Can granny flats save the housing crisis?

Australia's housing shortage has pushed more families to look at their own backyard for answers. Granny flats are becoming a practical way to create space for relatives, generate rental income and support adult children finding it difficult to meet rising costs of buying their first home. The Housing Industry Association (HIA) says homeowners are ready to build secondary dwellings yet the maze of shifting rules makes it difficult for them to proceed with confidence

HIA executive director of planning and development Sam Heckel says the biggest barrier is uncertainty. "We have a really fragmented planning system across Australia," he says. "Rules change from state to state and even council to council. Then zoning adds another layer again. Homeowners are left unsure of what they can do."

He says this confusion often stops projects before they start. "People want to use their land well," he says. "They want space for family or a way to bring in extra income. When the rules are unclear, it becomes hard for them to take the next step."

Heckel believes a national framework would give homeowners the confidence they need. "Building standards have been harmonised since the early nineties," he says. "Planning has never followed that same path. A national approach would mean everyone is working off the same rulebook."

Why clarity matters for homeowners

Heckel says inconsistent regulations across state and local government lines are adding unnecessary complexity and thousands of dollars in hidden costs. He believes these costs rarely improve outcomes and often discourage families who want a straightforward way to add space.

HIA's latest member survey shows builders expect to construct 10 times more granny flats in 2026 than they did in 2022. Heckel says that statistic shows a strong correlation to how families currently live. "More people are working from home, and more households want flexible arrangements," he says. "Granny flats give them that flexibility."

He also points to modular systems and off-the-shelf products as practical solutions making the idea more appealing. "The growing popularity of modular homes proves that many Australians want quick, modern and simple ways to add density to their backyards," he says.

Despite the obvious advantages and ease of implementation, homeowners still face a lack of clear information about how to get approval and start building. "The Australian Bureau of Statistics (ABS) does not track granny flats very well," he says. "They get lumped in with other approvals so we do not have good data. That makes it harder for families to understand how common these projects are and how achievable they can be."

What Tasmania and New Zealand show

Tasmania has already shown what happens when rules shift in favour of homeowners. Recent Tasmania reforms allow granny flats up to 90 square metres. "That's a really good change," Heckel notes. "In NSW and Victoria the limit is around 60 square metres. Families need more space now. Getting to 90 square metres means you can fit three bedrooms which makes the home suitable for a full family."

New Zealand's model puts homeowners first with its nationally consistent framework that sets standardised design rules for secondary dwellings. Compliance triggers a planning exemption which removes long queues and bespoke assessments. "It has given homeowners significant certainty on what they can do," Heckel says. "You reach out to council for a memo, and you know exactly what approvals you need. It keeps the process simple and predictable."

HIA wants all Australian states to adopt a similar approach. The association is calling for a national framework that allows granny flats up to 90 square metres to bypass planning through clear exemptions. "The federal government should take the lead by establishing national design standards," Heckel says. "By removing the need for costly bespoke planning processes we could unlock thousands of homes in established suburbs and regional areas."

He says the opportunity is ripe. "With strong demand and major retailers now offering off-the-shelf solutions the right nationwide policy shift could give homeowners a fast and simple way to create more space."

As affordability pressures are increasing, more families are looking for practical ways to stay close, support each other and make better use of their land, and a national rulebook would give them a clear path to do it.