NZ offers blueprint for home-building productivity fixJacob ShteymanAAPMon, 15 September 2025 4:01AM
New Zealand might just hold the key to solving Australia’s housing supply mess.
Zoning reforms across the ditch provide a template to boost dismal construction productivity and help the industry reach its supply targets, a research paper by economic think tank e61 Institute has found.
Labour productivity in the construction sector – essentially how many homes are built per hour worked – has declined since 2000 in Australia, adding to the time and cost it takes the industry to provide supply.
New Zealand is unique among Anglosphere nations in having experienced substantial growth in construction productivity since the turn of the millennium.
Productivity growth surged in Auckland and Upper Hutt, near Wellington, immediately after they were ‘upzoned’ in the mid-2010s, relative to the rest of the country, report author Matthew Maltman said.
Governments have tried a variety of things, including changes to regulation and modular construction, to get productivity moving in Australia in recent decades, to no avail, he said.
“It’s still up for debate how large (the productivity gains from zoning reform) could be, but this seems to be something that there is evidence shifted the dial,” Mr Maltman told AAP.
“So given that’s true, it’s something that’s worth thinking about, given the benefits associated with affordability and allowing people to live in higher-amenity locations that comes with these types of reforms.”
His research found Auckland’s zoning reforms improved construction productivity by approximately eight per cent, but he said it was hard to quantify the extent of the boost it would deliver in Australia.
So how does zoning reform result in greater productivity?
One reason is that allowing more medium-density housing incentivises more firms to enter the market, boosting competition, while smaller employers are encouraged to hire more staff, Mr Maltman said.
The Productivity Commission has found Australia’s construction sector is dominated by small-scale firms and subcontracting arrangements, with the average company employing fewer than two people.
That results in builders missing out on the benefits of economies of scale.
Mr Maltman found medium-density housing itself was more efficient to build than the alternative of single-family homes on the urban fringe.
The NSW and Victorian governments have substantial zoning reforms under way that will increase height limits for developments across Sydney and Melbourne, particularly around public transport hubs.
Economists including the Grattan Institute’s Brendan Coates and Peter Tulip of the Centre for Independent Studies say even without the increased productivity benefits, these measures will make a significant difference to supply and affordability.
In a panel discussion with Dr Tulip and New Zealand Housing Minister Chris Bishop, NSW Premier Chris Minns said his government’s housing reforms had taken “direct inspiration” from Auckland’s zoning changes.
Australia is falling short of the government’s target of 1.2 million new homes in the five years to mid-2029, but there are signs efforts at the state and federal levels are starting to boost the sector’s capacity.
Dwelling starts are set to rise a cumulative 30 per cent to 239,800 – just shy of the annual run rate required to meet the target – in the four years to 2028/29, Oxford Economics Australia forecasts.
Student accommodation, build-to-rent, retirement, and land lease were beginning to fire, while social and affordable housing was receiving a boost from the National Housing Accord, said Maree Kilroy, senior economist in construction and property forecasting.
“Nonetheless, typical mass market house and land packages and infill apartment development is where most of the heavy lifting will need to be done to meet housing targets,” she said.
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