National housing supply targets may become increasingly difficult to meet unless regulatory barriers, planning delays and workforce challenges are addressed, according to a new industry survey of small building businesses.

The 2026 Small Business Conditions Report, released in Canberra by the Housing Industry Association (HIA), captures feedback from members working across the construction sector and who identify as a small business. The findings suggest demand for new homes remains strong, but operational pressures are intensifying.

“This report is not only a gauge of the level of sentiment in the small business sector but is also a measure of how the home building sector may be performing from 2026 onwards,” says HIA Managing Director Jocelyn Martin. “Small building businesses are the engine room of Australia’s home building industry, but they are being asked to do more with less.”

According to the survey, growing compliance obligations, rising insurance costs and lengthy approval processes are combining to squeeze margins and confidence across the sector.

Regulatory requirements appear to be a particularly significant concern. The report found 68% of respondents have considered scaling back operations or shutting shop because of red tape, while nearly three-quarters do not expect to hire additional staff over the coming year.

The report highlights planning approval timeframes as a major productivity constraint.

“Planning delays are a major barrier to productivity, with 88% of small builders reporting approval timeframes exceeding eight weeks, and one in three experiencing delays of more than six months,” notes Martin. “For small businesses, time is money and lengthy approval processes mean higher holding costs, delayed starts and increased financial risk, which reduces the number of homes that can be delivered.”

Labour availability also remains another persistent challenge, the survey reveals, with 67% of small builders reporting difficulty recruiting or retaining skilled workers, limiting their ability to expand operations or take on new projects.

“Compliance pressures continue to mount, with more than half of small builders spending at least five hours a week on regulatory tasks, and nearly one-third spending more than ten hours,” Martin adds.

Additional findings suggest broader business pressures:

59% do not expect to have a more profitable year in 2025/26 than the previous year.
63% say that NCC 2025 changes have had a moderate or major business impact.
88% report that compliance demands have increased personal stress levels.
56% have hired or reassigned staff to manage administrative or regulatory tasks.

HIA believes focussed policy adjustments could ease pressure on small builders while supporting housing delivery goals.

“Streamlining planning systems, reducing compliance burdens and providing greater regulatory certainty would immediately improve productivity across the small business sector,” says Martin.

“Targeted support for apprentices, skills pathways and technology adoption would help small builders expand their workforce and lift output. But without reform, housing supply will continue to fall short,” she concludes.

Image: Housing Industry Association (HIA) 2026 Small Business Conditions Survey

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