Housing stock is going backwards and won't improve unless planning approvals for higher density are easier in every capital city, a report warns.

While the federal government celebrates the early success of a scheme getting more buyers into their first homes, progress could grind to a halt unless more homes are built where people want to live.

Australia's capital cities are among the world's least dense and restrictive zoning is failing to keep pace with rapidly rising housing demand, a Grattan Institute report has found.

It proposes a low-rise housing standard allowing three-storey townhouses on all residential-zoned land in capital cities, creating the capacity for one million new homes in Sydney alone.

A mid-rise housing standard of six or more storeys around transport hubs should a

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