Former RBA economist Tony Richards says Australia could have built an additional 1.3 million homes in the past 20 years if it weren’t for costly zoning, planning, and building regulations imposed by local councils.

Richards argues that local councils often succumb to NIMBY opposition, hindering the construction of medium-density housing. He suggests that granting more decision-making powers to authorities outside of local councils may be necessary to address this issue.

Richards believes that the federal government’s target of one million new homes over five years is not ambitious enough, as a much larger expansion is required to address past housing undersupply and accommodate future population growth.

Meanwhile, rising construction costs (up 30% in the past two years) have led to developers shelving projects. According to KPMG, Victoria and NSW have seen a surge in demand for new dwelling approvals, but higher input costs and potentially lower returns on investment have hindered actual construction.

In April, new apartment approvals in Australia reached their lowest level in over 11 years, leading economists to warn of a worsening rental and affordability crisis. Approvals for apartments, townhouses, and semi-detached homes dropped nearly 17%, totalling a seasonally adjusted 3,545 approvals, the lowest figure since January 2012.