Regulation Forcing Australians to Buy the ‘BMW’ Equivalent of a House: Think Tank Director

A man works on a construction site building new apartments in Melbourne, Australia on April 4, 2023. William West/AFP via Getty Images

Australians are forced into buying “the housing equivalent of a BMW” because of excessive regulation, says Graham Young, executive director of the Australian Institute for Progress (AIP) think tank.

He criticised the National Construction Code (NCC)—which mandates the country’s home building requirements—leading to extra costs for new housing.

“People should be able to buy a basic house and retrofit comfort at their own convenience,” Young told The Epoch Times.

He highlighted that mandated features like 7-star energy efficiency, double-glazed windows, and accessibility features unnecessarily add more than 10 percent to the cost of new homes. This, he argues, is pricing out average Australians from homeownership.

The comments come after Leader of the Opposition, Peter Dutton, announced on Oct. 19 the Coalition’s plan to freeze any further changes to the NCC for 10 years. He said this would reduce red tape and the cost of building a new house.

“The Coalition’s freeze will provide certainty to the industry and let builders get on with the job of building homes for Australians,” said Dutton.

According to Young, the NCC has created a system where only new housing developments are subject to strict and costly regulations while existing homes remain exempt. This uneven application of rules is unfair and inefficient, driving up the cost of new homes.

Is Dutton’s $5 Billion Housing Plan Enough?

Dutton also announced a $5 billion housing policy that aims to speed up the construction of 500,000 new homes by funding critical infrastructure like sewerage, water, and power.

The plan promises to address supply issues by focusing on greenfield developments, with funding available on a “use-it-or-lose-it” basis to encourage swift action by developers.

Young believes Dutton’s proposed policy is a step in the right direction, as it targets infrastructure, a major impediment to increasing housing supply.

However, he feels the plan falls short of addressing the root causes of the crisis.

“Australia needs to build a Canberra a year just to keep up with migrant demand,” he said, noting that the infrastructure for such a project would far exceed the $5 billion proposed.

In a broader critique of Australia’s housing policies, Young highlighted the need for a complete overhaul of how infrastructure for housing developments is financed.

The burden of upfront costs, including developer levies and infrastructure charges, is passed onto homebuyers, driving up prices and limiting competition to large developers who can afford the steep entry costs.

He suggests an introduction of Municipal Utility Districts (MUDs), which would allow infrastructure to be funded through borrowings, with repayments spread over time by the end users.

This, he argues, would ease the financial pressure on new developments and allow for more affordable housing options to emerge.

A recent report, Faster, Better, More: How to House Australia, by AIP, highlights that the key drivers behind the crisis include rapid population growth spurred by federal government immigration policies and restrictive land-use regulations that limit suburban expansion.

Regarding the housing crisis, Young said, “We did this to ourselves” through deliberate choices by federal, state, and local governments that failed to address demand and supply imbalances.

Meanwhile, Housing Minister Clare O'Neil did not appear pleased with the Coalition’s new plan, claiming it hasn’t outlined a broader housing target and has not shown the same willingness to work with the states to build more homes.

Labor has been trying to pass two bills—Help to Buy and Build to Rent—but has failed to receive the support of the Greens and Coalition.

A Deeper Crisis of Policy Failures

The Business Council of Australia (BCA) has also addressed the housing crisis, releasing a report on Oct. 21 calling for urgent reforms to meet the nation’s housing needs.

The report notes that housing supply is running behind by 64,000 homes annually and suggests 29 key recommendations to address this shortfall.

Among the findings, it identifies restrictive zoning rules, escalating construction costs, and an inefficient approval process as major barriers to increasing supply.

“We need urgent action from all levels of government to fix this,” said BCA Chief Executive Bran Black, adding that the current system is failing to deliver the 1.2 million homes required over the next five years.

One of the report’s most concerning findings is that taxes, including the GST, now account for roughly one-third of the cost of new housing. These levies, coupled with restrictive planning regulations, have artificially inflated housing prices, with the median cost of a two-bedroom unit in the Brisbane region now surpassing $1.3 million.

Young concurs with the BCA’s assessment, arguing that high-density urban development, the preferred model for the past three decades, is proving inefficient and costly.

“Increasing the supply of the more expensive housing product will not improve affordability,” he warns, calling for a revaluation of urban planning policies that constrain outward suburban growth.

Key Recommendations to Address the Crisis

Both Young and the BCA advocate for significant reforms to counter the effects of decades of flawed housing policies.

They recommend slowing population growth to a level the housing industry can sustain.

Then, a national reform fund should be created to incentivise states and territories to streamline housing regulations and speed up approvals.

Additionally, they suggest reducing unnecessary building codes that unfairly penalise new housing while exempting older, less energy-efficient homes.

To combat rising labour and material costs, they propose simplifying regulatory processes and promoting apprenticeships in the construction trades.

The BCA also urged stronger laws to eliminate corruption in the construction sector, which contributes to unsafe and unproductive building sites.

According to the report, productivity in the construction sector has declined significantly in the last decade.

“We must ensure that building sites are lawful and safe environments for workers,” Black added.