Smaller lot sizes should be on the agenda to stimulate supply says the HIA.
State and local governments should consider radical moves like cutting residential lot sizes to address the lack of new housing supply and the affordability crisis, according to the Housing Industry Association.
The call comes as uncertainty rattles the industry with higher costs and interest rates tipped to last well beyond the announcement of a ceasefire between the US and Iran.
The break out of the Middle East conflict is pouring pressure on supply chains of major builders and share values of listed residential developers have sunk in 2026.
Despite an increase in building at the end of last year, Master Builders chief economist Shane Garrett said not enough homes were being built to meet Housing Accord targets. “Australia has amassed a 77,500-home shortfall since the start of the National Housing Accord, with these latest figures meaning that an unprecedented 262,140 new homes per year need to be built over the remainder of the Accord’s term to 2029,” he said.
The group is calling for investment incentives, cutting red tape by at least 25 per cent, better pathways for apprentices and embracing skilled migration.
Urban Taskforce chief executive Tom Forrest called on governments to respond immediately to the impacts of the supply shock that is smashing the nation’s development and construction sector. Developers, quantity surveyors and cost estimators say construction costs have spiked by 10 to 15 per cent this year.
Mr Forrest said urgent relief needed to be rolled out with the suspension of fees, taxes and charges placed on new housing.
“Measures that may have been scheduled for announcement in upcoming Budgets must be brought forward and implemented right now,” he said.
The HIA is asking for a more lasting change – it wants outdated minimum lot-size rules in planning schemes scrapped.
The group argues they prevent the development of new homes in established suburbs. “Governments are setting housing targets with one hand and shutting down supply with the other,” HIA executive director of planning and development Sam Heckel said. “You cannot meet housing targets while leaving 1950s planning rules untouched.”
HIA data shows housing construction remains well below the 240,000 homes a year required to meet national targets, while land prices have surged to record highs. Despite this, up to 80 per cent of residential land in many cities remains locked into low-density zoning or similar with minimum lot sizes that effectively prohibit subdivision.
“These rules are a political choice, not a technical necessity,” Mr Heckel said. “They were designed for a completely different time, yet governments continue to protect them even as affordability collapses. Smaller, sensible lot sizes in well-located suburbs would deliver more homes quickly, without high-rise development and without major infrastructure spending.”
The HIA said subdivision was already limited by stormwater rules, flooding, demolition costs, heritage protections and demand.
HIA modelling shows reducing minimum lot sizes from 500sqm to 300sq m would cut the land cost of a new home by more than $200,000 on average.