Australia’s housing shortfall has a red tape problem at its core, and a new federal report lays out just how bad it’s got.

The Productivity Commission’s interim housing regulation report, released this week, found that overlapping and contradictory planning rules are preventing homes from being built where people actually want to live. The commission was tasked by Treasurer Jim Chalmers to find ways to unlock more housing supply against a national target of 1.2 million new homes between mid-2024 and mid-2029. That target is already more than 200,000 homes behind schedule.

The report’s examples read like a script from a bureaucratic satire. A developer seeking to add trees to satisfy council landscaping rules was told by the local fire authority to cut canopy to reduce fire risk. A Sydney apartment that won a national design award in 2015 couldn’t get approval because its floor space fell short of the state’s style guide. A family that knocked down their house to build a prefab discovered council rules required the new home to be smaller than the one they’d demolished.

Commission chair Danielle Wood said poorly designed regulation was adding cost, creating uncertainty and shrinking what’s commercially viable to build. Development approval alone costs between $3,900 and $22,000 per project, with building approval adding another $3,700 to $18,000 on top. That’s before accounting for land-holding costs if approval timelines blow out. One developer told the commission that paperwork and approvals added more than three years to a 1,600-lot project in Melbourne’s growth corridor.

Recent upzoning reforms have technically unlocked capacity for 650,000 new homes in Sydney and 980,000 in Melbourne, but the commission found less than half of that is commercially feasible because of other restrictions still in place. Height limits, setbacks, floor-space ratios and heritage overlays can make a technically approved four-storey building impossible to design within the remaining constraints. Queensland’s Noosa Shire Council alone has 95 local variations to the standard Queensland Development Code. In NSW, some developments need referrals to 22 separate government agencies before work can start.

The commission backed allowing at least three storeys on most residential land, consistent with calls from the Grattan Institute and pro-housing groups. It also called for softening or removing rules on minimum floor size, balcony requirements, car parking and subjective standards like “neighbourhood character”. Heritage protections, it argued, should apply building by building with a cost-benefit justification, not blanket swathes of suburbs.

The push matters well beyond apartment blocks. Anyone considering a granny flat will be familiar with the council-rule maze the commission is targeting, where local variations routinely override state codes and push approval timelines out by months.

For builders, subbies and anyone waiting on project pipelines, the message is plain: the capacity to build is there, but the approvals system is eating the opportunity. The final report is due next March, when formal recommendations will follow.

Frequently asked questions

How much does development approval actually cost in Australia?

According to the Productivity Commission’s interim report, development approval costs between $3,900 and $22,000 per project. Building approval adds another $3,700 to $18,000 on top of that, and those figures don’t include land-holding costs if timelines blow out.

When will the Productivity Commission release its final housing regulation recommendations?

The final report is due in March next year, at which point formal recommendations will follow the interim findings released this week.

Why can’t developers use the housing capacity unlocked by recent upzoning reforms?

The commission found less than half of the newly unlocked capacity, 650,000 homes in Sydney, 980,000 in Melbourne, is commercially feasible, because height limits, setbacks, floor-space ratios and heritage overlays can make a technically approved building impossible to design within the remaining constraints.

Sourced from ABC News, Productivity Commission. Original article.