Australia's chances of hitting nationally agreed housing targets and bringing down the prices of new homes are being hurt by challenges to the timber industry.

Thousands of regional jobs are facing the axe unless a new national forest policy is delivered, including an expansion of plantations, a report has found.

Native forest logging is in terminal decline after contracting 80 per cent across two decades, with plantations not expanding quickly enough to cover the losses.

That will become a problem as Australia aims to build 1.2 million well-located homes by 2029, a target vowed by the federal government.

Plantation forestry provides 42,000 jobs, 30,000 of which are in manufacturing.

The industry was at a "tipping point," said the chair of the Australian Climate and Biodiversity Foundation, which commissioned the report.

"This report shows that failure to support the plantation timber industry can drive up housing costs and undermine regional employment," Ken Henry said.

"Investing in plantation expansion, mill capacity, and workforce transition will be critical to securing Australia's timber supply."

Australia is already at risk of missing the nationally agreed housing target.

Industry groups including the Property Council of Australia and Master Builders Australia estimate current rates could leave the nation hundreds of thousands of homes short.

The foundation's report found existing plantations and sawmills were unlikely to meet short-term demand peaks, and long-term challenges in attempting to build the requisite homes.

Dr Henry said national forest policy had not been updated in more than 30 years.

"The next federal government needs to facilitate plantation expansion, support local industries creating engineered wood products, and develop carbon methods and environmental laws that transform the new management of native forests to create regional jobs and protect areas from hazards like fires," he said.

He has consistently called for native forest logging to end, citing environmental factors and an expected manufacturing boost.

Industry group Australian Forest Products Association said the government should be incentivising investment in sustainable wood, and pressed back against ideas that would increase duties on plantations.

"We don't need further cost imposts on construction, let alone on the most carbon-friendly building material we have in Aussie-grown timber," chief executive Diana Hallam said.

"Not only will this tax drive up the cost of construction by taxing carbon-friendly timber production, it will also disincentivise new production tree plantings that are desperately needed to ensure Australia's future sovereign capability in timber and wood fibre."

Victoria and Western Australia ended native forest logging in 2024, while the sector in NSW has struggled with deficits and fines in recent years.