More Sydney workers are living further away from jobs than ever, and it's because of inner city planners, the Grattan Institute says.

A new book by Grattan Institute fellows Paul Donegan and Jane-Frances Kelly, City Limits: Why Australia's cities are broken and how we can fix them, calls for an overhaul of Sydney's planning laws which make it too costly, expensive and time consuming to get planning permission to build new dwellings in inner Sydney.

"We are certainly not proposing a free-for-all, but the bureaucratic processes can be a lot smoother and simple," Paul Donegan said.

"The way the processes are working at the moment creates a big disincentive for people to build homes where the job creation is occurring and where many people have indicated where they want to live.

"If you think about the super-heating prices in parts of inner Sydney, that's people saying that they want to live there. The demand is there but because not many new homes are there, there's not supply to match it and prices are going through the roof."