The State Government has launched a major review of residential planning and building approvals processes, amid concern red tape is adding to WA's housing supply shortage.

While industry has welcomed the move, saying it will help developers get projects off the ground quicker, the opposition says it is too little too late.

WA's record population growth is bringing significant demand for housing with estimates the state needs an extra 40,000 homes.

The Urban Development Institute of Australia's Debra Goostrey says there is too much red tape in the approvals process.

"There are up to 28 agencies that can be involved across the board in getting a planning approval, all of these things take time," she said.

The government's review was revealed in the budget.

The Planning Minister John Day says he wants to streamline the process to help boost housing supply.

"The development industry and the building industry has made it clear that they would like the system to be improved, streamlined and that a lot of approval times were excessive," he said.

Ms Goostrey says a simpler approvals system will complement the government's plans for larger metropolitan local governments under its council merger plans, and hopefully drive down costs .

"Time means money so every cent that it costs the developer in delays goes to the home buyer so getting the system working as smoothly as we can is critically important," she said.

The Opposition's Rita Saffioti says planning reform is long overdue

"This is an acknowledgement that the Government has failed in respect to land development in Western Australia," she said.

"There are less homes being built in WA, less land being approved.

"We need more homes being built to reduce the pressure on rents and house prices."

The review is expected to be completed within six months.