A landmark AHURI report led by RMIT University has identified market volatility — not planning constraints — as the primary cause of Australia's housing crisis, with boom-and-bust cycles creating persistent disruption to labour supply, costs, timelines and build quality across the sector.

Led by RMIT University Associate Professor Andrea Sharam, the 18-month research project involved 19 researchers from seven universities and examined construction dynamics across both the detached housing and high-rise apartment sectors. Its findings arrive as Australia works to meet the National Housing Accord target of 1.2 million new homes over the five years to June 2029.

"Our ultimate conclusion was market volatility presented the most significant risk for builders, and the biggest constraint on construction output and quality," says Sharam.

The data behind the disruption

The numbers underscore the scale of the problem. In detached housing, a boom year can push the number of homes under construction up by 50,000, while a downturn can strip that figure back by 20,000. In the apartment sector, the volatility has been more extreme: the construction boom of the 2010s drove activity up by almost 300 per cent, before a combination of prudential regulatory changes and the withdrawal of Chinese investment contributed to a 30 per cent decline.

Those swings generate cascading problems throughout the building industry. "During booms costs spike, labour shortages hit, supply chains are disrupted and timelines blow out," says Sharam. "Booms also draw in marginal operators and under-skilled workers, increase pressure to cut corners, and disrupt work scheduling creating task queues."

The consequences of downturns are equally damaging — and some are permanent. "Downturns meanwhile cause some permanent loss of labour, wage suppression, loss of knowledge and innovation, and businesses leaving the sector," Sharam adds.

A fragmented sector ill-equipped to absorb shocks

The report also points to the sector's fragmented structure as a compounding factor. Housing construction in Australia relies on temporary teams of subcontractors that form for a project and disband on completion. Small and medium-sized builders continue to deliver approximately half of all apartments and most detached homes — a model that makes it harder to transfer skills between projects, retain workers over time and develop long-term capability across the industry.

Low margins, limited financial buffers and inadequate enforcement of the building code further suppress investment in training and innovation, while creating pressure to prioritise speed and cost over quality. This dynamic contributes to what the report identifies as a structural deficit in Australia's residential construction industry.

Sharam describes the cumulative effect as a persistent paradox: "This paradox of being too busy to invest during booms, and too uncertain to invest during busts, creates a persistent barrier to industry-level improvement."

Pathways to reform

The report argues that solving Australia's housing shortage will require system-level reform rather than single-point solutions. It identifies three priority areas: reducing market volatility, strengthening workforce development and improving consistency and enforcement in the building code.

On policy, the report cautions against demand-stimulating measures, which risk replicating boom conditions and amplifying the construction labour shortage problems already embedded in the sector. Instead, it points to social housing investment during downturns as a means of smoothing construction cycles and preserving workforce capacity through lean periods.

The report also challenges prevailing narratives about planning as the primary barrier to new home building in Australia. "Blaming individual factors, like the planning system, is the biggest myth we need to quash," says Sharam. "The National Housing Accord aims to build 1.2 million homes by 2029, it will take significant system-level reforms to get us there."

Overcoming construction constraints for the supply of new detached and high-rise housing is published by the Australian Housing and Urban Research Institute (AHURI). RMIT University co-authors are Andrea Sharam, Ali Zolghadr, Louise Dorignon, Ron Wakefield and Ehsan Gharaie. DOI: 10.18408/ahuri5334001.

Architecture & Design Team

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