Red Tape Adds $80,000 Holding Cost to New Home Builds

Australians attempting to build new homes are facing holding costs of up to $80,000 before construction begins, as council delays and regulatory red tape keep projects stalled. Despite Australian Bureau of Statistics data showing a rise in detached house approvals to their highest level since September 2021, industry experts warn that paper approvals do not translate to actual housing supply, leaving the country well short of its National Housing Accord targets.

Why are holding costs delaying Australian home building?

Everyday Australians are bleeding money while waiting for projects to move from paperwork to construction. Mitch Pryor, director of Pryor Connections, said the real handbrake on housing is not just trade shortages or building expenses, but red tape.

A project being approved does not mean a home is being built. There is a big difference between a number on a government spreadsheet and someone actually pouring concrete.

Pryor highlighted severe delays in Victoria. An Ascot Vale project requiring building consent has been sitting for close to 18 months without work starting. A project in Rye on a vacant block took close to 12 months to reach the point where construction could begin. By the time owners sit through months of council delays, holding costs can easily reach $70,000 or $80,000 before a shovel goes in the ground.

Do building approvals guarantee new homes?

Industry figures argue that a planning approval is fundamentally different from a completed home that buyers want to purchase. Mark Errichiello, director of Master Advocates, said approvals alone will not solve Australia's housing shortage if the homes do not stack up financially for developers or buyers.

A planning approval is one thing. A completed home that buyers want to purchase is another thing entirely.

Avi Khan, principal at Ray White AKG, noted that while the pipeline has improved, it is not moving fast enough to fix the housing shortage. An approval is only the beginning of the process, and it does not mean a home is ready, affordable or guaranteed to be delivered. Khan added that Queensland's approval lift still lags behind demand driven by interstate migration, population growth, the Brisbane Olympics, and infrastructure projects.

Is Australia meeting its National Housing Accord targets?

Australian Bureau of Statistics figures show 17,019 dwellings were approved nationally in May, 5.3 per cent higher than a year earlier. Private sector house approvals rose 2.8 per cent to 10,537 for the month, while total house approvals reached 10,690. Multi-unit approvals, however, decreased by 7.3 per cent.

Annualised, the May result would amount to about 204,000 homes. This falls well short of the 240,000 homes a year needed under the National Housing Accord. Victoria approved 4,808 dwellings in May, the highest of any state, followed by 2,948 new detached homes. NSW approved 2,284 detached homes, and Queensland approved 2,266. Even with Victoria leading the nation, the pipeline remains insufficient to close the national shortfall.

How do taxes and red tape impact housing affordability?

Red tape, construction costs, holding costs, taxes and compliance requirements are making housing more expensive before buyers even enter the market. Errichiello warned that these costs are ultimately passed on to the consumer, whether they are an owner-occupier or an investor.

In some projects, 45 to 50 per cent of the cost can be tied up in taxes, holding costs and other charges.

Tim Reardon, chief economist at the Housing Industry Association, noted that while building approvals for new houses increased to a new high in May 2026, up by 3.0 per cent to 10,690, Australia is still not building enough homes to meet demand growth. Reardon pointed to a narrow window of opportunity for buyers, as home prices have temporarily fallen due to uncertainty created by the federal budget.

What are holding costs in residential construction?

Holding costs are the ongoing expenses a property owner incurs while waiting for construction to begin. These typically include council rates, land tax, interest on loans, and opportunity costs. When council delays and regulatory red tape extend the pre-construction phase, these holding costs can accumulate to between $70,000 and $80,000.

How many homes does Australia need to build annually?

Under the National Housing Accord, Australia needs to build 240,000 homes a year to address the national housing shortfall. Current annualised approval rates are sitting at approximately 204,000 homes, leaving a significant gap between the government's target and the actual pipeline of new housing supply.