MBA ACT deputy executive director Jerry Howard said the local industry was being strangled by regulation, adding significant costs to the bottom line for builders and renovators.

Residential construction starts in the capital fell by 18.5 per cent in the December quarter, seasonally adjusted, a drop which the MBA in part blames on regulatory costs and delays caused by excessive red tape.

''Maybe we're getting to the point in the construction industry where people cannot afford to build,'' Mr Howard said.

''It's going to affect the government's bottom line because if people can't afford to build in Canberra and if we don't create an environment that supports investment in building, they'll just go across the border.''

MBA ACT is calling for urgent action in the wake of last week's federal budget, which has put increased pressure on the industry by cutting public service jobs within the capital.

''The bottom line is that unless a definitive strategy is put in place, we will face considerable pressure on an industry which employs around 15,000 in the ACT and contributes heavily in terms of job creation and apprenticeships,'' Mr Howard said.

''We can't control what the feds do, but we can control what we do within our own building and planning system.''

Mr Howard said an important step in the reforms would be addressing building and planning anomalies, including difficulties surrounding draft variations.

He said the recent case involving the development of two heritage-listed 1920s cottages in Yarralumla was an example of a project for which the development application had expired and would have to be reassessed.

He said it could be demolished if it did not meet current planning legislation introduced after the initial development application, such as DV 306. ''I find it quite bizarre that a draft variation has de facto force of law before any consultation has occurred or, for that matter, consideration by the Legislative Assembly,'' he said.

However, a spokesman for the environment and sustainable development minister said the measure was necessary.

''If interim effect is not made, developers have the opportunity to rush in with development applications before the draft variation is considered by the minister, getting around the intent of the change,'' he said. The spokesman said the government, along with industry bodies such as the MBA, had already invested substantial time, effort and funding into creating better regulation.

''The stated goal of the project is to create a clear and concise regulatory framework that assists the economic development of the city whilst at the same time improving the quality of the built form within the city,'' he said.

The spokesman said for most building projects valued at less than $20 million, regulatory costs have decreased in the past year.