Prefab housing promised 50 years ago as solution to housing supply crisis

When it comes to housing, Australia loves a taskforce.

More than 50 years ago, the federal government established one to "investigate modern housing techniques" to boost Australia's "large, unsatisfied demand for housing".

It published a 114-page report in 1974, describing, in minute detail, the benefits and challenges of shifting housing construction in Australia to a production line.

Prefab housing, short for prefabricated housing, refers to homes that are manufactured off-site in a factory, in sections(also called modules) and then transported to their final location for assembly.

The obvious benefits of building prefab homes are that they're constructed under cover without the worry of weather disruptions, use robots and machines for speed, and are built in bulk to drive down material costs.

The report argued modern techniques were key to solving the housing crisis and urged national standards to boost prefab housing, criticising the slow productivity gains in construction.

Five decades later, pre-fabricated housing remains the subject of taskforces and reports, rather than a mainstream building method.

Australia's Productivity Commissioner Danielle Wood echoed the words of the 1974 report — almost to the letter — just a few weeks ago in the commission's latest report on housing, which found productivity in the sector had declined 12 per cent over the past three decades.

"Governments should continue to reduce unnecessary regulatory impediments to greater uptake of modern methods in housing construction, including prefabricated and modular …," the 2025 report read.

It's not a barren industry and prefab housing has slightly increased in popularity over the past few years. However, according to prefabAUS — the peak body for Australia's off-site construction industry — it makes up just 8 per cent of construction.

Overseas, particularly in Nordic countries such as Sweden, some factories whip up entire houses in days once all materials are delivered.

Sweden's edge comes from over a century of refining prefab techniques, the country's abundant timber, and its need to build quickly in a cold climate.

Lindbäcks Bygg is one of Sweden's most successful prefab manufacturers and operates highly automated factories that make apartment buildings, houses and units from design to delivery on site in about 12 weeks.

Those who champion the sector in Australia say while almost every other industry has become more productive in the last 50 years, housing construction has not, and the country cannot afford to continue that way.

Other industries are on a production line — why not housing?

Damian Crough launched prefabAUS in 2013 to push for industrialised housing.

He wants the industry to grow to 33 per cent of construction by 2033.

"All other industries industrialise. Every year, car factories get more productive, aerospace is the same — you have suppliers from around the world delivering components to one factory to create an aircraft," he argued.

"I think it's possible, I think it's achievable, I think we have to get there."

Australia's Productivity Commission's latest report on the housing construction industry said prefab and modular were "unlikely to be a silver bullet for housing construction productivity" because of varying rules and approvals processes across state and local governments.

But there are signs that's changing.

Last year, the federal government launched a $900 million productivity fund for states and territories to remove barriers to modern building techniques, such as prefabricated and modular homes, while also announcing funding for a voluntary certification scheme and a national reform program to create new regulations.

The Australian Building Codes Board has also released a compliance handbook and consulted on a product registration scheme.

Mr Crough said it was the biggest ever investment in the industry by the Commonwealth.

It's being used to help fund a $50 million TAFE training centre in Melbourne to teach advanced construction courses.

"You've got this push from within governments for modular and prefab and they're like 'just do it' but then it gets to the operational delivery side and no-one is skilled in this, so it slows down," Mr Crough said.

Former NSW building commissioner David Chandler said the $900 million fund was a start but he was adamant the industry needed much more.

"It needs leadership, it needs subject matter expertise, and the people that are currently in many of the seats that are driving policy here have never built anything," he said.

"We are not the united states of Australia, we're a whole bunch of states and territories that play the game on their own, and you can have a look at that by the way the National Construction Code is played out; it's almost a different version in every state.

"That's a really big bang on productivity in this country."

Millions spent by governments to boost prefab industry

It's difficult to form a complete picture of the industry in Australia because projects are managed state-by-state across public and private partnerships.

But state governments appear to be the biggest buyers.

NSW threw $10 million at the industry last year to "explore and trial" prefab construction and in the last two years has built 68 homes using modern methods.

Queensland has built 175 prefab homes since 2023 for social and essential worker housing, and announced 600 more would be completed for social housing by December.

Victoria has built 114 prefab houses in the regions, again for social housing, and Tasmania recently announced prefab and 3D printing would be used to help build 10,000 social and affordable homes by 2032.

The costs of the projects to governments are largely unknown due to deals that are "commercial in confidence".

Prefab won't be cheap until it hits scale

While some in the industry criticise a lack of federal leadership and a revolving door of housing ministers that lack nuanced construction expertise, and others blame onerous regulation and an industry without skilled workers, one thing everyone agrees on is that there's not enough money.

Just like car manufacturing and food production, industrialising an industry only becomes profitable when it hits scale.

Chris Meade comes from a traditional building background and switched to prefab modular two years ago.

His company, Echidna Built, operates in regional Victoria and Mr Meade believes it's the answer to the region's ongoing lack of worker accommodation.

"You're not making a mess on a site with offcuts and waste and excavation, you can have a lot of preparation done, and you've got much better control over all the aspects of the building as well."

The industry's biggest advantage is speed.

Mr Meade can build one module in a couple of months. But he's aiming to cut that down to five days in the short term, and one day in the long term.

"We're not affected by rain, wind or heat, we're in a controlled environment, so we don't lose money or increase costs through lost time, production time," he said.

But to achieve that he needs to build a much larger factory, invest in the latest technology, and bring on in-house trades.

"Scale's what's required and that requires a significant investment," said Echidna Built's chief financial officer Andrew Gatty.

That significant investment — or rather, a lack of it — is what's tripped up many other prefab, modular companies around the world.

Prefab is not without risk

Some local councils in the United Kingdom have abandoned prefab due to poor quality homes and a string of companies going bust, according to a government committee report.

Similar issues are plaguing the industry in New Zealand.

In the past few years, at least half a dozen companies have gone under in Australia, including one that received a $500,000 grant from a state government to build social housing.

Former NSW building commissioner Mr Chandler said that was concerning.

"I see this very much through a consumer lens first and foremost," he said.

"The challenges that we have with these new business models is that the people that start them all have great ideas, they're very innovative, and they're very committed to the industry. But what they spend most of their time doing is working on their widget, and very little time on their business case.

Mr Meade from Echidna Built said new national standards for housing and state regulations had been a big hindrance because they were written for traditional housing construction.

One that sticks out, he says, quite literally, is the requirement for all new houses to have disability ramps.

Those ramps must be built to a specific gradient and length, which makes it too big to be carried on a road so the ramps must be built on site, adding considerable cost and time.

"It adds a lot of cost to buildings and not all places need it. A very small amount of people require that sort of access," he said.

"The costs that have been imposed on us by legislation changes have added a lot of unnecessary cost."