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Launched today, 2 September, at Anchor Homes in Bayswater, prefabAUS’ new industry-wide contract targets one of prefab housing’s key constraints — aligning finance with factory production — as Federal Member for Macnamara and Special Envoy for Social Housing and Homelessness Josh Burns calls for greater scale across the sector.
PrefabAUS has launched a standard form contract for Class 1 prefabricated housing designed to align construction payments with the way factory-built homes are actually manufactured and delivered. (main image: prefabAUS members and industry attendees at Anchor Homes’ Bayswater display centre for the launch of the new standard form contract for prefabricated housing.)
Developed with sponsorship from Commonwealth Bank, the contract is intended for use across the industry by manufacturers, builders, customers and lenders, regardless of which lender provides the finance.
The contract was presented during a prefabAUS industry visit to Anchor Homes’ display centre in Bayswater, Melbourne, attended by prefabAUS Executive Chairman Damien Crough and Burns.
Crough said existing construction contracts and lending arrangements had created a particular problem for manufacturers because substantial work occurs before a home reaches the building site.
The lack of a payment mechanism during factory production had forced manufacturers to rely on working capital or provide bank guarantees against projects underway in their facilities.
That, Crough said, “actually devalued their business and made it hard to grow.”
Why conventional contracts don’t fit factory production
Traditional residential construction contracts generally link progress payments to work completed on site. Prefabricated construction changes that sequence, with much of the dwelling completed inside a manufacturing facility before it is transported and installed.
The new contract establishes defined payment stages intended to reflect design, offsite manufacture, transport, placement and completion. PrefabAUS says this should give manufacturers more predictable cash flow while providing customers and lenders with greater clarity around how a prefab project progresses.
At the launch, Crough described it as “a standard form contract that recognizes a home being manufactured in a facility rather than being built on site.”
He said CommBank’s involvement, alongside its lending policy for prefabricated housing, could help remove one of the constraints on manufacturers seeking to increase production.
CommBank has separately introduced a lending policy allowing eligible customers to access progress payments during the offsite construction phase, reducing the amount that may otherwise need to be funded before the dwelling arrives on site.
The prefabAUS contract itself, however, is not restricted to CommBank-financed projects.
Burns puts scale at the centre of prefab growth
Burns said the ability to increase manufacturing scale would be critical if prefab and other modern methods of construction were to make a larger contribution to housing supply.
“Well, it’s all about scale, isn’t it?” Burns said during the visit.
“The more scale we’ve got, the more confidence you’ll have,” he said, adding that greater production volumes could also give manufacturers more certainty through their supply chains.
Speaking later to industry participants, Burns linked the issue to the broader challenge of housing affordability and construction productivity.
“We need to find ways to build quickly,” he said.
“But we also need to find innovation and bring improved productivity in the construction of housing.”
Burns said the economics of prefabricated housing remained closely tied to scale.
“We also know that the economics of prefab housing is one where we need scale, and there will be a tipping point where prefab and modern methods of construction are a dominant aspect of construction in Australia,” he said.
“But we need to continue to build that momentum.”
Finance becomes part of the scale equation
Burns said access to finance was essential if more Australians were to consider prefab housing.
“Without being able to access finance,” he said, people could be “looking at this, wanting it, but not being able to actually afford it.”
He said financing models needed to work not only for manufacturers, but for Australians seeking to buy factory-built homes.
Crough also pointed to consumer confidence, arguing that clearer contractual and financing structures could make factory-built housing easier for customers to understand and fund.
For an industry seeking to move from individual projects to repeatable production, the significance of the new contract is therefore less about introducing another form of building agreement than about bringing the financial structure of a project closer to the way the home is actually produced.
The prefabAUS Standard Form Contract for Class 1 Domestic Construction is now available to industry participants, with further work underway to digitise the contract and streamline its use across projects.
Find prefabAUS HERE
