Housing approval delays add thousands to development costs
Australia’s fragmented housing approval system is adding time and significant costs to residential development, prompting Productivity Commission chair Danielle Wood to call for stronger oversight of decisions across government agencies and other approval bodies.
The commission is examining reforms to the housing approval process as part of its Housing Supply Regulation report. Wood said its final report would contain specific recommendations, with options under consideration including an independent adjudicator, performance targets and financial incentives linked to approval timeframes.
The issue extends beyond planning decisions made by councils. Residential projects can require approvals involving different levels of government, utility providers and other public agencies, leaving developers to coordinate requirements that can sometimes conflict.
Wood said an independent body capable of considering competing requirements and issuing a ruling could help resolve such situations more efficiently.
Delays can materially increase development costs
The financial effect of lengthy approvals can be substantial.
The commission’s report, citing Centre for International Economics data, estimated that a one-month delay in 2025 added $7,609 to the cost of a greenfield development.
The additional cost was estimated at $11,166 for a townhouse in a “character zone” and $3,403 for an inner-city apartment.
Wood said complicated and uncertain processes make housing take longer and cost more to build, with the problem occurring across different parts of the approval system.
Treasury data published in the commission’s interim report also showed considerable differences between jurisdictions. Victoria recorded a median residential development approval time of 146 business days, while South Australia recorded a median of 18 calendar days.
The figures covered the six months to September 2025, with Queensland and Western Australia not submitting data shown in the comparison.
Housing approvals present a mixed picture
Australian Bureau of Statistics figures cited in the report showed new dwelling approvals over the year to July increased 8.7 per cent from a year earlier to 206,312, their highest level in more than four years.
Growth in apartments and other attached housing outpaced detached houses over that period.
However, monthly approvals fell 3.6 per cent from June to a seasonally adjusted 17,687, with both houses and attached dwellings declining.
Oxford Economics Australia lead economist Maree Kilroy said higher interest rates, declining established home prices and construction cost inflation were weighing on demand for new dwellings.
The commission is also examining the productivity consequences of approval complexity. Wood said in April that houses, townhouses and apartments were taking 40 per cent longer to build than 15 years ago.
After allowing for larger and higher-quality homes, she said housing construction productivity had still declined by 12 per cent over 30 years.
Modular housing case highlights regulatory friction
As part of research for its final report, due to the federal government in March, the Productivity Commission is surveying developers about difficulties encountered during approval processes.
Wood cited an unidentified NSW example involving a family seeking to demolish an existing house and replace it with a modular home.
According to Wood, the council struggled with the proposed construction method. Approval took a year to secure, while additional requirements meant the overall process lasted three years longer than it would have for a standard build.
Henley Homes managing director Anthony Blackshaw also argued that land supply and planning constraints should receive greater attention in discussion about housing delivery.
For property investors and developers, the commission’s work places approval timing and regulatory coordination alongside construction costs and financing conditions as factors affecting the delivery of new housing.
SOURCE ATTRIBUTION:
Based on reporting by Michael Bleby, published 7 September 2026. Source: www.afr.com
