Housing minister Clare O’Neil has unveiled one of the government’s “big, immediate areas of new reform” to help increase Australia’s capacity to build new homes.
The federal government is throwing its weight behind prefab, with the intention of introducing a certification program for the construction method, as well as putting $40 million behind a trial to roll out “kit of parts” construction and $120 million towards states' regulation of the sector.
Facade panels for a new home being trucked to site in the Netherlands. Image: Getty
Prefab, or prefabricated homes, refers to method of building where the dwelling is constructed largely off-site and transported to location for final assembly.
“Kit of parts” construction is a type of prefabricated building, where standardised elements are created offsite. These can be things like bathroom pods, flooring systems and roof structures.
Speaking to the National Press Club, Ms O’Neil noted that the government had looked to “countries around the world” where prefab and modular construction was being used “to build homes faster, efficiently and at greater scale”.
Countries like the Netherlands, Germany and Finland are particularly known for their use of prefab. Newly-launched prefab company Built Living estimates that, based off of examples from these nations, prefab construction can deliver homes up to 20% cheaper with construction completed 50% faster.
Ms O’Neil noted that “Australia has been slower to adapt” to this technology and said that was why the government was making it a big area of new reform.
The $40 million in funding for kit of parts construction will support states' and territories' uptake of a system developed by Building 4.0, a research initiative co-funded by the Australian Government.
In this model, 80% of components are manufactured offsite using standardised processes and 20% are tailored to the structure onsite.
In addition, Ms O’Neil announced that the national productivity fund would dedicate a further $120 million to ensure states and territories are equipped to regulate modern construction methods consistently with traditional approaches.
The government will also introduce a national voluntary certification scheme to simplify the approval of prefabricated housing under the National Construction Code.
The government’s Homes for Australia Plan has also been updated to include prefab in Australia’s national reform agenda.
Prefabricated apartment sections being craned into location in Berlin. Image: Getty
According to Duncan Maxwell, associate professor at Monash Art, Design and Architecture Faculty, and director of the Future Building Initiative, this announcement from the government represents “a significant shift in Australia’s housing agenda".
"It moves beyond treating housing solely as a planning and taxation issue to recognising it as a broader innovation challenge encompassing systems integration, productivity and advanced manufacturing.”
“By supporting the sector to develop an interoperable 'kit-of-parts' approach, rather than proprietary systems, the initiative has the potential to accelerate housing delivery, reduce costs, strengthen domestic manufacturing capability, and facilitate scalable modern methods of construction,” Mr Maxwell said.
He believes that over the longer term, this approach may fundamentally reshape the "design, procurement and delivery of housing across Australia.”
Planning reform also on the agenda
Alongside the support of prefab, the second area of innovation that the federal government will target for reform is state and territory planning rules.
Ms O’Neil said that the government believed restrictive planning was stymieing the creation of new housing in many well-located areas, while adding roughly $140,000 to the cost of the average new home.
“We have seen significant planning reform in some states and territories. We need to see more,” she said.
Ms O’Neil will bring together the state and territory minister for housing, planning and building in what she called “the first meeting of its kind in Australia’s history”.
The discussions, the first of which is to be held on 29 May, will include more detail about how jurisdictions can get access to funding from the government’s new $2 billion Local Infrastructure Fund.
Announced at the 2026 budget, this fund was launched with the caveat that funding will only be awarded to those that have made strides to improve their planning systems.
Are you interested in learning more about new home building across Australia? Check out our dedicated New Homes section.
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