STATE and local governments are being accused of actively constraining housing supply through outdated planning rules, even as they commit to improving affordability.
New analysis from the Housing Industry Association (HIA) has found that minimum lot size restrictions embedded in planning schemes across Australia are preventing new homes from being built in established suburbs, undermining efforts to meet national housing targets.
The findings raise fresh concerns about the viability of the National Housing Accord, which aims to deliver 1.2 million new homes over five years.
According to the HIA, current planning settings make that target increasingly difficult to achieve.
HIA Executive Director of Planning and Development Sam Heckel said governments were sending mixed signals on housing supply.
“Governments are setting housing targets with one hand and shutting down supply with the other,” Mr 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 per year required to meet national targets, while land prices continue to climb to record highs.
At the same time, the association estimates that up to 80 per cent of residential land in many cities is effectively locked into low-density zoning, with minimum lot sizes preventing 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.”
The HIA argues that minimum lot sizes are among the simplest constraints to remove, but remain largely unchanged due to political reluctance to reform suburban planning controls.
“Governments keep talking about affordability, but this is where it is being lost,” he said.
The association says reducing minimum lot sizes in established suburbs could unlock significant new housing supply without the need for high-rise development or major infrastructure investment.
It also argues that concerns about overdevelopment are overstated, noting subdivision is already limited by factors such as stormwater requirements, flooding, demolition costs, heritage protections and market demand.
“The market already decides where subdivision works and where it doesn’t. What governments are doing is stopping it everywhere, regardless of context,” Mr Heckel said.
HIA modelling suggests reducing minimum lot sizes from 500qm to 300sqm could cut the land cost of a new home by more than $200,000, offering what it describes as immediate relief for first home buyers and downsizers.
“This is a fast, low-cost reform that governments could implement tomorrow,” Mr Heckel said.
“If governments are genuinely serious about housing supply and affordability, minimum lot sizes must go.”
