Recognition of the need for more sustainable and efficient construction methods is growing.

This is intensified by a housing shortage in Australia and a commitment to reducing carbon emissions. There is increasing interest about the benefits of off-site construction to help address these challenges.

While off-site construction may not be the panacea for all construction and environmental objectives, it does present significant advantages: more affordable houses can be made at scale, reducing impacts on the environment and overcoming workforce limitations.

Optimising the advantages of off-site construction in Australia, however, will depend on a harmonised regulatory approach.

So, what is off-site construction?

Off-site construction is not particularly new and as an industrialised replicable process, dates back many decades. The term itself is also interchangeable with ‘pre-fabrication’, ‘modular construction’, or ‘modern methods of construction’[1].

Off-site construction can also be viewed as a closed system of production where there is a single point of supervision for inputs and outputs. This ensures greater accountability, including for the materials and components, supply chains and inventories, and the designs and processes that go into assembly. As such, it can be compared to the way a car is manufactured.

This is different from on-site construction, which is an open system of production that may include the assembly of some objects that have been manufactured off-site (such as roof trusses or pre-cast panels). In this form of construction there are potentially multiple points of accountability, multiple contractors involved in assembly, complex supply chains, and more than one point of supervision.

Off-site construction benefits

The benefits of off-site construction start with the advantage of auditable quality assurance and management systems within a factory setting. This extends to include:

• Superior energy efficiency;
• Tighter building envelopes;
• Carbon and waste reduction;
• Significant cost efficiencies;
• Buffering of supply chain delays; and
• Helping to overcome workforce shortages and improving workplace safety.

In the US, national housing costs rose 52 percent from 2017 to 2022. It is estimated that off-site construction can deliver projects 20 to 50 percent faster than traditional methods through simultaneous site development and building construction at the plant. This increases productivity and provides cost savings of up to 20 percent[2].

Additionally, embodied carbon associated with the production and transportation of construction materials in conventional practices accounts for 11 percent of global emissions. According to research by the University of Cambridge and Edinburgh Napier University, off-site modular constructed homes can provide embodied carbon savings of up to 45 percent[3].

Roughly 30 percent of all building materials delivered to a conventional construction site end up as waste[4]. Off-site construction can also reduce this to a negligible amount.

Due to the many benefits of off-site construction, one could be forgiven for believing this is as much a policy consideration for treasuries, housing, industry and environment portfolios as it is for building, despite its overt relationship with building control.

The key to success: consistent regulation

If off-site construction is to contribute to addressing current policy challenges, it will be important to ensure that regulatory oversight for innovation in this space is appropriately designed.

Noting that the technical requirements of the National Construction Code (NCC) apply whether building work is conducted through on or off-site construction, potential risks associated with regulating the administration of off-site construction include:

• Multiple approaches by different jurisdictions to regulating off-site construction will impact its economies of scale, raise costs, and potentially result in competition for resources and experience;
• An absence of standardisation will undermine uniform understanding and consistency around best practice. This includes accredited third-party involvement in the creation of appropriate safeguards for independent assessment of project design and manufacturing;
• A failure to recognise that regulating the output of off-site construction is more of an accreditation exercise (ISO/IEC 17020) relating to process and practice, rather than certification (ISO/IEC 17065), which focuses solely on the product; and
• If jurisdictions do not have efficient mechanisms to determine practitioner licensing, and whether manufactured output for off-site construction complies with applicable Code requirements, the benefits of off-site construction can quickly diminish.

Achieving a nationally harmomised approach to the administrative regulation of off-site construction could occur through several pathways, including mirror legislation or a more unconventional approach of using the NCC as a vehicle, through its governing requirements.

Adding up off-site construction

Locally, Australia has set the ambitious national target of 240,000 new homes per year over five years[5], more than the current record of 219,479 completed homes in 2018[6].

In light of increasing construction costs, an ongoing skills shortage, and under-investment in innovation, there will be a significant role for off-site construction to play to achieve this ambitious target.

The growth of off-site construction has the potential to provide a cost-effective solution to Australia’s housing shortage, while also contributing to achieving Australia’s emissions reduction targets.

From an industry perspective, it also provides numerous advantages such as building product traceability and accountability for designs and processes.

The US experience highlights the benefits of off-site construction, but also the difficulties of optimising it where there is no nationally consistent approach.

Australia has the opportunity to take advantage of off-site construction through a nationally coordinated regulatory approach, and to learn from the experiences of the US.

A nationally consistent regulatory framework will be critical if the many benefits of off-site construction are to truly add up.

[1] The International Code Council (ICC) and Modular Building Institute’s (MBI) 1200 series of standards define off-site construction as: ‘A modular building, modular component or panelized system which is designed and constructed in compliance with adopted codes and standards, and is wholly or in substantial part fabricated or assembled in manufacturing plants for installation – or assembly and installation – on a separate building site and has been manufactured in such a manner that all parts or processes cannot be inspected at the installation site without disassembly, damage to, or destruction thereof.’

[2] Green Building & Design PRO July 21, 2022.

[3] Royal Institute of British Architects (RIBA) Journal, ‘Modular schemes slash embodied carbon by over 40%, research shows’ 13 June 2022.

[4] Green Building & Design PRO July 21, 2022.

[5] https://www.pm.gov.au/media/helping-more-australians-buy-home.

[6] https://www.abs.gov.au/statistics/industry/building-and-construction/building-activity-australia/latest-release#number-of-dwellings-completed.

Neil Savery is the Managing Director of ICC Oceania, an arm of the US based International Code Council, which develops the model I-Codes, promotes building safety and provides practical solutions for practitioners who work in the building sector.

Up until recently Neil was engaged by the Insurance Council of Australia as a specialist adviser on matters relating to the built environment, and in particular its intersection with the resilience of buildings in the context of climate change. At the end of 2023 he completed four years as chair of, and ten years as a representative on, the Interjurisdictional Regulators Collaboration Committee, an association of fifteen countries dedicated to ‘best practice’ building regulation.

Prior to this Neil was the Chief Executive of the Australian Building Codes Board for nine years, having been a Board member for eleven. In that role Neil championed the transition to improved access, awareness and understanding of the National Construction Code.

As part of the Council of Australian Government processes for twenty years, Neil was involved in advising Ministers on significant building and planning policy reform, including his time as Chair of the Senior Planning Officials Group.

Neil has been the Deputy Commissioner of the Victorian Building and Plumbing Industry Commissions and served as the inaugural Chief Planning Executive for the ACT Planning & Land Authority for eight years. 

Prior to this Neil was the Executive Director of Planning SA and before that the Director of City Planning and Special Projects at the City of Greater Geelong where he oversaw the transformation of Geelong’s Waterfront and Central Business District.

He is a former Adjunct Professor at the University of Canberra, holds qualifications in town planning, urban design and ecologically sustainable development, and is an inaugural Board member of the International Building Quality Centre.

He is a Registered Planner, a former National President of the Planning Institute of Australia and a Graduate of the Australian Institute of Company Directors.

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