���������

A landmark ���������Inquiry has found system-level reform is needed to reduce market volatility and address other challenges for housing construction across Australia.

��������� report lead Dr Andrea Sharam said the sector had never received a holistic examination, despite the rate of detached housing completions barely changing in over four decades, and apartments taking longer to build.

“Our 18-month Inquiry into Australia’s detached and high-rise housing construction sectors involved 19 researchers from seven universities,” the RMIT University Associate Professor said.

“Our ultimate conclusion was market volatility presented the most significant risk for builders, and biggest constraint on construction output and quality.”

This volatility, deepened by demand swings, could push the number of detached homes under construction up by 50,000 in a boom year, or down 20,000 in a bust.

The impact was even clearer for apartments – the 2010s boom saw construction leap almost 300%, before prudential regulation and withdrawal of Chinese investments drove a 30% decline.

“During booms costs spike, labour shortages hit, supply chains are disrupted and timelines blow out.” Dr Sharam said. “Booms also draw in marginal operators and under-skilled workers, increase pressure to cut corners, and disrupt work scheduling creating task queues.”

“Downturns meanwhile cause some permanent loss of labour, wage suppression, loss of knowledge and innovation, and businesses leaving the sector.”

Another key constraint on construction was the dominance of small and medium builders.

Between 2007-08 and 2024-25 the number of building firms grew from 11,486 to 27,700, reflecting another issue constraining the sector – fragmentation.

“Larger firms are generally more efficient than small ones, but small and medium builders deliver half of apartments and most detached homes,” Dr Sharam said.

“Smaller builders rely heavily on temporary contractor teams that disband after each project, breaking the skills transfer chain. When downturns forced layoffs, labour capacity was constrained when the market recovered.”

The Inquiry also found inadequate regulation enforcement, low margins and poor builder capitalisation pushed some builders to prioritise cost and speed over quality, while starving the industry of investment in training and innovation.

“This paradox of being too busy to invest during booms, and too uncertain to invest during busts, creates a persistent barrier to industry-level improvement,” Dr Sharam said.
 

How to get more homes built

The Inquiry found the first step to improving housing construction productivity was to appreciate the sector existed as a ‘system of systems’, where all sector participants were interconnected, and policy changes affecting isolated parts would not meaningfully increase homebuilding.

“Reform needs to focus on the system level. Blaming individual factors, like the planning system, is the biggest myth we need to quash,” Dr Sharam said.

The Inquiry provided eight interconnected policy development options:

1. Develop a national strategy for efficient housing construction: This meant developing national coordinated strategies integrating construction, housing, manufacturing, and technology and innovation policy.

2. Address market volatility: Measures that stimulate demand should be avoided, as it assumes construction capacity that does not exist. However, investment in social housing – especially during market downturns – could smooth construction cycles and support long-term capacity.

3. Modernise the regulatory framework: Policymakers should harmonise the National Construction Code across jurisdictions and ensure compliance.

4. Attract and retain skilled employees: A national construction training board should be established comprising TAFE, universities and industry representatives focused on workforce development.

5. Include cost escalation provisions in contracts: Embedding fair and transparent cost escalation provisions within construction contracts would enable better risk sharing and more stable and collaborative practices.

6. Provide greater support for research and development (R&D): Government and industry should provide financial support for R&D to drive productivity.

7. Consider onshoring to reduce supply chain risks: The global supply chain is vulnerable to significant disruptions and onshoring can reduce sovereign risk and supply chain risk.

8. Reduce market fragmentation: There is a need to grow firm sizes, but care is needed to avoid excessive market concentration, as this can enable behaviours like land banking.

“The National Housing Accord aims to build 1.2 million homes by 2029, it will take significant system-level reforms to get us there,” Dr Sharam said.