Andrew Leigh calls for national approach to modular construction

Assistant Minister for Productivity, Competition, Charities and Treasury Andrew Leigh has placed modern methods of construction (MMC) at the centre of the federal government’s productivity agenda, arguing that nationally consistent regulation and greater manufacturing capacity could help reverse Australia’s declining housing construction productivity. (main image: MODNPODS modular accommodation units at Reflections Holiday Park, Hawks Nest, NSW.)

Addressing the Australian Sustainable Built Environment Council (ASBEC) at Parliament House, Canberra, on 29 October, Leigh outlined the government’s existing investment commitments and its ambition to establish modular construction as a conventional housing delivery option by 2036.

Citing Productivity Commission figures, Leigh said Australia produces approximately half as many homes per construction worker as it did 30 years ago, with building sector productivity declining 12 per cent over that period after adjustments for larger homes and higher building standards.

“Yet housing construction productivity has gone backwards,” Leigh said.

He pointed to prefabricated wall panels, bathroom pods and volumetric modules as opportunities to shift construction activities into controlled manufacturing environments, where standardisation, specialist equipment and parallel factory and site operations can improve efficiency.

National certification and regulatory reform
A central theme of Leigh’s address was the need to remove regulatory differences between states and territories that constrain manufacturers seeking to supply a national market.

The federal government has committed $120 million through the National Productivity Fund to support states and territories in placing MMC on an equal regulatory footing with conventional construction.

A further $4 million supports nationally consistent definitions and a voluntary manufacturer certification scheme, scheduled for full commencement in mid-2028.

Led by Housing Minister Clare O’Neil, the proposed arrangements are intended to provide manufacturers with clearer pathways to demonstrating compliance with the National Construction Code.

“A manufacturer investing in a new production line wants to serve customers across the country. Different regulatory interpretations can make that considerably harder,” Leigh said.

“One nationally certified product should be able to reach a national market.”

Leigh also referred to building ministers’ agreement earlier in October to pursue a simpler, more nationally consistent National Construction Code, including clearer approval pathways for innovative construction methods.

The government is additionally providing $42.7 million to make Australian Standards referenced in legislation freely available online.

Other existing commitments highlighted in the speech included the $39.3 million Kit of Parts initiative, intended to make standardised Australian-designed building components freely available, and $135 million for Construction Centres of Excellence.

Manufacturing investment and the economics of MMC
Leigh identified the National Reconstruction Fund Corporation’s investment of up to $120 million in Built Living, the joint venture between Built and Wesfarmers, as an example of emerging industrial-scale housing manufacturing.

The investment, announced in August, supports a proposed facility in Neerabup, Western Australia, designed to manufacture components for more than 2,000 apartments annually.

Built Living is targeting apartment construction up to 50 per cent faster and 20 per cent cheaper than conventional methods, although these remain company ambitions rather than demonstrated project outcomes.

Leigh acknowledged that modular construction does not yet deliver consistent cost savings across all applications.

Referring to research by CEDA and Urbis, he said MMC could reduce construction times by 20 to 50 per cent, while some modular developments currently attract cost premiums of 10 to 20 per cent.

In other applications, particularly regional projects and higher-density developments involving repeated designs, costs can already be approximately 10 per cent lower.

“Factories need a reliable flow of orders. Expensive machinery delivers its greatest benefit when production is steady,” Leigh said.

He also identified construction finance as an unresolved challenge, noting that conventional progress-payment arrangements often fail to accommodate expenditure incurred before factory-built components reach a development site.

Leigh said significant prefabrication currently accounts for approximately 3 to 5 per cent of new Australian housing, while industry association prefabAUS has set an aspiration of reaching 30 per cent of construction by 2033.

However, he cautioned against treating market share alone as the measure of progress.

“The goal is higher productivity and better homes. Modern construction methods are one way of getting there.”

By 2036, Leigh said he wanted modular housing to be regarded as an ordinary option for developers and homebuyers, with Australian factories supplying customers nationally and supported by predictable demand.

The address did not introduce a new funding programme, but consolidated several existing federal initiatives around a common objective: establishing the regulatory, financial and manufacturing conditions required for MMC to operate at greater scale.

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