Prefab alone can’t solve our housing crisis. We need to think bigger.

The $54 million funding for prefab housing in last week’s federal budget is an important step towards solving Australia’s housing supply issues.

It could fix about 10 per cent of the housing problem. The big shift required to solve 80 per cent is a fully industrialised approach to building and construction, acknowledging that 10 per cent will always be conventionally produced.

Industrialised building is akin to the digital disruption of the 2000s era. It is often mentioned in the same breath as Modern Methods of Construction (MMC) but is broader in that it considers design, development, planning approvals, financing and building operation as well.

Pumping more funding into prefab is important, but equally critical is being realistic about its potential to solve our housing crisis, or whether it can fix bottlenecks experienced at every step of the current building process.

Industrialised building is not an argument for more technology per se. It is primarily a new way of working that will see existing supply chains and business models picked apart and superseded by more efficient ones.

This structural shift is a long game. Tradies nearing retirement will need a good reason to change their ways. The mainstream development industry will get a shake up too. Having long enjoyed the highest margins in the sector, new market entrants are likely to challenge developers’ position at the top of the value chain.

If history is anything to go by, industrial relations will present a hurdle even though this transformation is likely to create more jobs and growth opportunities than it destroys.

It will also take at least a decade even if we get cracking now. And therein lies the rub: industrialised building can solve today’s problems but only in 10 years’ time.

Meanwhile, today’s housing crisis is all-consuming and rightfully so. Having a roof over your head is considered a basic right of Australians even though fewer people find it attainable.

The magnitude and acuteness of the problem leaves very little headspace and investment for productive and innovative long-term solutions. Which is exactly what got us into this pickle.

Governments are faced with an invidious choice: put a cheque in the mail that will arrive 10 years from now with interest, or continue tweaking the dials of the present industry for another decade hoping for a better and faster outcome.

There is a third option: a two-speed plan that produces practical short-term solutions laddering up to a long-term master plan.

The case for exploring better ways of building is uncontested. Skills shortages in construction are dire and the ageing profile of the industry means it will only get worse.

Australia’s housing productivity has declined by 12 per cent over the last 30 years while the rest of the economy has improved by 49 per cent.

Our building industry has been slow to adopt digital technologies and embrace new ways of working, contributing to a spike in construction costs of roughly 65 percent in the last 10 years and housing starts sitting around 90,000 per year below where they need to be.

All of this means we’re paying about $200,000 more to build an average suburban house (minus the land value) than we were 10 years ago. The same price increases are being felt in the apartment space.
Industrialised building is not yet fully operational, but Australia is well on the way to establishing it. Work in this area reveals the potential to reduce construction times and costs by 20 per cent and reduce design and development processes from months to weeks.

To supercharge its initial prefab investment the government could consider three complementary structural reforms; firstly, aggregate demand to create a strong and sustainable pipeline for this new industry. Secondly, increased awareness of an emerging industry that can make standardised building parts but doesn’t result in standardised building designs. Finally, focus on the economic feasibility of medium density housing which generates the volume of housing we desperately need and the most liveable cities.

Mathew Aitchison is Chief Executive Officer of Building 4.0 Cooperative Research Centre and a Professor of Architecture at Monash University.