Australia's housing shortage could be eased through major reforms to planning and development rules, according to a new interim report from the Productivity Commission, which argues that outdated and overlapping regulations are making it more difficult and expensive to build new homes across the country. The report calls for governments at all levels to adopt a more flexible planning system that allows housing to be built where demand is greatest.

The Commission found that a complex mix of zoning restrictions, planning controls and approval requirements has slowed housing development for many years. It said regulations intended to protect neighbourhood character or manage development have gradually accumulated, creating barriers that increase costs, extend approval times and reduce the number of homes being built.

Among the rules identified were building height limits, minimum lot sizes, setback requirements, parking mandates, minimum apartment size standards, broad heritage protections and floor-space restrictions. According to the report, many of these measures reduce the amount of housing that can be constructed on available land and make projects less financially viable.

The Productivity Commission suggested governments consider allowing medium-density developments, including buildings of at least three storeys, across more residential areas. It also proposed reviewing requirements relating to balcony sizes, parking spaces and other design standards where they unnecessarily increase construction costs without delivering significant public benefits.

Productivity Commission Chair Danielle Wood said regulation plays an important role in ensuring safe and liveable communities, but poorly designed or excessive rules can prevent enough homes from being built. She said Australia needs a planning system that supports housing supply while continuing to protect important community values and environmental standards.

The report comes as governments work toward the national target of delivering 1.2 million new homes between mid-2024 and mid-2029. The Commission noted Australia is currently behind schedule and warned that without planning reform it will become increasingly difficult to achieve the target. Increasing housing supply is viewed as an important step toward improving affordability for both home buyers and renters.

The interim findings do not represent final recommendations. Instead, they are intended to encourage discussion with governments, industry groups, councils and the community before the Commission prepares its final report. Stakeholders will have the opportunity to provide feedback on the proposed reforms and identify practical ways to simplify planning processes while maintaining appropriate safeguards.

Housing industry representatives have generally welcomed efforts to reduce unnecessary delays and improve approval processes, while some community organisations have emphasised the importance of balancing increased housing supply with environmental protection, infrastructure planning and neighbourhood amenity. Governments will consider the Commission's final recommendations before deciding whether further planning reforms should be implemented.

The report highlights the continuing national debate over how Australia can increase housing supply, improve affordability and ensure future growth is supported by efficient planning systems that meet the needs of communities across the country.