26,000 approved rental apartments remain unbuilt as research calls for modular housing reforms

More than 26,000 approved build-to-rent (BTR) apartments across Australia have yet to commence construction, with new University of Melbourne research identifying taxation, financing and regulatory barriers that are limiting opportunities to deliver rental housing through volumetric modular construction (VMC). (main image: Freecity’s Herring Road project puts factory-built housing into practice as new research calls for reforms to bring modular construction into the mainstream.)

The report, Enabling Volumetric Modular Construction in Australia’s Build-to-Rent Sector – International Policy and Governance Recommendations (pdf), was commissioned by modular developer Freecity and released at an industry workshop in Sydney on 9 October.

Drawing on policy and construction practices in the United Kingdom, Canada, Singapore and the United States, the research argues that Australia’s housing delivery challenges are not solely a question of construction capacity. They also reflect financing and regulatory systems that have yet to accommodate industrialised building methods.

According to the report, 26,210 approved BTR apartments remain at development approval stage, while 64 per cent of approved BTR developments have yet to secure funding. The average period between development approval and construction commencement has also increased to more than 30 months.

These figures come against a backdrop of apartment construction costs rising approximately 80 per cent over the past decade, further weakening development feasibility.

Why modular construction and build-to-rent align
The researchers identify a strong relationship between BTR developments and volumetric modular construction.

Unlike conventional build-to-sell apartment projects, BTR developments typically involve a single long-term owner, repeated apartment layouts and consistent specifications. These characteristics provide opportunities for manufacturing standardisation, volume purchasing and greater production efficiency.

The report cites research indicating that VMC can reduce construction programmes by 25–50 per cent compared with conventional methods, particularly where factory production proceeds concurrently with site preparation and structural works.

Freecity Chief Strategy Officer and report co-author Steven Mann said Australia has an opportunity to establish a substantially larger rental housing sector. “It’s rare for a country to have the chance to grow a new type of housing. BTR is already one of the largest property investment markets in the world and Australia only started delivering it this decade. We believe modular BTR is well suited to delivering high-quality rental homes in large numbers and if Australia can match the growth rates of the US and the UK, it could be delivering more than 10,000 homes per annum by the next

The case for financing reform and manufacturing certainty
The research identifies six interconnected barriers affecting BTR and modular construction: taxation, finance, incentives for industrialised construction, planning, certification and insurance, and transport logistics.

One recommendation is to introduce a Commonwealth GST rebate for qualifying BTR developments, drawing on Canada’s 2023 decision to remove GST through a rebate for new purpose-built rental housing.

The researchers also propose a national low-cost, repayable construction loan programme, with preferential financing arrangements for developments using certified volumetric modular systems.

However, one of the report’s more consequential findings for Australian modular manufacturers concerns the relationship between factory investment and project pipelines.

International experience has demonstrated that expanding manufacturing capacity does not necessarily create a sustainable modular construction industry. Several overseas manufacturers have struggled or closed despite substantial investment in production facilities.

The researchers argue that governments should establish a consistent, long-term development pipeline before, or alongside, supporting new manufacturing capacity.

Singapore provides one example. Its use of mandatory prefabricated prefinished volumetric construction on selected government land sales sites has helped establish predictable demand, contributing to design-for-manufacture-and-assembly adoption reaching 76 per cent of gross floor area in 2025.

Certification and planning remain significant obstacles
The report also calls for nationally consistent certification and approval arrangements that give financiers and insurers greater confidence in modular construction.

Australia’s proposed National Voluntary Certification Scheme for manufacturers, being developed through the Australian Building Codes Board, is currently expected to be implemented in mid-2028.

The researchers recommend bringing that timetable forward and extending assurance arrangements across the manufacturing, transport and installation process.

They also acknowledge NSW’s Building (Approvals and Practitioners) Act 2026 as an important legislative development, establishing dedicated pathways for prefabricated buildings.

Lead author Dr Xiao Ma, from the University of Melbourne’s Faculty of Architecture, Building and Planning, said many of the barriers arise before construction begins.

“Modular construction is well proven overseas. In the countries we studied, BTR and modular construction grew quickly where governments provided pipeline certainty through enabling policies such as tax, government-backed finance, planning recognition or guaranteed demand on public land. Most of the barriers we found in Australia hit at the very start of a development (e.g, financing, planning, and design), when investors are deciding whether a project is viable.”

Freecity advances its modular development pipeline
The research comes as Freecity progresses several Australian developments using volumetric modular construction.

Its 20-storey, 528-room purpose-built student accommodation project at Herring Road, Macquarie Park, is under construction and is expected to become Australia’s tallest volumetric modular building.

The company is also designing a VMC-BTR tower of more than 60 storeys in Parramatta and has received development approval for two residential VMC-BTR towers at Rouse Hill, incorporating co-living accommodation and providing 548 rental homes.

While the study’s recommendations would require further government action, its central finding extends beyond BTR: improvements in factory productivity alone will not establish a viable industrialised construction sector without corresponding changes to development financing, regulatory certainty and the availability of projects.

For Australian modular manufacturers, the challenge is therefore as much about securing a dependable pipeline of projects as it is about increasing factory capacity.

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