What are the prospects for lifting residential construction productivity? What role might increasing the amount of off-site construction work performed play?

It’s time to face into the ‘how’, of restoring housing delivery capacity, productivity and the modernisation of Australia’s construction industry, not the ‘what’. Currently there are no viable foundations to build short and medium-term transformation. Most of the industry remains disenfranchised in the current settings. The voices of a few, often feed into self-interest, versus good for one, good for all. Australia’s construction industry is a seminal social and economic asset. This asset is at risk. Credible leadership is overdue.

Overview

What are the prospects of lifting construction output by 20-percent and lowering cost with no increase in workforce? Can 50-percent of dwelling constructors achieve this by 2030?

Let’s put ambitious supply targets to one side for this conversation. The repetitive narrative at all levels of government has a lot to say about removing barriers, but little on the growing gap between planning consents and actual keys to finished dwellings.

Off-site fabrication is embedded in the narrative to be seen to do something. Anything.

The 2025 State of the Housing System Report had many shortcomings. Whether it played into the government’s narrative or the interests of self-interest groups, there is no one walking around today suggesting that a viable, implementable strategy to lift dwelling completion rates is anywhere near the horizon. Sacred cows were untouched.

The Australian Modern Methods of Construction (MMC) policy agenda is not focused on measurable sector wide, end-to-end delivery reform. MMC has a very narrowcast platform. Its lifeblood is dependency on social housing uptake. There is very little uptake in the market housing sector where most of the delivery heavy lifting must occur. Social housing programs currently avoid Value for Money (VfM) scrutiny. They shouldn’t.  When Social Housing pipelines dry up, the future for MMC and Prefab may look bleak.

Most private market housing feasibilities struggle with their base cost. Cost includes the impact of time, especially when measured from project consent to use. There are few if any MMC or prefab housing developments that can display a bankable feasibility uplift.

Useful industry facing context was shared by attendees at two recent Future Place Summits. Future Place is an iteration of the US Built Worlds corporation that facilitate venture capital flows into emerging and mature opportunities in the global construction marketplace. Modern Methods of Construction (MMC) was not the centre conversation.

The first Summit addressed Preconstruction Innovation. It explored strategies, technologies and partnerships to deliver more accurate preconstruction with fewer resources. The use cases were largely centred on how AI/ML can unpack client tender documents and risks. And then help shape bid strategies. It was an interesting immersion on how the known knowns may be translated into smart bids. Perhaps the unknown, unknowns less so. The most profound comments were directed to the baked in procurement intransigence of government organisations charged with delivering infrastructure and housing. One panellist commented that it was lucky that no clients were present as honest accounts of delay, cost and incompetence were accepted as business as usual. Preconstruction innovation could end up being a gaming technology.

The second Summit addressed the global Living Sectors market. Its theme was the shaping of living in Australia. The banner was ‘The new real’. Build to Rent (BtR), Land Lease and a small session on the potential of prefab and modular buildings made the mix. Insights into the maturity of the European, North American and Japanese markets versus the relative immaturity of the Chinese, South Korean and Australian markets were stark. Issues of sovereign risk, scale, proven delivery and operational capabilities were linked to views on core and non-core attractiveness for the major capital players. These are usually, large pension or sovereign wealth funds who seek benchmark-based data to attract their interest. Australia, while showing potential, sat outside of the core mandates of these investors, including Australia’s Future Fund. The fund has no core domestic sentimentality. Smaller investments in local offerings were likely to attract cautious support accompanied by cordial interest in political led supply initiatives.

The reality is that institutional investors in the Living Sectors market are looking for assured indexed annuity like returns from proven, stable operators. Quality is a core criteria. These are sophisticated investors. They only have an opportunistic interest in Build to Sell (BtS). The delivery of BtR offers no real proposition for home ownership.

The Future Place presentations were tight and of pitch-like quality.

Also on show was the National Multi-Family Council (NMHC). NMHC is the provider of US, European and Japanese Real Estate Investment insights covering both for-profit and not-for-profit players in the market. Greystar is a mature US REIT with a recent presence in the Australian market. NMHC has been largely ignored in Australia by the major real estate related associations like the Property Council of Australia and the Urban Taskforce. The challenge that NMHC presents is that the investment excellence and measured performance of members over time is paramount. In Australia, industry associations are membership led. The strong and weak sit at the same table. There is little appetite for two classes of member. This culture was on display in the early phase of standing up the NSW Building Reforms. Trustworthiness is now becoming a value.

Future Place’s attendee profile was instructive. The interests of capital in the modernisation of Australia’s construction industry’s future are limited. These interests essentially turn on feasibility, the quality of assets and operation, scale and proven performers.  Beyond the current political push to drive the MMC there seems to be little market led uptake. The question of how to achieve more with less, how it is defined, incentivised and benchmarked will not be investor led. Workforce outputs are key.

As the number of consented dwelling projects mount up, the gap to achieving the delivered housing targets widen. The performance of public, public sponsored and the private market deliverers of housing must attract the same light being shone on their productivity performance. Capital markets will only show interest as development feasibility and delivered quality outcomes present. They will not be the heavy lifters.

The attendee profile at the two Future Place summits is instructive. The messages were clear. The Australian housing market remains in the sub-prime investment landscape.

Tackling the public policy narrative and industry intransigence to modernise. Informed accountable leadership must surface soon.

While self-interest prevails, there will be no change.

Australia’s Fair Work Commission’s Chief Murray Furlong recently called out government inaction on construction crime corruption. He said there was a once in a generation opportunity to clean up the construction sector, saying ‘it was the behaviour you are prepared to walk past, is the behaviour you are prepared to accept’. He praised the CFMEU’s Administrator Mark Irving KC’s work to help clean up the union. Furlong said these efforts need to be matched by tier-one builders, their clients and funders, major contractor employer organizations and other unions, in addition to state and Commonwealth governments. He named 5 tier-one contractors for their failure to adequately respond to union corruption or organised crime infiltration for 25 years.

Unfortunately the same level of call-out can’t be said for the Australian Productivity Commission’s 2024 Report on Housing Construction Productivity can we fix it? It avoided the how and ended up becoming more of a foggy what. There was no measurable strategy to lift industry capability, capacity and productivity. References to the potential for off-site construction as a key step were tendered with a lack of credible evidence-based facts, only prospective claims by the self-interests. The report lacked the rigor that any self-respecting researcher would need to justify their work.

Then along came the National Construction Industry Forum’s 2025 Blue Print for the Future proposing a building and construction industry that works for everyone. No-one was offended, just a wonderful collaboration of self-interests that were not game changing by a long margin. Dominated by tier one-one and industry advocacy interests.

The reality is that in every forum since, not a single advocate or contributor to these indulgent pieces of taxpayer funded work can point to any broad scale initiatives by the industry that are likely to make a systemic difference. Demonstration is largely confined to social housing tokens that are not indicative of wide industry or market housing uptake. The delivered keys are disappointing. The cost and time of delivering fewer than 899 social housing dwellings delivered so far becomes more embarrassing each time the Housing Australia Future Fund attempts to pump up its tyres. See the ABC’s report, Will the Housing Future Fund recover from its rocky start?

And it’s hard to fathom the benefits that will be realised from the Building 4.0 CRC.

Now in its fifth year and due to wind down in 2027 the 2025 Annual report is more about research projects than on the ground industry wide change or measurable benefits.

The report claims CRC research shows that systematising construction, through approaches like the System 600 kit-of-parts, can reduce waste, cut delivery times and give families access to homes that are modern, adaptable and built to last.

A recent Modern Methods of Construction (MMC) Showcase, sought to demonstrate how MMC can provide high-quality, scalable and sustainable housing more quickly and cost-effectively, with a strong focus on social and affordable housing. While the usual suspects were hi-fiving over their achievements, informal industry feedback ranged from underwhelming  to embarrassing. The cost of early projects has yet to present.

There is no question that the need to expand Australia’s social and affordable rental housing stock is overdue and urgent. But this stock may only make up 10-percent of the new dwellings necessary to match the needs of those who are unable to turn to a social housing solution. The current push to enlist major new supplies of market Build to Rent stock is unlikely to deliver less than 5 percent of new supply any time soon. BTR sits on the cusp of social and market housing supply. This stock is locked into rental for about 15-years as is much of the affordable dwellings being generated by recent planning concessions. It’s this cusp that starts to identify the differences between sophisticated and unsophisticated investors and owner occupiers. And it’s this cusp where the bounds of prime and sub-prime debt are taking shape as further interventions to enable purchasers to enter the market occur. The latest is CBA’s Build-to-Rent-to-Buy and Off-Site payments for modular construction models may be adding new complexities.

The challenge at this juncture is to ask, ‘how’ are these initiatives being leveraged to lift productivity, to drive down construction costs and demonstrate any form of changing the industry’s ability to deliver value for money housing any time soon? The costs of embedded inefficiency mounts as industry associations advocate for the status quo

to lower standards and shelter the interests of their lowest common denominator members. These were my observations during a review into the 2007 Building the Education Revolution (BER) and as NSW Building Commissioner. Resistance to change prevails. At the headwaters sit government led organisations charged with delivering smarter, better and faster. They are not being held to any level of pre-determined accountability for their cost and time performances, and risk aversion.

A report into the BER achievements showed that government agencies often spent as much, if not more time in planning and procuring their programs than the actual time for construction on-site. The performance of the $10.0 bn Housing Australia Future Fund (HAFF) is likely to be audited following the criticism that it is behind schedule to deliver the 40,000 social and affordable dwellings in its mandate. Hopefully the audit will have wider terms of reference than timing and process and look to the bigger questions of Value for Money, and opportunities that may be being lost to leverage modernising and improving the productivity of an industry in dire need of re-shaping its future.

A useful starting point may be the findings of the 2010 BER Report and statistically validated data drawn from over 3000 primary school buildings delivered nationally.

Where does Australian Prefab sit in the context of all of this?

MMC techcos and fabricators should take note of the market success and failure dynamics that have been reported by Built Worlds over the last 10 or more years. Understanding what investors require should be compulsory nighttime reading for governments looking to push the prefab agenda without some of these insights.

For the larger part of the construction sector, alternatives to the MMC silver bullet involving more practical and non-business threatening policies must be on the table.

There are no incentives to change. The main game is survival and relying on Business as Usual (BaU) to play. And government procurers of housing must overcome their overly zealous approach to risk and negative mentalities to profit. Profitable enterprises are the employers of the here and now, and beyond. A strategy to modernise needs to show how win-win is possible and a genuine commitment made to enabling smarter BaU.

The starting point must be to unpack how an end-to-end procurement focus will deliver a 20-percent reduction in time and on-site workforce inputs and a path to lower costs. Off-site has a role but it must become mainstream and get off its fringe hobby horse.

NSW is the most modernisation ready residential construction sector in Australia. Despite the nay-sayers who pushed back against the last 5-years of reform, the productive rewards are now being observed. The Design and Building Practitioners Act (DBPA) and NSW’s Planning Portal tracker do not exist in other states. The DBPA sets constructors up for success. Modern construction methods that progressively absorb more off-site inputs depend on well-developed design and integration details before a confident go button can be pressed. On most market housing development, the process is constructor led. Design and Construction (D&C) contracts concentrate the delivery and performance risk on constructors. Arguing against this defies gravity. Holding back contract tendering and award until 80-percent of traditional design is completed because designer self-interests claim builders are untrustworthy is baseless. The trustworthiness of developers and builders in NSW is now measurable.

Shifting from BaU to Smart-BaU depends on upfront engagement to tackle productivity, to reduce on-site material and workforce inputs, reduce overall delivery time, enable parallel commitments of on-site and off-site work and tackle embedded practices. These initiatives do not exclude MMC, they are inclusive for all who want to play.

In NSW the introduction of co-regulatory initiatives like iCIRT and Defects Liability Insurance are now the benchmark credentials for trustworthiness. Decerning lenders, investors and unsophisticated purchasers needed to facilitate off-the-plan sales can now face into the prospect that trustworthy developers and builders are likely to be around in the future to attend to their projects if needed. The incidence of serious defects in new dwelling projects is receding. All, essential for market confidence.

MMC is not the horse in all of this. It is just in the cart. In NSW developers are now accepting that their relationship journey with new projects is likely to span at least 15-years form conceptualisation to end of their statutory obligations. They are focusing on supply chain relationships that offer capability and durability. Accountability is key.

Builders who have embraced the NSW reforms are now experiencing early engagement and the prospect of building smarter. There are so many productivity uplift opportunities in a new setting where the able can be sorted from the less able. D&C contracts set up clear single point accountability. This is where these opportunities should be being leveraged by government and semi-government agencies tasked with housing supply. They should be prioritising measurable VFM capture. Not turning their back on it.

MMC and prefab must now embrace ethical behaviour and accountability. This means accountability to building owners and investors. Add financiers and insurers. Their standards do not stop at the factory gate, irrespective if those gates are on-shore, or off-shore. MMC’s customers must not become modern construction’s guinea-pigs. Dumbing down industry standards to accommodate MMC is pointless. Public confidence in Australia’s built-world is paramount. Any failure serves no interest.

Policy makers and industry interests also need to evaluate what remains to be done beyond Social Housing led procurement to enable MMC to become mainstream.

This includes but not limited to:

• Resolving MMC’s standing in the construction regulatory framework with nationally consistent construction standards,
• Developing a smarter BaU road map that includes MMC to show how both public and private procures of buildings can lock in elusive productivity benefits,
• Understanding and resolving obsolete construction contract forms that have yet to embrace the changing workflows and procurement arrangements for MMC,
• Creating a credible strategy that will attract consumers to purchase MMC buildings, especially in the apartment market,
• Supporting educators to understand and adopt modern construction methods,
• Demonstrating that MMC is in fact delivering better VFM by lowering costs and lifting the prospects of new development feasibilities.

None of these to-do-list resolutions are new. They have just been kicked down the road by those not willing to become accountable in a modern construction industry.

While Australian governments and industry remain focused on the ‘what’ versus the ‘how’, our construction industry will progressively submit to accelerating imports of value-added construction from on-shore. This is the opposite posture of the industry’s competing neighbours. Alan Kohler’s recent article assesses China’s race to embrace the potential of digitally enabled industries. It stands in stark contrast with western economies like Australia. China sets the mission and works back to make it happen. Until western economies understand the difference they will end up on the wrong side of history. The Australian construction industry needs to make some noise about the erosion of its domestic importance and the risk faced by becoming no more than installers when the last of the making has been allowed to float off-shore. And note the emphasis placed on engineers in China versus the impact of lawyer dominated economies ours.

Summary

The core questions posed in this article are likely to remain unresolved in the current policy and industry setting. They are fundamental to change. The foundations are missing.

What are the prospects for lifting residential construction productivity?

What role might increasing the amount of off-site construction work performed play?

What are the prospects of lifting construction output by 20-percent and lowering cost with no increase in workforce? Can 50-percent of dwelling constructors achieve this by 2030?

The slightest of construction modernisation breezes have been blowing in Australia for over 20-years. They have blown through the early off-site manufacture inputs like pre-cast concrete and more recently in timber building innovation. While all have proffered faster, smarter, better and cheaper as their reasoning, the parts have not joined up to present the full picture. Not much has changed and the measurable benefits elusive.

MMC is not showing signs of crossing over to the market housing sector. Some may argue otherwise but the proof will be in a genuine VFM MMC comparison with BaU.

This data is overdue or the modernisation of construction will stay in the ‘what’ row and miss the ‘how’ bus. While a data blind spot remains the serious construction cost crisis and the practices that have been their root cause will become part of the permanent cost landscape. That is simply unsustainable. Conversion of consents to keys will stall.

It’s time for a fresh national housing productivity driven strategy to displace the ‘what’ narratives that have been penned without the necessary industry ‘how’ insights targeted to housing. The strategy must incentivise lifting all the boats, not self-interests.

The prospects for MMC and prefab have yet to become mainstream in a modern industry.