Australia’s Housing Target Is Failing, and Approvals Are Not the Reason

The most striking fact about Australia’s housing shortage is that a record number of dwellings are under construction and completions are still falling short. There were 243,864 dwellings under construction at the end of March 2026, the highest on record, while only 43,816 homes were completed in that quarter. The pipeline is full and the output is constrained — which points to labour, cost and insolvency rather than to planning or finance as the binding problem.

What do the numbers actually show?

A pipeline that is full and a throughput that is inadequate. Only 173,400 homes were built in the year to March 2026, some 66,600 fewer than the Accord’s annual target of 240,000. Dwelling approvals were 196,500 in the year to February 2026, and approvals have consistently exceeded completions.

The unfinished pipeline has grown accordingly. Dwellings under construction reached 243,864 at the end of the March 2026 quarter, the highest number on record, with a further 30,000 or so approved but not yet commenced. That is a substantial stock of housing that has been financed, approved and started but not delivered.

New commencements are also softening — 48,012 in the March 2026 quarter against 43,816 completions. When starts and completions run at similar rates while the unfinished stock sits at a record, the constraint is clearly the speed at which projects move through construction rather than the willingness to begin them.

Why can’t Australia build faster?

Labour, most immediately. The federal housing minister has described the shortage of construction workers as chronic, with an estimated 90,000 additional workers needed in residential construction. Skilled trades — electricians, plumbers, carpenters — take years to train, so the shortage cannot be resolved within the Accord period regardless of policy.

Productivity is the compounding problem and the less discussed one. Master Builders Australia has reported that output per worker per hour in construction is roughly 18% lower than a decade ago, which means the same workforce delivers materially fewer homes than it once did. A skills shortage against falling productivity is a considerably worse position than a skills shortage alone.

Cost is the third constraint. Building costs have risen roughly 35% to 45% since 2020 and residential lot values by around a third, which makes marginal developments financially unviable regardless of demand. Average development approval timelines in capital cities have reportedly reached around 14 months, roughly double the pre-pandemic norm, and many growth corridors lack the roads, sewers and power connections that must precede housing.

How bad is the insolvency picture?

Persistent rather than improving. More than 2,800 construction companies entered administration between 2022 and 2025, and while company insolvencies recorded a modest improvement of around 6.4% below 2025 levels, they remain elevated and business-related personal insolvencies have continued climbing.

The forward indicators are worse than the headline. New tax debt default disclosures for construction businesses spiked 49% in the first quarter of 2026, trade payment delays worsened over the same period, and construction business exits ran 10% higher year on year. Tax debt disclosure is a lagging symptom of cash flow distress and a leading indicator of failure.

Credit access is tightening at the same time. Business credit demand from smaller construction firms fell 5.6% year on year, and analysts have noted that with traditional credit demand falling and tax debt crackdowns forcing disclosures, distressed builders will likely face tighter lending and may seek more expensive secondary financing to bridge worsening payment delays. That is how a cash flow problem becomes an insolvency.

Why does the fixed-price contract model fail?

Because it assigns cost risk to the party least able to bear it over the longest period. A residential builder signs a fixed-price contract, then buys materials and labour over the following twelve to twenty-four months at prices set by markets it does not control. If costs rise 20% during the build, the builder absorbs the entire increase.

During the pandemic period that dynamic destroyed a large number of otherwise competent businesses. Builders held books of contracts signed at pre-inflation prices and were legally obliged to complete them at a loss, and the only way to fund those losses was to sign new contracts and use the deposits — which converts a margin problem into a solvency problem.

The structural response has been contract terms allowing cost escalation, shorter price validity periods and higher contingency allowances, all of which transfer risk to the buyer. That is more sustainable for the industry and more expensive and less certain for households, which is one reason housing has become less affordable even where prices have not risen.

Will the target be met?

No, on any reasonable reading of the data. Housing analyst Cameron Kusher has argued the target was announced without the economic, financial and construction conditions needed to make it achievable, and that the progress being made is insufficient with the target set to be missed by a wide margin. The National Housing Supply and Affordability Council has forecast a shortfall in the hundreds of thousands.

Some conditions have improved. Building approvals and commencements picked up in 2025, particularly for higher-density projects, strong housing prices have supported project feasibility, and lower interest rates and rising household incomes strengthened effective demand while underlying demand growth from population eased.

The honest conclusion is that a five-year target cannot fix a constraint that takes longer than five years to relieve. Training 90,000 additional construction workers, reversing an 18% productivity decline, and building the road, sewer and power infrastructure that growth corridors require are all decade-scale projects. The Accord identified the right problem and set a timeframe unrelated to the mechanics of solving it.

What would actually increase supply?

Workforce, first and unavoidably. An estimated 90,000 additional residential construction workers are required, and training skilled trades takes years. Migration of qualified tradespeople, faster apprenticeship completion and recognition of overseas qualifications are the only levers that operate within the Accord’s timeframe, and each is contested.

Productivity is the larger structural opportunity and the harder one. Output per construction worker per hour is around 18% below where it was a decade ago, which means the same workforce delivers substantially fewer homes. Prefabrication, modular construction and standardised design are the recognised responses, and all require scale commitments that a fragmented industry of small builders cannot make individually.

Enabling infrastructure is the third. Many growth corridors lack the roads, sewers, water and power connections that must exist before housing can proceed, and those are government responsibilities with their own funding and delivery constraints. Releasing land without servicing it produces approvals that cannot convert into completions, which is part of why the approvals and completions lines have diverged.

One point about the demand side deserves noting, because it is where the political argument concentrates. Housing demand is driven by population growth and by household formation, and average household size has been falling, which means the same population requires more dwellings than it once did. That is why supply targets calculated from population growth alone consistently understate the requirement, and why a target set in 2022 has become harder rather than easier to meet even as population growth has eased. Supply and demand are both moving, and only one of them is being managed.

How does this affect rents and prices?

Directly and with a lag. Housing supply that does not arrive means the existing stock must accommodate a growing population, which shows up first in rental vacancy rates, then in rents, and eventually in prices as renters who can buy do so to escape the rental market. Vacancy rates across Australian capitals have been tight for an extended period.

The National Housing Supply and Affordability Council has noted that tight vacancy rates and ongoing shortfalls in rental supply persisted through 2025, while effective demand strengthened as interest rates fell and household incomes rose. Falling rates improve borrowing capacity, which raises prices, which is why monetary easing during a supply shortage tends to worsen affordability rather than improve it.

The uncomfortable feedback loop is that strong housing prices support construction project feasibility. Developers proceed when completed values exceed costs, so higher prices unlock supply – meaning the mechanism that eventually increases supply is the same one making housing unaffordable in the meantime. Policy that suppresses prices without addressing construction capacity reduces supply further.

For anyone tracking this, the figure to watch each quarter is completions, not approvals or commencements. Approvals measure intent, commencements measure activity, and only completions add to the housing stock. Australia currently has a record 243,864 dwellings under construction and completions running well below target, which means the gap between the two lines is the clearest available measure of how badly the pipeline is bottlenecked.

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