This paper examines productivity growth in the housing construction sector and highlights decades of poor performance. It provides policy directions for improving construction productivity by reducing regulatory burden, streamlining and speeding up approval processes, supporting innovation and improving workforce flexibility to help mitigate this persistent policy challenge. The report outlines seven reform directions to improve homebuilding efficiency.

Key findings

• Decades of falling productivity in housing construction have restricted the supply of new homes and contributed to increasingly unaffordable housing.
• New estimates of physical productivity in housing construction show completion of half as many homes per hour worked compared to 1995.
• Labour productivity in the broader economy has increased by 49% over the same period.
• A complicated and slow approval process, lack of innovation, a fragmented industry dominated by small players, and difficulties in attracting and retaining workers are all issues that have impacted productivity.

Reform directions

1. Coordinating housing development and construction approvals.
2. Effectiveness of building regulations.
3. Improving building quality.
4. Extension services for housing construction.
5. R&D funding for housing construction.
6. Modern methods of construction.
7. Improving workforce flexibility.