A failure to place the embattled CFMEU into administration would lead to escalating building costs and flow through to other parts of the economy, housing groups warn.
A parliamentary inquiry has been told any further hold ups in passing laws to place the union into external administration will lead the construction sector going further into jeopardy.
Attempts to grant ministerial powers to place the construction division of the CFMEU into administration fell through on Thursday, after the coalition and the Greens voted down the proposal.
Master Builders Australia deputy chief executive Shaun Schmitke said delays to the bill created greater uncertainty for the industry.
"At the moment, everyone's very tense, but I can tell you that the industry needs that certainty," he told the inquiry on Friday.
"They need to know that they will be able to move forward in a period where they're going to be able to deal with the union in administration or otherwise, which is responsible, lawful and sensible.
"The longer the bill is delayed, the greater the concern amongst industry participants, and the bigger the pressure that is mounting."
Under the government proposal, the administration period would run for five years, with political donations being banned in that period and lifetime bans issued for criminal officials holding office at other organisations.
The government had hoped the laws would pass parliament on Thursday, but was held up, with the opposition saying the proposal was too weak.
Housing Industry Association managing director Jocelyn Martin said hold ups with the legislation meant issues with the CFMEU in the sector could not be adequately addressed.
"It undermines confidence in the sector and a sector already bearing the brunt of current monetary policy. It acts as a strong disincentive to enter the industry," she said.
"Our sector is feeling the impacts and activities of the CFMEU, whether that is directly ... or indirectly through increasing costs as a result, for example, competing for labour with the entire industry and the broader economy suffering the consequences."
The proposal to place the CFMEU into administration came following revelations of alleged union links to organised crime and corruption.
