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This paper examines the uptake of environmentally sustainable housing in two major cities in Australia. The paper responds to literature that suggests sustainability is not so much a technological problem as an institutional one, and to theories of innovation which focus on innovation diffusion through chains of production. The disaggregation and piecemeal nature of innovation within the building industry is underpinned by unfamiliarity with new technologies, a lack of consistent legislation and pricing and unclear channels of communication. These generate uneven adoption of environmentally sustainable materials and processes within this industry.