WA government highlights new focus on modular homes

Modular homes, sometimes billed as the building industry’s answer to flatpack furniture, only account for roughly five per cent of the total construction market but have taken centre stage in Western Australia’s state budget.

In a quest to address a chronic lack of housing supply, the WA State Government on Monday (16 June) announced that Keystart will launch a new low deposit modular loan product to assist more people, particularly in regional WA, to purchase a modular home. Keystart is an initiative launched by the Western Australian Government aimed at helping people into home ownership by lowering entry costs.

The state government said modular construction is a popular choice in regional WA where access to trades and the cost of a traditional build can make housing inaccessible.

“Delivery of modular homes is also increasing in the metropolitan area driven by good design and speed to market,” the government said.

“Low deposit modular loans will improve access to affordable homes that can be delivered faster.

“The product will also provide additional progress payments to support builders' cashflow and to grow the industry.”

Modular homes are houses built in sections, or "modules," inside a factory and then transported to a building site for assembly on a foundation. These sections are then joined together to create a complete, permanent home.

Western Australia’s government is not the first to turn to modular homes.

The Queensland Government’s QBuild Modern Methods of Construction program aims to increase the use of modular solutions in social and affordable housing. 

The Federal Government in March committed $54 million to support the expansion of prefab and modular construction.

Prefabricated homes potentially halve the time required to construct new homes but have historically encountered obstacles such as prolonged planning approvals and complex financing options for prospective homeowners.

Recognising those potential roadblock, $4.7 million of the federal budget commitment was designated to establishing a voluntary national certification process to hasten approval times for offsite construction projects.

REIWA President Suzanne Brown has commended the funding of several new Keystart products in the State Budget 2025-26, acknowledging the potential boost to housing affordability and supply.

“Housing supply and affordability are some of the greatest challenges facing the property market at the moment,” Ms Brown said.

“Innovative solutions are needed to help build affordable new homes. Modular homes can be more affordable and built more quickly than a traditional build.

“Keystart’s low deposit modular loan product will make this type of build more accessible for home buyers, which may help boost new home supply.

“This could be particularly beneficial in regional WA, where it is harder to get tradespeople and building costs have risen significantly.”

Construction productivity deteriorating

Despite the current low share, there is growing recognition of the potential of modular construction to address housing affordability and supply challenges in Australia.

Some projections suggest one in ten new homes built in Australia could be modular by 2027.

A report by Built Offsite stated that Australia’s construction sector faces a critical moment.

“Without meaningful productivity improvements, the country risks falling even further behind in meeting housing demand.

“Modular housing offers a path forward, but significant policy shifts are needed to facilitate its wider adoption.”

Australia’s housing construction productivity has slumped badly.

Productivity Commission research showed the number of dwellings completed per hour worked has plunged by 53 per cent over the past three decades. Despite increasing demand, driven by population growth and a housing shortfall, the industry has failed to achieve efficiency gains comparable to other sectors, placing further pressure on housing affordability.

It is a situation that is not unique to Australia.

While the National Construction Code (NCC) does not prohibit modular construction, it remains largely structured around conventional onsite building methods.

“This has led to uncertainty in approval processes, with certifiers and local governments often taking a conservative approach, limiting investment in modular solutions,” Built Offsite’s report noted.

Housing crisis drives modular uptick

The Australian Building Codes Board has begun working with industry to clarify regulatory pathways for modular and prefabricated housing.

The Australian Building Codes Board has released a comprehensive Prefabricated, Modular, and Offsite Construction Handbook, to provide guidance on building safely, sustainably, and in compliance with the National Construction Code.

Australia’s housing crisis, marked by soaring costs and sluggish construction, is driving the shift toward modular home building.

Modular homes, built off-site in controlled factory settings, promise faster build times, reduced waste, and up to 20 per cent cost savings, according to Productivity Commission modelling.

Innovations like AI-driven design and net-zero energy homes further enhance their appeal.

Despite the enthusiasm, challenges persist. The industry suffers from underinvestment, high initial costs, and a fragmented construction sector dominated by small firms reluctant to adopt new technologies.

Local councils’ scepticism, fuelled by past failures of low-quality prefab homes, adds another hurdle.

Modular housing’s potential to address Australia’s goal of 1.2 million new homes by 2029 is undeniable, but scaling up requires overcoming labour shortages, streamlining regulations, and boosting financier confidence.

As the government collaborates with banks to create tailored financial products, the sector is poised for growth.

If these barriers are addressed, modular homes could redefine Australia’s housing landscape, offering a sustainable, affordable solution to an enduring crisis.