HIA Urges Lot Size Cuts Amid Housing Shortfall and Affordability Crisis

The Housing Industry Association (HIA) suggests that state and local governments consider reducing residential lot sizes as a measure to address the current lack of new housing supply and the affordability crisis. This recommendation comes as the housing industry grapples with significant challenges.

Industry Challenges Mount Amid Rising Costs

The housing industry faces instability due to increased costs and interest rates. Supply chains for major builders are experiencing pressure, with a mention of the Middle East conflict contributing to these issues. Adding to the sector's woes, share values of listed residential developers have declined in 2026.

Persistent Housing Shortfall Undermines National Targets

Despite an increase in building activity at the end of the previous year, Master Builders chief economist Shane Garrett stated that home construction levels are insufficient to meet Housing Accord targets.

A shortfall of 77,500 homes has been noted since the National Housing Accord's inception, with 262,140 new homes per year required until 2029 to meet targets.

This significant deficit highlights the urgent need for comprehensive solutions to boost housing supply.

Industry Leaders Propose Solutions

Key industry bodies have put forth a range of recommendations to tackle the current crisis.

HIA: Scrap Outdated Lot-Size Rules

The HIA advocates for scrapping outdated minimum lot-size rules in planning schemes, arguing they prevent new home development. The organization highlights that up to 80% of residential land in many cities remains designated for low-density zoning. HIA executive director of planning and development Sam Heckel stated that these rules are a political choice, not a technical necessity, and are hindering efforts to meet housing targets.

HIA modeling suggests reducing minimum lot sizes from 500sqm to 300sqm could decrease the land cost of a new home by over $200,000 on average.

Master Builders: Focus on Incentives, Training, and Migration

Master Builders calls for investment incentives, a 25% reduction in red tape, improved pathways for apprentices, and increased skilled migration. These measures aim to strengthen the industry's capacity and streamline development processes.

Urban Taskforce: Urgent Relief for Construction Sector

Chief executive Tom Forrest of Urban Taskforce urged governments to respond immediately to supply shock impacts on the development and construction sector. He noted that a 10-15% spike in construction costs this year necessitates urgent relief measures.

Tom Forrest advocated for urgent relief measures such as suspending fees, taxes, and charges on new housing, and implementing scheduled budget measures promptly.