For years, the story was rising prices. Now it is feasibility: whether a home can be financed, built and then sold or rented for what it costs to deliver. That is a design question as much as a finance one.

This piece looks at the trend, how Australian practices are responding, and what it means for Architects & Designers and building product suppliers in every capital city.

The crisis has changed shape

Australia's housing crisis continues to place pressure on households and the construction industry alike. In 2026, though, it is less about runaway prices and more about a supply pipeline that is losing momentum.

Property values have begun to decline across most capital cities, according to Cotality. That has not made housing affordable. Higher borrowing costs, elevated rents and ongoing supply shortages mean affordability remains a significant challenge.

Australia is also behind on new homes. Industry figures show completions running well short of the pace needed to deliver the National Housing Accord's 1.2 million homes by mid 2029, and the Government's advisers now expect the target to be reached later. Elevated construction costs and tighter finance are making it harder to deliver the homes Australia needs.

How rate rises are reaching every part of the market

Rate rises are being felt across the whole housing market, not only on building sites. Mortgage holders are paying more, fewer homes are changing hands, and renovation work has so far held up better than new building.

New homes are where the slowdown turns into a longer shortage. The Reserve Bank's business liaison programme reports that apartment projects are mainly stacking up in premium segments of the market. Put plainly, the modest, well-located homes Australia most needs are the ones least likely to stack up.

Policy is shifting at the same time. The 2026 federal Budget announced that negative gearing will be limited to new builds from 1 July 2027, and Building Ministers have paused residential changes to the National Construction Code until mid 2029 while working to remove barriers to prefabricated and modular construction. Whether those measures outweigh higher borrowing costs is still an open question.

That raises a difficult question for the industry: how can modest, well-located housing stay financially viable without compromising the quality and liveability residents depend on?

How three practices are responding

Australian practices are answering that question from three directions: smaller homes, mixed tenure and better social housing.

Cox Architecture has designed compact City Starter apartments at Precinct 75 in St Peters, Sydney, a build-to-rent project for Coronation Property. Each home is small but fully resolved, with a full kitchen, laundry and storage, and relies on shared amenity across the precinct to make compact living work.

Hassell designed 195 Pier Street in Perth, a build-to-rent tower that mixes social, affordable and market apartments with no visible difference between them. Hassell's paper Design actions for better housing argues that closer collaboration between policymakers, developers, builders and designers is part of the fix.

Kerstin Thompson Architects, with Hayball, delivered Elizabeth Street, North Richmond for Homes Victoria's Big Housing Build. Its social housing apartments step up around a central courtyard, and the project was shortlisted in the 2026 Victorian Architecture Awards.

Government is drawing on the profession too. The NSW Housing Pattern Book offers architect-designed low-rise and mid-rise homes with faster approval pathways.

The ethical question: faster and cheaper, but for whom?

Every shortcut to supply carries a design decision about who the housing is for. A compact rental is not the home most Australians are working towards. For most, the goal is still a place of their own, and a house remains the most common aspiration.

What is changing is the path. Westpac and Commonwealth Bank both report more first home buyers turning to apartments and townhouses, and research by the Australian Housing and Urban Research Institute suggests many see an apartment as a step towards a house rather than the end goal.

That makes the quality of the first step matter. A compact apartment can be a well-designed place to live while saving, or a lowering of the floor, depending on the storage, daylight and shared space that come with it.

Smaller is not the only answer. For households that want a family-sized home, the pattern book's low-rise designs (terraces, semi-detached homes, row homes and manor homes) aim to make architect-designed homes quicker and cheaper to approve.

When budgets tighten, pressure to cut cost lands on the things residents live with for decades: acoustic separation, thermal comfort, durable finishes and accessible layouts. Architects are often the last people in the room arguing for them.

What this means for Architects & Designers and suppliers

For Architects & Designers:

• Expect cost scrutiny earlier. Ask suppliers for installed cost, lead times and whole-of-life cost, not only a unit price.
• Watch repeatable housing types. Pattern book, build-to-rent and social housing designs repeat a product choice across many homes.
• Use CPD to stay across National Construction Code adoption in your state and prefabricated construction methods.

For suppliers:

• Lead with feasibility. Show how your product saves time on site, reduces defects or lowers running and maintenance costs.
• Make substitution harder. Clear compliance documentation, tested performance data and reliable lead times help a product survive value engineering.
• Understand what each housing type needs. Homes built for sale, build-to-rent and social housing projects have different requirements, particularly where durability, long-term maintenance costs and consistent product performance contribute to better housing outcomes.

Where to continue the conversation

The numbers will keep moving. What will not change quickly is that fewer projects will stack up, and design and product choices will decide which ones do.

The Arc Agency brings suppliers and Architects & Designers into the same room at The-Arc events across seven Australian cities. See what is coming up on The-Arc events calendar.

Frequently asked questions

Last updated: 10 November 2026