Australia’s housing crisis is forcing governments to get creative, but who would have thought a trip to Bunnings for a sausage sizzle could lead to a shake-up of property laws?

The retail giant’s foray into selling flatpack ‘pod’ homes is not just offering a DIY solution to space woes, it’s inadvertently accelerating a nationwide push to relax granny flat regulations, with Tasmania now leading the charge to allow significantly larger backyard dwellings.

Under proposed amendments to the state’s planning scheme, the maximum size for a granny flat will jump from 60 square metres to a more substantial 90 square metres, with the government arguing it will unlock much-needed housing supply and diversify accommodation options.

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“We need to be coming at housing from all angles,” Minister for Housing and Planning, Kerry Vincent said.

“There is significant demand for one-and two-bedroom homes across the state, and we need to make it easier to deliver this type of accommodation.

“Having a small, self-contained dwelling located on existing blocks represents low-hanging fruit as we look to increase our medium-density housing stock.

“By expanding this size, we can create more diverse housing stock, giving Tasmanians greater options for where they can live.”

Noela and Peter Perkins with their new granny flat. Picture: Nigel Hallett

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Currently, a 60-square-metre limit often restricts these dwellings to a single bedroom, even with a bathroom and kitchenette.

The expanded allowance, however, is expected to pave the way for more functional two-bedroom granny flats, offering genuine relief in a state grappling with the nation’s lowest rental vacancy rate – a dire 0.72 per cent according to PropTrack data.

But what does Bunnings have to do with this legislative shift?

The Bunnings effect: Flat-packs fuelling policy change

In recent months, the hardware behemoth has begun selling backyard ‘pod’ houses for as little as $26,100, with larger versions at $42,900.

These units, which can be assembled in as little as two days, are marketed as DIY-friendly solutions for everything from crisis accommodation to home offices.

Bunnings has entered the housing market by selling pod-style granny flats for as little as $26,100, with larger versions at $42,900.

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The pods can play a part as crisis accommodation, a workspace or a teenage retreat. Source: Bunning

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Founder Matt Decarne, whose company supplies the pods, champions them as “the ultimate DIY” project and a vital part of the solution to Australia’s affordability squeeze.

Crucially, some of these tiny and modular dwellings, including several of Bunnings’ designs, may not trigger extensive planning or building approvals – a major drawcard for buyers seeking speed and simplicity.

Property industry expert James Fitzgerald believes the highly publicised availability of these products has been instrumental in normalising backyard density.

“As affordability worsens, more owners will look at their existing land and ask how to make it work harder. Backyard density is one of the few levers available that doesn’t require moving, subdividing, or taking on a second mortgage,” he recently wrote for Yahoo Finance.

“In many markets, granny-flat style setups are already renting for around $400–$500 per week. That’s not theoretical upside. That’s real income.”

A national trend: States scramble to cut red tape

Tasmania’s move mirrors a broader national trend.

Queensland, for instance, released a statewide building code in late 2024 to empower councils and simplify approvals for second dwellings, following 2022 changes that made it easier to rent granny flats to non-family members.

Victoria also recently eased restrictions for building granny flats in residential and rural areas. Even New South Wales is considering blanket rules to override councils that restrict secondary dwellings, as urged by an inquiry into rural land reforms.

The impact is already being felt by builders.

Elsewhere pods founder Matt Decarne inside the larger granny flat product. (Source: Supplied)

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Modular flatpack builds are projected to grow by around 7 per cent a year to hit $18 billion by 2030. Source: Elsewhere Pods

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A recent Housing Industry Association survey found that builders expect to construct ten times more granny flats this year compared to 2022.

Furthermore, market research firm Mordor Intelligence projects Australia’s prefabricated buildings market, which includes these modular flatpack builds, to grow by around 7 per cent annually, hitting $18 billion by 2030.

Advocates argue that backyard density is a pragmatic part of the solution to the housing supply crunch, especially given ongoing construction delays due to tradie shortages, material costs, and regulatory hurdles.

“This change gives homeowners and builders the flexibility to build a genuinely usable second home that meets real market demand,” Housing Industry Association Tasmanian executive director Benjamin Price said.

“Larger granny flats mean more choice for families, more rental supply, and more work flowing through the residential building sector.

“If we’re serious about housing supply, then freeing up infill opportunities is simply common sense.”