49%, the physical productivity of the home building sector has declined by 53%. This stark contrast means that fewer homes are being built for the same amount of labor, with the sector now completing approximately half as many homes per hour worked as it did in 1995.
Even when accounting for quality improvements and larger home sizes, the report still shows a 12% decline in overall building productivity. Julie Abramson, Commissioner of the independent agency behind the report, pointed out that there is no single cause for this decline, but emphasized the role of governments in easing regulatory bottlenecks and fostering innovation in the sector.
Danielle Wood, Chair of the Productivity Commission, stressed the need for action from governments. “While governments are focused on changing planning rules to boost housing supply, the speed and cost of new builds also matter. Improving the productivity of home building will result in more homes, irrespective of workforce size, interest rates, or costs,” she said.
Proposed Reforms
The report outlines several reforms aimed at tackling the sector’s four primary challenges: slow approval processes, lack of scale, limited innovation, and workforce issues. These include:
- Establishing coordination bodies to speed up approval and construction processes.
- Conducting an independent review of building regulations, particularly the National Construction Code (NCC).
- Removing barriers to innovation by funding public research and development in housing construction.
- Reviewing occupational licensing systems and addressing labor supply issues to improve workforce mobility.
Wood highlighted that excessive regulation is having a “deadening effect” on productivity, urging governments to reconsider decisions that hinder housing development and delay the construction of new homes.
Industry Support for Reforms
Industry leaders have welcomed the report’s findings and recommendations. Master Builders Australia, in particular, noted that the findings validate long-standing concerns within the sector. CEO Denita Wawn emphasized the need for a coordinated approach to address productivity challenges.
“We agree with the Commission’s sensible recommendations, and governments must take action now to improve productivity,” Wawn said.
The Housing Industry Association (HIA) also backed the proposed reforms, calling for the introduction of a housing supply minister and more funding to streamline the NCC. HIA’s Shane Keating stressed that addressing these issues now is crucial for achieving the goal of delivering 1.2 million homes.
Both the Property Council of Australia and the Urban Development Institute of Australia endorsed the recommendations, particularly the need to review and improve the NCC. Mike Zorbas, CEO of the Property Council, described the report as “a love letter to better housing supply” and underscored the importance of improving project timelines and coordination for residential and commercial developments.
As Australia faces a housing crisis, the industry and experts agree that reforming red tape and improving construction efficiency will be key to addressing the country’s housing needs.
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