Australia’s productivity watchdog is urging the government to rewrite planning, zoning and approval rules, warning that current regulation is a major driver of the nation’s housing shortfall.
The Productivity Commission’s (PC) interim report on housing supply regulation argued that Australia requires a “build mindset” across all levels of government, coupled with broad-based upzoning and faster approvals.
The PC began by directly tying Australia’s affordability crisis to a chronic failure to deliver enough dwellings in high‑demand suburbs, adding that this mismatch was pushing prices and rents out of reach for many households.
“Australia doesn’t build enough homes in the areas where people want to live. This has made housing unaffordable in many parts of the country,” the report read.
The report then identified regulation as the key lever governments can pull to fix the problem - while acknowledging that some rules are essential.
"Regulation limits housing development, and improving it is a key lever for governments. While some regulation is necessary to ensure the safety, quality and liveability of new housing stock, too much or unnecessary regulation constrains housing supply," it said.
“Regulation can stop certain housing development occurring altogether. It can also deter development due to slow, cumbersome and expensive processes and uncertainty.
“The number and interaction of different regulatory requirements can also limit housing construction."
Four principles for a new regulatory mindset
To steer reform, the PC set out a framework it believes should guide how governments design and apply housing rules.
It encouraged the government to “‘adopt a 'build' mindset; only regulate when necessary; coordinate with infrastructure; and keep the process simple.”
Those principles sit beneath an overarching objective that shifts the focus from process to outcomes, with the Commission arguing that the ultimate test of any planning system is whether it delivers enough well‑located homes.
Big push for upzoning and fewer land‑use limits
The report singled out zoning and land‑use controls as the area where reform could most dramatically increase housing supply.
“Land-use controls prevent housing being built, or limit the form it can take. Relaxing these controls would have the greatest effect on housing supply of all our reform directions,” the PC noted.
Accordingly, the Commission called for a broad program of upzoning that would normalise medium‑density housing across the nation and lift height in key precincts.
“Governments should commit to broad-based upzoning in cities, including by allowing 3-storey development on most residential land, reducing minimum lot sizes, using more mixed commercial and residential zones, and allowing more mid- and/or high-rise development in high-demand areas,” the PC outlined.
“This upzoning should be supported by reducing restrictive land-use and built-form controls that lower development feasibility, limit choice or impose costs that outweigh their benefits, such as maximum floor-space ratios or minimum car parking requirements.”
Aligning housing with infrastructure and contributions
Beyond zoning, the PC highlighted infrastructure planning and funding as a major constraint.
"If housing is not coordinated with infrastructure, it can delay or limit new dwellings. Infrastructure planning is often the main constraint on building houses in new areas (greenfield sites), so it should be a high priority for reform,” the report noted.
It then set out how it believed governments should better tie together infrastructure provision, land availability and development charges so that projects can be financed and delivered with more certainty.
“Governments should better align infrastructure plans with housing and show how infrastructure provision will be funded and sequenced with land availability. They should also make planning more consistent across levels of government, between councils, and with infrastructure service providers,” the PC said.
On the question of who would fund the measure, the Commission said that industry should contribute, but insisted this must be done in a transparent and targeted manner.
“Developers should contribute to funding infrastructure, but it should be done efficiently and only where there is a clear link between infrastructure and development. Governments should ensure contributions are predictable and consistent, and their timing is aligned to development finance,” it said.
Faster, simpler approvals with risk‑based pathways
The interim report also pointed to slow, complex approval processes as a major bottleneck.
“Making approvals more efficient can help deliver homes faster, but these reforms on their own will not be sufficient,” the report cautioned.
To address this, the PC called for key trade‑offs resolved earlier and assessment resources focused where risks are highest.
“Governments should enhance strategic planning processes to consider infrastructure requirements and trade-offs associated with development early, rather than during the approval process,” it recommended.
“Governments should make greater use of risk-based assessment pathways such as fast-track and state-significant development. Pathways should be supported by coordination bodies with power to resolve disputes; improved use of technology; and transparent reporting of approval outcomes.”
The Productivity Commission invited stakeholders to examine the report and comment on it by written submission by 30 September with a final report due to be provided to the government by March 2027.
[Related: Home ownership rates plateau as Sydney plummets]
Want to see more stories from trusted news sources?
Make The Adviser a preferred news source on Google.
Click here to add The Adviser as a preferred news source.
