Muhammad Adnan Fazal

Amplify- Prefab and Modular Housing Executive Summary The Federal Government, along with state and territory governments, has set an aspirational target to deliver 1.2 million new well-located homes over five years – an average of 240,000 homes per year. The Accord has helped drive accountability across all levels of government and sharpened the focus on supply-side solutions. Achieving this target will be difficult. For context, the residential construction sector has only once delivered 220,000 dwellings annually over four consecutive years – in the late 2010s. And it comes at a time when the capacity of the construction industry is already stretched. The challenge is compounded by lagging productivity across the sector. The overarching objective, therefore, must extend beyond short-term targets and aim to build long-term, enduring supply capacity and solutions. There are several ways to accelerate housing delivery. Increasing the number of multi-density projects such as those now being prioritised by the NSW Government around transport hubs is one. Another is fostering greater diffusion and adoption of innovative technologies to help build more homes faster. Recent advances in building construction have shown promise in improving delivery speed. Yet, industry take-up has been slow. Building contracting is inherently risky: firms must comply with standards while achieving returns that reflect project risk. Adding further uncertainty, adopting new construction technologies is often seen as costly and a step too far – even when those technologies are proven, and compliant with the National Construction Code, and manufactured to Australian standards. Despite these challenges, accelerating the uptake of modern methods of construction (MMC) remains one of the most promising ways to lift productivity and deliver more homes, more quickly. This paper aims to quantify the potential supply uplift from increased MMC adoption via two plausible scenarios based on a range of government and 2 / 41 industry actions. It also examines recent advances in construction technology, identifies barriers to uptake, and the relative benefits of MMC methods versus traditional building. Key findings Based on policy and private sector led actions to address key barriers to MMC, an MMC Acceleration Scenario could enable the delivery of around 122,000 additional homes over 20 years (31,000 in the first 10 years, and 91,000 in years 10–20). Under more ambitious policy and private sector led actions, an MMC Acceleration Plus Scenario could support 192,000 additional homes over 20 years (44,000 in the first 10 years, and 148,000 in years 10-20). The MMC Acceleration Scenario could unlock an estimated $14 billion in additional economic output and housing investment over 10 years or $55 billion over 20 years. The MMC Acceleration Plus Scenario could deliver approximately $20 billion over 10 years or $87 billion over 20 years in additional economic output through higher housing investment. Australia lags many global peers in MMC uptake, estimated at ~5%, compared to Sweden (~45%), Japan (~15–20%), New Zealand (~10%), and Canada (~4%). The primary benefits of MMC are its ability to deliver homes in up to half the time of traditional methods, using fewer on-site resources, a more predictable workforce, and generating up to 80% less construction waste. While there is currently no material cost advantage in using MMC over traditional builds, greater scale is expected to unlock cost advantages over time. 3 / 41 Seeding the pipeline is likely to be the single most important short-term lever to accelerate MMC adoption. Addressing finance constraints, enabling greater product customisation, streamlining regulatory certification, and building a fit-for-purpose workforce are also key to unlocking growth. Unlike traditional construction, MMC relies more heavily on efficient freight networks, integrated supply chains, access to capital and imported manufactured components. The expressed appetite for more MMC at the recent Economic Roundtables could help kickstart changes to regulation and government policy that are needed to allow MMC to grow and increase construction industry productivity. There isn’t enough housing, a generational problem The structural decline in inflation and interest rates that began in the early 1990s has now run its course. In 1990 – just before the early 1990s recession – the average mortgage rate in Australia was 17%. By the time of the COVID-19 pandemic, it had fallen to just 4.52%, according to RBA data . This long-run decline was mirrored across most advanced economies and had consequences for the Australian housing market. For homeowners, falling interest rates delivered contributed to a significant windfall: the median Sydney house price increased more than elevenfold over the 30year period. For prospective buyers, however, affordability worsened as prices consistently outpaced incomes. In response, successive state and Federal governments have sought to boost first home buyers’ purchasing power – typically through direct subsidies or grants. Most recently, the Federal Government has introduced a shared equity scheme. While these interventions have helped some first home buyers enter the market, the broader evidence suggests they have largely been capitalised into prices, creating a large financial impediment to the next marginal buyer. More positively, the current Federal Government has taken a more proactive role in supporting housing supply, 4 / 41 particularly via social and affordable segments, through initiatives such as the Housing Accord and the Housing Australia Future Fund (HAFF), which together aim to deliver 20,000 social and 20,000 affordable dwellings. The Housing Accord was designed to bring together all levels of government, institutional investors, community housing providers and the construction sector to boost medium-term supply. In its second phase, governments have raised their collective ambition from 1 million to 1.2 million well-located homes over five years, beginning mid-2024. This target, averaging 240,000 completions per year, is highly ambitious. Australia has never delivered housing at this pace, let alone in a coordinated way across public and private segments. Still, setting a stretch target sends a clear signal to market participants and can help align planning, investment, and delivery. Figure 1: Residential construction completions Private & public sector construction completions (Rolling 4 quarter sum) '000 Accord s ocial and a ffordable only ta rget Public sector construction completions (Rolling 4 quarter sum) 12 - 1.2 % of a l l completions 10 1.0 8 0.8 6 0.6 0.4 4 120 per '000 people (RHS) 2 1980 1990 2000 2010 2020 2030 No. 1.4 14 220 - % 0 1970 1980 1990 0.2 2000 2010 2020 0.0 2030 Source: ABS Cat 8752 1 See Cash Rate Target Overview | RBA 5 / 41 Prefabricated and modular housing can be a part of the solution Productivity in residential construction is a problem in Australia Australia’s construction industry has consistently underperformed on productivity compared to the broader economy . While the sector is often criticised for being slow to adopt new technology, the nature of building contracting itself creates structural barriers to innovation. ABS data illustrates the scale of the challenge. Over the past couple of decades, productivity in the Australian construction industry has remained weak (see Figure 2). Unfortunately, detailed productivity data across different construction segments – such as detached housing, multidensity residential, infrastructure, and commercial buildings – is not available. However, insights from the United States provide a useful reference point. In the US, labour productivity in multi-family residential construction has been materially stronger than in the single-family segment. This difference reflects the different style of construction and site logistics used in each sector. Multi-family construction benefits from more efficient worksite dynamics. Tower cranes and vertical build systems streamline material handling, and scheduling trades across multiple, similar dwellings reduces downtime. In contrast, single-family builds often involve dispersed sites, requiring trades to set up and pack down for each individual property, adding time and cost. Additionally, the economics of multi-family development improve significantly in urban areas where land is scarce. Higher-density developments allow more households to be housed on the same land footprint, making more efficient use of both labour and land. 6 / 41 Figure 2: Productivity growth (1995 = 100) Index Private sector Labour Productivity (1995 = 100) Index 190 US 170 US Construction industry Labour Productivity (1995 = 100) Mul ti -family 170 150 150 Aus tra lia 130 130 110 90 110 90 1995 2000 2005 2010 2015 Si ngle-family 70 Aus tra lian construction 2020 50 1995 2025 2000 2005 2010 2015 2020 2025 Source: ABS Cat 5204 US NBER. Labour productivity is measured as gross value added per hour worked Lump sum contracting, where a builder agrees to complete the entire project for a fixed price, regardless of the actual costs incurred during construction, remains the dominant model for new residential construction. Under this arrangement, the builder assumes most of the construction risk, and creates a strong bias toward using familiar materials and proven processes. As a result, many contractors are reluctant to adopt new technologies or building methods, and this also explains the slow uptake of MMC across the industry. Understanding the assembly process To properly understand how productivity can be improved in residential construction, it’s worth understanding the tasks that need to be undertaken to build a residential construction project. Residential construction involves undertaking many tasks of assembly that have traditionally been undertaken onsite. For example, reinforced concrete foundations are built by first excavating the foundations, then placing reinforcement into the excavation, before pouring concrete. Walls are built by firstly building frames on site using timber or steel transported to the site, erecting the frames in position, fixing external cladding using materials 2 Productivity in residential construction refers to the efficiency with which inputs, particularly labour and capital, are converted into new homes, with labour productivity measured as construction output completed per hours worked, and multifactor productivity is the output from capital (equipment) used. 7 / 41 transported to the site, installing insulation into the wall framing, and fixing internal cladding using materials also transported to the site. Figure 3 shows the full list of tasks that need to be undertaken to complete a detached dwelling construction project. Technological advances mean that many tasks can now be undertaken off-site, and these are highlighted in bold. Figure 3: Typical detached dwelling residential construction tasks • Site clearance • External cladding • Foundation excavation • Services rough-in • Placement of slab reinforcement • Window and door insulation • Placement of slab concrete • Insulation and internal cladding • Wall frame construction and erection • Painting • Services connection • Roof frame construction • Floor covering and cabinetry • Fixing of roof sheeting • Landscaping Source: Macro Strategy Advisors. Tasks completed off-site using modular construction typically include the items listed in bold. It may also include painting, service connections, floor covering, and cabinetry. What is prefabricated and modular housing Improvements in manufacturing technology have been the catalyst to take many of the onsite assembly tasks off-site. By taking tasks off-site and into a factory, economies of scale can be achieved and the marginal cost of production can be reduced. According to the Housing Industry Association 3 , prefabricated and modular housing can provide projects with the following benefits: 3 See Pre-fab and modular construction 8 / 41 • Reduce onsite construction time. • Increase labour productivity by using a factory-style assembly line approach. • Improve cost control. A well-defined delivery schedule is easier to meet in a controlled factory manufacturing process. • Improve quality control. It is easier to control the quality of a manufactured product in a factory than it is to control a product assembled on site and exposed to weather. • Less waste. On-site construction creates a lot of waste that normally ends up in landfill. • Safer work environment. It is easier to provide a safe work environment in a factory than it is on a construction site, where temporary scaffolding and other equipment need to be put in place. Furthermore, onsite work is highly dependent on the weather, particularly the tasks that need to be completed prior to “lock up”. There are three types of prefabricated building components: • Linear 1-dimensional (1D). 1D involves moving a relatively small component to the site and fixing it into position. This involves traditional methods of erection. For example, a steel beam or truss is manufactured off-site and fixed into place on-site. • 2 dimensional (2D}. 2D prefabrication involves manufacturing a wall, roof, or floor panel off-site and transporting it to the site for erection. A significant portion of the manufacturing work is done off-site rather than being done onsite using traditional methods of construction. • 3 dimensional (3D). 3D prefabrication is where 3-dimensional building components, such as the bedrooms of a house or a bathroom pod, are manufactured off-site, transported to the site, and installed. 9 / 41 MMC is not a single approach to construction, rather it is a collection of ‘methods’ to plan, design, and build that differ from traditional onsite builds. This paper is primarily focused on modular offsite manufacturing where a material proportion (typically more than 50%) of construction is completed offsite, in a controlled factory environment, using pre-manufactured components. However, MMC also includes new technologies such as 3D printing robotics artificial intelligence (AI). Box 1: History of prefabricated and modular housing Prefabricated and modular housing has a long history, dating back to the 1830s when London carpenter John Manning built a prefabricated home for his son migrating to Australia. The home was constructed in England, shipped to Sydney, and assembled on site. In the United States, prefabricated housing emerged in the 1840s to meet demand for housing created by the California Gold Rush. A notable early example was the Crystal Palace, built for Britain’s Great Exhibition in 1851 – designed in less than two weeks and constructed in just a few months before being dismantled and reassembled at a new site. Significant growth followed in the early 20th century, particularly in the US, where Sears Roebuck and Co. sold over 500,000 prefabricated homes between 1908 and the 1940s. These catalogue homes were marketed directly to consumers and cost roughly two-thirds less than traditional builds, with many still standing today. Another major wave of modular construction occurred after World War II, as countries like the US, Japan and those in Europe used prefabricated housing to meet the surge in demand from returning soldiers – delivering homes at scale, quickly and at a lower cost than conventional methods. 10 / 41 The Australian MMC industry In the early 20th century, prefabricated construction gained momentum as part of broader industrialisation. By the 1920s, “Federation Homes” had become popular across Australia, incorporating modular design elements such as standardised components and factory-built items. Following World War II, demand for demountable and relocatable buildings surged, particularly in Europe and Japan, where there was an urgent need to rebuild urban areas. Prefabrication methods were well-suited to meet this demand quickly and efficiently. The turn of the 21st century brought renewed interest in modular construction, driven by technological advancements and a growing awareness of its benefits. The industry began to embrace innovative building materials, digital design tools, and advanced manufacturing techniques, leading to improvements in construction quality, sustainability, and the ability to deliver more customised solutions. In 2014, Melbourne’s Acute Services Building, part of the Monash Medical Centre, was completed using modular construction. The $76 million project comprised more than 15,000 modules and demonstrated how speed and quality could be achieved at scale. Recent innovations, such as flat-pack modular systems, have expanded design versatility, enabling modular buildings to evolve from traditional rectangular configurations into more architecturally diverse structures that better reflect client preferences. Despite these advances, modular construction still carries some stigma in Australia where it is often viewed as cheap, transportable, and semi-permanent accommodation. In reality, many of these homes are constructed on residential blocks using similar materials and designs to conventionally built dwellings. A lack of systematic data collection makes it difficult to measure exactly how much MMC is being delivered in Australia. Consultation with industry, government 11 / 41 and other stakeholders suggests between 3%-5% of all dwellings, or (currently equivalent to 6,000 to 9,000 dwellings per annum) are built using MMC. For this report, MMC is defined as dwellings where the work done off site includes wall, floor, and roof framing, electrical and plumbing rough-in and fit-out, internal cladding and insulation, external cladding, and floor lining. Groundwork, slabs and foundations along with external work is done on MMC defined projects as well, but also when traditional construction methods are used. Similarly, items such as floor finishing, joinery, painting, and light fittings are work done on site when MMC is used but also completed by builders using traditional construction methods. Figure 4 highlights some of the businesses delivering modular homes in Australia. Figure 4: Some suppliers of modular residential housing in Australia Modscape One of Australia’s leading experts in offsite construction that uses the latest robotic technology. They have constructed prefabricated housing for single-residential homes, schools, hotels and a wider range of sectors. Shawood A subsidiary of Japanese home builder Sekisui House. They are expanding their market with community style development in many areas all over Australia such as Castle Hill. Community buildings are developed using modular technology, but single-family home product is also developed. 12 / 41 UniPlan UniPlan is a company based in Armidale NSW, established in 1999. 2,800 MMC properties across Australia. Parkwood modular buildings Provides a range of standard designs including 1-2 Bedroom Granny Flats, Smart Pods, 2-bedroom, 3-bedroom and 4-6-bedroom homes. Some solutions are transportable. Fleetwood Australia The building solutions unit is only in the multi-home project market (not standalone). It offers standard design solutions for residential developments, lifestyle villages, key worker accommodation, and social and affordable housing. Anchor homes Provides modular homes to the VIC and Southern NSW market. It offers standard designs for single or multi-home projects. JMB Modular buildings Provides standard design modular homes to the VIC market. Homes are generally smaller (1-3 bedrooms). Westbuilt homes A QLD based business providing modular homes to the South-east QLD and Northern NSW markets. It offers standard designs for single or multi-home projects. A wide range of home sizes is available. EcoLiv A regional Victorian manufacturer of standard design modular homes that can be delivered around Australia. 13 / 41 ArchiBlox A Victorian manufacturer of custom-designed modular homes servicing the NSW, VIC, QLD, SA, ACT, and TAS markets. The company also provides commercial building solutions. Hickory Hickory is a VIC-based medium to high-rise contractor that uses modular techniques and offsite manufacturing to speed up the construction program by around 30%. The business doesn’t build singlehome projects. It specialises in multi-density or commercial high rise projects. Habitech Systems A VIC designer and manufacturer of custom-designed modular homes servicing mainly VIC market. Source: Macro Strategy Advisors An academic study of the Swedish and Australian prefabricated building industries concluded that a focused and coordinated industry association is essential to support industry growth during its early stages. In Australia, the prefabrication and modular housing sector is represented by its own dedicated body – PrefabAUS. With over 300 members nationally (including both corporate and individual stakeholders), PrefabAUS supports the sector through events, learning opportunities, and advocacy. It aims to improve safety and efficiency in construction by promoting digital technologies, advanced materials, and modern systems. However, having a proactive industry body does not automatically translate to widespread disruption in a complex product like residential construction, where many manufactured components are traditionally assembled on-site. 14 / 41 Nonetheless, MMC is gaining increasing attention from policymakers. In the 2024–25 Federal Budget, the Commonwealth Government committed $54 million to accelerate MMC adoption. An additional $120 million has been allocated from the National Productivity Fund to incentivise states and territories to remove regulatory barriers that inhibit MMC uptake. These reforms aim to speed up home construction across Australia. At the state level, the NSW Government has committed $10 million to pilot the use of modular housing for social housing delivery, with projects planned in Wollongong and Lake Macquarie, and construction expected to be completed in 2025. The rest of the world uses it, so why shouldn’t Australia International comparisons provide useful context for understanding where Australia sits on the MMC adoption and innovation curve. A review of countries including Sweden, Japan and the UK highlights that Australia is currently lagging global peers. 4 Sweden is the global leader, with approximately 45% of detached homes and 95% of all multi-density residential buildings constructed using pre-fabrication methods5. Japan is also a global leader, with 15-20% of homes constructed using MMC. Japan is home to Sekisui House – the world’s largest homebuilder – which employs modular manufacturing techniques at scale. Its factories can produce up to 4,000 homes per year and delivered 10,000 homes between 2019 and 2022, demonstrating the capacity and speed MMC can unlock. In the United Kingdom around 10% of all residential construction is done using, but more recently targeted government procurement has accelerated take-up of MMC. For example, its primary social and affordable housing funding program includes a Strategic Partnerships program that requires at least 25% of new 6 homes be delivered using MMC . Industry is also playing a leading role, with the UK’s largest homebuilder, Barratt Developments, aiming to construct 30% of its 7 homes using MMC by 2025 . 4 All figures in this section should be considered estimates only due to the lack of widely available data. 5 See Issues_paper_Manufacturer_Certification_Scheme_for_Modern_Methods_of_ Construction.pdf 6 7 Capital Funding Guide - 9. Procurement and Scheme Issues - Guidance - GOV.UK Barratt Ramps Up MMC Homes Target To 30% By 2025 - London Build 2025 15 / 41 Figure 5: Estimated MMC undertaken in other countries 8 In New Zealand, around 9-10% of new residential buildings are completed 9 using is MMC . Similar to the UK, the NZ Government is using its social and affordable Housing Authority, Kāinga Ora, to promote and demonstrate the benefits of MMC to the broader housing industry. Projects supported by Kāinga Ora have demonstrate how cost-efficient imported manufacturing goods can help deliver housing at lower cost. MMC growth in Japan and Sweden hasn’t been driven by Government initiatives and direct investment in housing. Instead, it has been delivered by the private sector with supportive building codes and regulation, market structures dominated by large firms able to invest at scale, and consumer confidence in quality. A comprehensive country by country analysis, including broader considerations such as regulations, can be seen in the Appendix. Benefits of MMC relative to traditional methods Before modelling MMC’s potential to boost overall housing supply, it is useful to examine the specific factors that make it a more productive method of construction. This section draws on both qualitative insights and quantitative evidence to assess the benefits such as such as time savings, cost efficiencies, labour requirements, economic impacts, and waste reduction. Time savings stand out as the most significant productivity advantage. MMC 8 These figures have been drawn from publicly available information and should be considered indicative only. They largely reflect MMC associated with detached and duplexes. 9 See Issues_paper_Manufacturer_Certification_Scheme_for_Modern_Methods_of_Construction. pdf 10 Source: Hartigan & Associates analysis from a range of publicly available sources 16 / 41 homes can typically be delivered in half the time required for traditional builds. The cost savings achievable through MMC will vary widely and are shaped by multiple factors, including the scale of production, transport and freight distances, and efficiency of supply chains. Cost savings to date are not significant, with some 10 studies suggesting costs are higher and remain the key barrier to uptake , although 11 other studies suggest cost savings of 10-20% are possible However, efficiencies are expected to improve as MMC grow. Labour is also more manageable using MMC because coordination of subcontractors is not needed and weather is not disruptive to the manufacturing being done. Figure 6: MMC versus Traditional Construction Impact Area Time Savings Traditional Construction MMC ~9–12 months typical completion timeframe, ~50 days lost to bad weather Up to 30-50% faster (completion in ~4–6 months), due to off-site manufacturing and parallel site preparation, negligible days lost to bad weather Subject to high variability and cost blowouts Insignificant cost efficiencies currently, although some studies suggest up to 20% 13 of cost savings are possible Cost advantages likely to be greater in areas with capacity constraints (e.g. regional) Cost Savings 12 10 See 2023 ARCOM Proceedings 11 See Issues_paper_Manufacturer_Certification_Scheme_for_Modern_Methods_of_Construction.pdf 12 See Prefabs in the North of England: Technological, Environmental and Social Innovations, and Modular Construction: Revolutionizing Efficiency, Sustainability and Cost Effectiveness in Modern Development – Mann Report, although some studies suggest less time efficiencies see 2023 ARCOM Proceedings 13 See Issues_paper_Manufacturer_Certification_Scheme_for_Modern_Methods_of_Construction.pdf 17 / 41 Labour Impacts Subcontractor management and weather sensitivity makes traditional construction difficult. It’s also difficult finding labour in regional and remote areas Work done by subcontractors can be done by staff at the factory. This reduces the amount of work done on site and associated management complexities Economic Impacts Lower productivity, less scalable and slower to stimulate housing supply Higher productivity, can support faster housing deployment Waste Savings High construction waste (up to 30% of materials unused or discarded) Up to 80% waste reduction , due to precision cutting and reuse in controlled factory environments 14 The key benefit of MMC lies in its potential to deliver more housing in less time or more homes can be delivered with the same amount of labour input, which translates into higher productivity for the sector. Addressing barriers to unlock MMC Amplify has identified three priority areas that need to be addressed to accelerate the uptake of MMC: scalability (seeding the pipeline), modernising regulations, and mobilising the workforce. We assess the relative impact regarding dealing with these issues to accelerate MMC based on our research, together with discussions with stakeholders and industry. The analysis suggests that seeding the pipeline offers the greatest and most immediate impact in accelerating MMC adoption. A clearer and more consistent pipeline would give industry the confidence needed to invest and innovate, given the high upfront costs of establishing MMC capacity. Our liaison 14 See Economic Impact and Environmental Benefits of Modular Design 18 / 41 with some of the larger industry participants indicate that confidence in future pipeline is the key barrier to growth. 15 Notably, the Productivity Commission’s consultations highlighted “demand” as the most significant barrier to MMC adoption. This lack of demand does not in and of itself reflect a clear market failure that warrants government intervention. The perception of a cheap, semi-transportable home is a significant headwind for the industry to overcome. While the lack of demand is also likely due to construction costs having not fallen. There are several additional barriers hindering the uptake of MMC, as highlighted in the Productivity Commission’s report on housing productivity. Access to finance remains a key constraint, as MMC presents a different risk profile compared to traditional construction. However, recent moves by the Commonwealth Bank and its subsidiary to offer construction finance for modular homes is promising. Consumer preferences also pose a challenge. The Productivity Commission explicitly stated that “Australian consumers’ apparent preference for customised housing products, and limited knowledge and understanding of prefabricated construction may lead to a lack of comfort with the product, leading to low levels of demand” . Many Australians favour customised housing options, so improving the level of product customisation would better align MMC offerings with consumer expectations. Removing regulatory barriers such as aligning the certification process to suit a significant portion of the work done off site is important to promote MMC growth. This isn’t without precedent, with Canada redesigning its certification standards to accommodate MMC. MMC’s reliance on freight, transport logistics, and coordinated supply chains means that improvements in infrastructure, and reductions in regulatory and investment frictions (such as via foreign investment rules), could deliver outsized payoffs when it comes to improving nationwide productivity. 15 See Housing construction productivity: Can we fix it? 19 / 41 Quantifying the possibilities This section of the report attempts to assess the ability of MMC to contribute to Australia’s housing supply. The Australian residential construction industry was able to build 670,000 dwellings between 2016 and 2018, or an average of 223,000 per annum, without creating excessive pressure on resources or cost pressures (Figure 7 - LHS). However, it is important to note that to reach this milestone, the composition of dwellings constructed was evenly shared between detached and multi-density dwellings. This demonstrates that more dwellings can be built by multi-density development over detached development over a fixed time period. Figure 7: Residential construction Source: ABS Cat 5204 US NBER. Labour productivity is measured as gross value added per hour worked Multi-density construction allows more homes to be built over a defined period for two key reasons: • Greater land use efficiency. More homes can be built over a defined period using multi density construction. For example, acquiring an area of land for a 100-home multi-density project is more efficient than acquiring and developing 16 See Housing construction productivity: Can we fix it? 20 / 41 an area of land large enough for a housing estate for 100 blocks of land for detached housing. This is also reflected in a lower per-unit land cost because it is shared over a larger number of properties. • More efficient use of labour and materials during construction. Subcontractors such as concreters and form workers perform their specialist task on a building, but with multi density construction, that task is done over multiple properties. For example, the post-tensioned floor slab is formed and poured for say 15 properties when the subcontractor is on site, but with detached housing, the ground slab is formed and poured for just 1 property. Modelling assumptions • The scenarios model the marginal increase in MMC dwelling output associated with each policy mix, relative to an indicative baseline. These estimates represent output additional to what is currently being delivered, rather than total MMC delivery. • There are inherent challenges in attributing changes in housing output to specific policy interventions or industry actions. Therefore, these scenarios reflect a set of plausible scenarios based on professional judgement, designed to illustrate the potential scale of uplift rather than to predict precise outcomes. • We assume that the broader housing market is growing at the average pace of underlying demand or the average pace of household formation (over the last 20 years), which is currently around 180,000 dwellings per year. For the baseline,17 using ABS data we calculate the trend growth of housing completions in each state by building type and project it out over the projection period. This is equivalent to the trend growth in underlying demand over the period. • There is no system wide MMC data, but industry and Government estimates suggest MMC is around 3-5% of new builds. In 2024, the starting point for the projections, for both scenarios we’ve assumed that MMC is 5% of all construction (detached and multi-density) in each state, which would equate to around 9,000 dwellings across Australia in 2025. The output isn’t overly sensitive to the baseline assumption because the estimate is calculated from 17 ABS Building Activity, Australia Publication 21 / 41 a relatively large base and additional output from each scenario is calculated as a difference. • The total MMC construction market share is split between detached and multi-density. There is no data available to quantify the split, but industry contacts indicate that the multi-density share is very small. We assume MMC breakdown by building type is detached (80%) and multi-density 20%). • The plausible scenarios modelled and outlined below have been informed by consulting with 6 industry participants. Industry consultations suggest a doubling of capacity over the next 5-10 years would be possible if there was a strong pipeline of demand and other government and industry barriers were addressed. • The final MMC output numbers reflect construction approaches where a material proportion (typically more than 50%) of the build process is completed offsite, in a controlled factory environment, using pre-manufactured components. • To calculate the additional dwellings constructed, we calculate the difference between the MMC market share moving from “no new policy” baseline to being mobilised owing to the more modest and aggressive policy mixes. The splits between the detached and multi-density contributions are then calculated. • The modelling assumes that under the more modest scenario, the industry doubles its capacity and dwelling output by year 10 (from 5% to 10%) while the ambitious scenario sees the industry more than double its capacity from 5% to 12%. • Greater scale is likely to deliver cost efficiencies and accelerate MMC uptake further. While this hasn’t been explicitly modelled, it is reflected in the Acceleration Plus scenario as MMC accelerates at a faster rate from year 10 (moving from 12% to 22% in year 20). • We take no account of interest rate and house price movements because they are more important in the short term, and not the long term. 22 / 41 To assess the potential increase in supply benefits, we model an MMC Acceleration and MMC Acceleration Plus Scenario based on two sets of government policy and industry change that could be used to accelerate the uptake of MMC. These scenarios don’t represent policy recommendations, rather they illustrate the key areas that need coordinated effort needed by governments and industry to accelerate the use of MMC. MMC Acceleration Scenario Figure 8: MMC Acceleration Scenario: Policy and industry change required Policy and industry changes Issue addressed A MMC National Action Plan which would ensure whole of government coordination to addressing supply side impediments (e.g. workforce) and provide an MMC roadmap sending strong signal to market. The MMC Action Plan includes an aspirational target of achieving 15% MMC by 2045. Regulatory Friction, Workforce Immediately address known and outstanding MMC regulatory and compliance pathways, such as building in new certification processes, and better national guidance to support the accreditation of MMC solutions. Regulatory Friction 18 18 Ireland just released an MMC National Action Plan to help transform the construction sector (see Modern Methods of Constructions Action Plan). 23 / 41 Governments establish offsite regional knowledge sharing hubs to demonstrate the value of MMC technologies, showcase where MMC is most viable, and identify production components most suitable to MMC. This would particularly assist smaller builders identify MMC opportunities. Information Asymmetries, Education Housing Australia to play a more explicit MMC market demonstration role, like the Clean Energy Finance Corporation, to unlock, commercialise and deploy more MMC, helping to grow private sector investment. Demonstration, Finance Constraints 10% additional (and ongoing) HAFF funding (or a minimum of 5-10 MMC builds, annually) for Housing Australia as part of its social and affordable housing delivery, and 5% of the Government’s 100,000 new homes for first home buyers with state and industry developers to support new MMC construction across geographies. Seeding Pipeline, Demand States and Territories procuring a % of MMC as part of their social and affordable housing delivery programs. Seeding Pipeline, Demand 24 / 41 At least 2 of the major banks making finance available for at least 6 industry participants using MMC. Finance Constraints At least 6 major industry participants offering custom designed solutions using MMC. Improving Alignment to Consumer Preferences Source: Hartigan & Associates Results – MMC Acceleration Scenario The results of the modelling are shown in Tables 1 & 2. Based on the policy mix specified in this scenario, we estimate the following (these figures reflect dwelling output above the baseline): An additional 31,000 homes could be built over 10 years and another 91,000 over the following 10 years, or 122,000 homes in total over the next 20 years. Most of the contribution comes from NSW, VIC, and QLD. Economic output and investment in housing would increase by around $14 billion over the 10-year period. This does not account for the multiplier effects on other industries such as retail trade. Total economic output and investment could total $55 billion over the next 20 years. The smaller states don’t see a large benefit in our analysis. However, regional areas and dwelling supply in the smaller capital cities could easily increase more than in the scenario if policy efforts are focused on these areas because they are often located where construction costs are relatively higher than in the capital cities. 25 / 41 Mandating that 10% of an additional HAFF pipeline use MMC would support around 6,000 social and affordable dwellings in the first decade, and about 12,000 over 20 years. MMC Acceleration Plus Scenario Figure 9: MMC Acceleration Plus Scenario: Policy and industry change required* Additional policies Issue addressed The MMC National Action Plan to include a 20year aspirational goal that Australia achieves 20% of new supply from MMC by 2045 setting clear ambitions for industry. Seeding Pipeline, Demand 20% additional (and ongoing) HAFF funding for Housing Australia as part of its social and affordable housing delivery and 10% of the Government’s 100,000 new homes for first home buyers with state and industry developers as MMC to support new MMC construction across geographies, helping to demonstrate viability, showcase MMC and to stimulate demand. Seeding Pipeline, Demand Broader Government procurement of MMC (for things like schools, fire stations, flood and disaster responses etc) to generate positive spillovers for achieving scale (and lower cost) in MMC for housing. Seeding Pipeline, Demand 26 / 41 All 4 of the major banks making finance available. Finance Constraints At least 10 industry participants offering custom designed solutions using MMC. Improving Alignment to Consumer Preferences Source: Hartigan & Associates * indicates changes to industry or policies required in addition to those in the Acceleration scenario Results – MMC Acceleration Plus Scenario The results of the modelling are shown in Tables 3 & 4. Based on the policy mix specified in this scenario, we estimate the following: An additional 44,000 homes could be built over 10 years and 148,000 over the following 10 years, with around 192,000 in total over the next 20 years. Most of the contribution comes from NSW, VIC, and QLD. Economic output and housing investment could increase by around $20 billion over the 10-year period and a further $67 billion over the following 10 years. Total economic output and investment could total $87 billion over the next 20 years. This does not account for the multiplier effects on other industries such as retail trade, which would benefit from more residential construction output. Similar to the MMC Acceleration Scenario, the smaller states don’t provide a large contribution to the national benefit in our analysis. However, MMC is particularly suited to regional areas and smaller capital cities, so the distribution of the modelled benefit could be higher in these areas. 27 / 41 Mandating that 20% of an additional HAFF pipeline use MMC would support around 12,000 social and affordable dwellings in the first decade, and about 24,000 over 20 years. See Appendix for more detail on how the scenarios were constructed and how they can be interpreted. 28 / 41 Table 1: Addi�onal dwelling comple�ons MMC Accelera�on scenario (No.) Dwelling type by state Year 1 Year 2 Year 3 Year4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Total Year 11-Year 20 total NSW detached 105 220 336 451 566 681 797 912 1027 1142 6238 19719 multi-density 29 58 87 117 146 175 204 234 263 292 1604 5264 VIC detached 175 349 523 698 872 1046 1221 1395 1569 1744 9592 29345 multi-density 32 64 95 127 159 191 222 254 286 318 1748 5933 QLD detached 81 163 245 327 409 491 574 656 738 820 4504 11876 multi-density 1 13 28 42 57 71 86 100 115 129 643 2093 SA detached 84 112 140 168 196 223 251 279 307 335 2095 5226 multi-density 1 0 3 6 9 11 14 17 20 23 103 378 WA detached 136 174 212 249 287 325 362 400 438 475 3058 6483 multi-density 1 1 1 3 8 13 18 23 28 33 129 497 TAS detached 12 24 35 47 59 71 82 94 106 118 647 1957 multi-density 1 1 1 1 2 2 2 3 3 3 19 52 NT detached 1 1 3 5 8 10 13 15 18 20 95 291 multi-density 1 1 1 1 1 1 1 1 1 1 10 10 ACT detached 0 5 10 15 20 24 29 34 39 43 219 639 multi-density 1 7 12 17 23 28 34 39 45 50 257 945 Total 660 1192 1731 2274 2819 3365 3911 4457 5002 5548 30959 90706 Source: Macro Strategy Advisors 29 / 41 Table 2: Addi�onal economic output MMC Accelera�on scenario ($Am) Dwelling type by state Year 1 Year 2 Year 3 Year4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Total Year 11-Year 20 total NSW detached 55 115 175 235 295 355 415 475 535 595 3249 10272 multi-density 13 27 40 54 68 81 95 108 122 135 744 2441 VIC detached 76 151 227 302 378 454 529 605 680 756 4157 12719 multi-density 14 28 42 55 69 83 97 111 125 138 761 2584 QLD detached 36 73 110 147 184 222 259 296 333 370 2030 5354 multi-density 1 8 16 25 34 42 51 60 68 77 381 1241 SA detached 31 42 52 62 73 83 94 104 114 125 780 1946 multi-density 0 0 1 2 3 4 5 5 6 7 33 122 WA detached 52 66 81 95 109 124 138 152 167 181 1165 2469 multi-density 0 0 0 1 3 5 7 8 10 12 47 181 TAS detached 5 10 15 19 24 29 34 39 44 48 266 806 multi-density 0 0 0 0 1 1 1 1 1 1 7 21 NT detached 0 0 1 3 4 5 6 7 8 10 45 137 multi-density 0 0 0 0 0 0 0 0 0 0 3 3 ACT detached 0 3 6 8 11 14 16 19 22 24 123 360 multi-density 0 2 4 6 8 10 12 14 16 18 94 347 Total 285 526 771 1017 1264 1511 1758 2005 2252 2499 13888 41002 Source: Macro Strategy Advisors 30 / 41 Table 3: Addi�onal dwelling comple�ons under Accelera�on Plus scenario (No.) Dwelling type by state Year 1 Year 2 Year 3 Year4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Total Year 11-Year 20 total NSW detached 162 335 507 679 852 1024 1197 1369 1541 1714 9380 33223 multi-density 29 58 87 117 146 175 204 234 263 292 1605 7239 VIC detached 262 523 785 1046 1308 1569 1831 2093 2354 2616 14387 49392 multi-density 32 64 95 127 159 191 222 254 286 318 1748 8184 QLD detached 122 245 368 491 614 738 861 984 1107 1230 6760 19860 multi-density 1 13 28 42 57 71 86 100 115 129 642 2848 SA detached 100 145 190 235 279 324 369 414 458 503 3017 8767 multi-density 1 0 3 6 9 11 14 17 20 23 104 517 WA detached 160 222 283 344 406 467 529 590 652 713 4366 10810 multi-density 1 1 1 3 8 13 18 23 28 33 129 670 TAS detached 18 35 53 71 88 106 123 141 159 176 970 3292 multi-density 1 1 1 1 2 2 2 3 3 3 19 70 NT detached 1 2 6 9 13 16 20 23 27 30 147 486 multi-density 1 1 1 1 1 1 1 1 1 1 10 10 ACT detached 3 10 16 23 30 37 44 51 58 65 337 1070 multi-density 1 7 12 17 23 28 34 39 45 50 256 1304 Total 894 1661 2436 3213 3994 4775 5555 6336 7117 7897 43878 147743 Source: Macro Strategy Advisors 31 / 41 Table 4: Addi�onal economic output Accelera�on Plus Scenario ($Am) Dwelling type by state Year 1 Year 2 Year 3 Year4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Total Year 11-Year 20 total NSW detached 85 174 264 354 444 534 623 713 803 893 4886 17306 multi-density 13 27 40 54 68 81 95 108 122 135 744 3357 VIC detached 113 227 340 454 567 680 794 907 1020 1134 6236 21408 multi-density 14 28 42 55 69 83 97 111 125 138 761 3564 QLD detached 55 110 166 221 277 332 388 444 499 555 3047 8953 multi-density 1 8 16 25 34 42 51 60 68 77 381 1688 SA detached 37 54 71 87 104 121 137 154 171 187 1123 3264 multi-density 0 0 1 2 3 4 5 5 6 7 33 166 WA detached 61 84 108 131 155 178 201 225 248 272 1663 4117 multi-density 0 0 0 1 3 5 7 8 10 12 47 244 TAS detached 7 15 22 29 36 44 51 58 65 73 400 1356 multi-density 0 0 0 0 1 1 1 1 1 1 7 28 NT detached 0 1 3 4 6 8 9 11 13 14 70 229 multi-density 0 0 0 0 0 0 0 0 0 0 3 3 ACT detached 1 5 9 13 17 21 25 29 33 37 191 603 multi-density 0 2 4 6 8 10 12 14 16 18 94 479 Total 390 737 1087 1439 1791 2144 2496 2849 3201 3554 19687 66767 Source: Macro Strategy Advisors 32 / 41 APPENDIX International comparisons Sweden 19 • Around 45% of all new housing in Sweden is built using modular housing . • Swedish research has shown that modular construction reduces carbon emissions by around 50% compared to onsite construction, where there is more building waste. Modular construction uses stud framing, which allows higher quality insulation and energy performance when compared to double skin or solid brick. • The industry began with single-family housing but is now predominantly affordable multi family. • The assessment and verification of construction products is done using a nationwide system and Swedish building regulations. This is called Type Approval. Type approvals are also provided for products that are not covered by harmonised standards and European • Technical Assessments (ETAs). These approvals are done by a third-party, the Research Institute of Sweden (RISE). • Research by Chang-Richards et al. (2019) showed that in Sweden, selfcertification is followed by a third-party inspection and certification of factory production process and facilities, and manufacturing capacity. The research also showed that over time, Swedish modular housing manufacturers have developed a very high-quality focus and require less regulatory intervention because the technique is so widely used. 19 See A modern approach to construction | Savills Impacts 33 / 41 Japan • Following the completion of WWII reconstruction, Japan began to focus on providing modular housing. The aim was to produce superior quality homes, but at a relatively low volume. Initially, these homes were around 8% more expensive than conventionally built homes. In particular, the homes were built to meet high standards of durability and were manufactured with advanced features, warranties, and post-occupation care. These homes were designed to withstand earthquakes and were required to pass stringent fire and water resistance tests. • By 2019, 15%-20% of all new housing was built using modular construction. • The largest home builder in the world is Sekisui House, which uses modular manufacturing techniques in many of its projects. In 2019, it decided to enter the UK market via a partnership with ‘Urban Splash’ and the UK government’s housing agency. • The Sekisui House factory can build up to 4,000 homes a year. Between 2019 and 2022, it manufactured 10,000 homes, with up to 90% assigned a ‘zero energy home’ energy rating. This implies that net emissions are zero during the manufacturing, construction, and operational stages of the development. • Japanese manufacturers must adhere to the “home guarantee system” and “After Sales and Maintenance Service System”, which were introduced in the 1960s. This provides the consumers with services such as upgrades, renovations and re-customization. Any defects must be fixed without additional costs to the consumers. • The Minister of Land, Infrastructure, Transport and Tourism (MLITT) put in place a housing performance labelling system that requires third-party certification from private companies once they have conducted assessments to issue a performance evaluation. A standard 20-year warranty comes with all modular houses, which includes after-sales service. • An important step in the development of the approval process has been inspections by industry-specific trained professionals both in the factory and onsite, rather than just relying on manufacturers to adhere to a general building code. 34 / 41 The UK • Japan’s successful adoption of modular housing had its origins in post-WWII reconstruction, and it had an important influence on the growth of modular housing in the UK. • Ilke Homes was a UK company that manufactured homes not only in the UK, but also in Ireland and across Europe. It was liquidated in 2023, but most of its important assets were purchased by another firm, Home Space. • In 2013, the Build Offsite Property Assurance Scheme (BOPAS) was introduced to encourage off-site construction. The scheme is a risk-based evaluation that provides assurances to lenders, developers, contractors, and homeowners that buildings designed, manufactured, and installed by accredited MMC providers will conform to industry best practice durability and system integrity. The scheme is also designed to ensure that buildings created will be readily mortgageable for a minimum of 60 years. • The British Board of Agreement (BBA) issues certificates of assurance for construction products, subcontractors, and processes. They demonstrate a product’s fitness of purpose and compliance with building regulations. Manufacturers may be audited to ensure adequate quality management systems. Repeated testing may be required. • The UK modular industry is regulated by the same building codes as conventional construction. • In the early 2000s, the government made it a requirement that 25% of homes being funded by the Affordable Homes Program be built using MMC. However, this was dropped during the recession, which saw many developers cut back 20 their limited use of MMC to save costs . • Homes England have made supporting MMC a core part of their strategy through to 2022 23, and the 2021–26 Affordable Homes Program has made large grants conditional on the use of MMC in 25% of new housing. • The UK’s largest homebuilder is current targeting around 30% of all new home 21 builds to be built with MMC . 20 21 See Policy Briefing - UK Government MMC Policies and Strategies v1 2022.pdf See Barratt Ramps Up MMC Homes Target To 30% By 2025 - London Build 2025 35 / 41 New Zealand • In New Zealand, off-site manufactured housing account for around 10% of 22 newly built homes . • Similar to Australia, current NZ building consenting processes are best suited to traditional construction methods, and can present barriers, duplication and delays for more innovative products and methods. However, a voluntary manufacturing certification scheme was introduced in 2021 to help remedy some of these issues.23 • The NZ Government is using its social and affordable Housing Authority – Kāinga Ora – to promote and demonstrate the benefits of MMC in its housing delivery. • In August 2024, Kāinga Ora completed a significant social housing project in Auckland’s Point Chevalier suburb, delivering 61 one-bedroom apartments designed for older individuals and those with health needs, demonstrating 24 the efficiency and value of MMC . The projects supported by Kāinga Ora are in some circumstances very deliberately integrating cost efficient Chinese made manufacturing goods to help deliver housing at lower cost. • Kāinga Ora has also developed standardised designs for our homes to reduce complexity, duration and costs across the build process, which offers 25 increased opportunities for MMC . • Studies have found that standardisation in off-shore products regarding the New Zealand Building Code remains the biggest challenge in the consenting 26 process. Singapore • In Singapore, modular housing can only be approved if the builder can assure that the ‘Prefabricated Prefinished Volumetric Construction (PPVC) system 22 See Auckland Market Opportunity – modular housing | Auckland Economic Development 23 See Building law reform - Fact sheet 3 - Modern Methods of Construction 24 See Kaingaora Building a Better Future: The New Zealand Government’s Strategy for Modular Housing Solutions Manufactured in China 25 See Kainga Ora.pdf 26 See (PDF) Development of a framework for quality assurance of off-site manufactured building components: A case study of the New Zealand housing sector 36 / 41 meets the building code performance requirements. An application for offsite manufacturing is then submitted to the Building Innovation Panel (BIP). The BIP then seeks suitable regulatory authorities to provide feedback about the application. • If approval is granted, In Principle Acceptance letters are issued to the supplier/ manufacturer and are listed on the BCA’s website. • Additional accreditations are also required by the Pre-caster’s Accreditation Scheme for PPV shell production and the Prefabricated Pre-finished Volumetric Construction (PPVC) Manufacturer Accreditation Scheme (MAS) for fitting out works. The PPVC MAS is managed by the Singapore Concrete Institute and the Structural Steel Society of Singapore. The scheme ensures quality assurance and control in the production of PPVC and sets the process for manufacturers to produce high-quality PPVC systems (Swinburne University of Technology, 2022). Canada 27 • Some estimates put Canda’s MMC at around 4%, similar to Australia’s output. • There are three Canadian Standards Association (CSA) standards that are directly related to the construction of modular housing: • CSA A277-16 {R2021): Specifies the procedure for the certification of prefabricated buildings, modules, and panels. This standard provides the procedure for certifying buildings, and partially or fully enclosed modules and panels for buildings of any occupancy. It provides requirements for certification of the factory quality program and the prefabricated product, auditing of the factory quality program, and in-factory inspection of the prefabricated product. (Swinburne University of Technology, 2022). • CSA Z240 MH Series-16 (R2021): This standard provides general requirements for manufactured homes, including technical requirements, and requirements on quality control, markings, and provision of printed instructions (Swinburne University of Technology, 2022). 27 See Issues_paper_Manufacturer_Certification_Scheme_for_Modern_Methods_of_ Construction.pdf 37 / 41 • • CSA Z240.10.1:19: This standard provides requirements for site preparation, foundation, and installation of buildings. The standard also provides requirements for permanent foundations, anchorages to resist overturning and pier toppling due to wind, connection of modules, and skirting (Swinburne University of Technology, 2022). In addition to national standards, prefab and modular buildings must comply with provincial and territory building code requirements. Additional certifications are used to quantify other aspects of the modular buildings, including energy efficiency and sustainability (BC Housing, 2014). Barriers to Finance In traditional single-home construction, milestone payments have been used to provide the client with cash flow to meet payments to the contractor. However, when using modular construction, it is not possible to do this because a large portion of the work is being done off-site. Banks have financed projects built using modular construction by making only two payments available to contractors- a deposit at the start of manufacturing and a payment at completion. This created significant cash flow pressures for builders. In practice, modular builders negotiate with banks to adjust the standard payment terms. In some instances, the builder will find their financing and use it to provide cash flow while the dwelling is being assembled in the factory. The cost of this is then passed on to the homeowner, and according to industry sources, it could be around 1.5% of the total cost of construction. It is also possible that homeowners have sufficient equity in other assets to fund the manufacturing process, with the second traditional bank lending product available to refinance the equity upon the completion of construction. A guarantor could also be used in a similar way. Bankwest announced in December 2023 that it would increase its support for modular construction by allowing its customers to authorise an additional 38 / 41 payment stage for up to 95% of the value of the land (90% for investment loans). The additional progress payment has been made available only for applications without Lenders Mortgage Insurance (LMI) and with a Loan to Value Ratio (LVR) equal to or lower than 80%. In January, CBA became the first major bank to offer lending to households hoping to build their home using modular construction. It provides finance for construction to a limited number of manufacturers and builders using this method of construction. MODELLING The following section provides a more detailed explanation of how the modelling in this paper has been constructed, along with a simple interpretation of the figures in a broader housing context. The modelling assumes that, in the absence of strong policy action, MMC uptake will continue to grow broadly in line with underlying housing demand. In the baseline scenario, growth is largely driven by demand for multi-density apartments. While only around 20% of the MMC contribution is assumed to be multi-density, the strong underlying demand for this building type means it makes a significant contribution to the baseline. All dwelling outputs are expressed as MMC dwellings above the baseline (see Figure 10). The Acceleration and Acceleration Plus scenarios apply different policy mixes to generate this additional output. By Year 10, the Acceleration Scenario delivers around 6,000 dwellings (annually) above the baseline, while the Acceleration Plus Scenario delivers around 8,000 annually above the baseline. By Year 20, the Acceleration Plus Scenario reaches approximately 20,000 MMC 39 / 41 dwellings above the baseline. The total output figures are distributed across states and territories in line with underlying demand (outlined in the methodology section). Figure 10: Number of dwellings constructed using MMC Estimated housing supply using MMC No. '000 40 Currrent MMC Acceleration 30 Acceleration Plus 20 10 0 2003 2008 2013 2018 2023 2028 2033 2038 2043 2048 Source: ABS, Macro Strategy Advisors Pty Ltd Projections for current MMC are calculated using the current industry contribution Given the challenges in attributing specific output levels to individual policies or industry actions, long term projections rely on a higher degree of judgement, anchored in plausible industry capacity and growth assumptions. Below is also a more detailed explainer and interpretation of Acceleration Plus Scenario. 40 / 41 Figure 11: Explainer and Interpretation of Acceleration Plus Scenario Period (years) Description of plausible scenario construction 1-5 This period assumes that the share of MMC increases linearly from a starting point of around 5% and this more than doubles to around 12% within 10 years Interpretation of the final numbers In the early years (1–5), growth is driven primarily by demand-pull levers, notably additional HAFF funding directed toward MMC delivery in the social and affordable housing segment. For context, a 20% increase in HAFF allocation to MMC (as specified in current policy mix) would deliver an estimated 1,200 additional MMC dwellings annually, compared with the modelled average of ~1,700 additional dwellings per year over this period. Ensuring 10% of the Government’s 100,000 new homes for first home buyers with state and industry developers would also add to demand for MMC. Clear long-term targets and demand-pull measures provide industry with the certainty needed to commit capital, find new sites, get relevant approvals and expand capacity, and invest in skills and technology. In the medium term (6–10 years), growth reflects industry consultations suggesting that with the right policy signals such as ongoing strong demand from Government procurement and improved customisation MMC capacity could plausibly double. 5-10 By this stage, leading firms are assumed to have made significant investments, secured sites, and commissioned and built new factories. The strong policy environment would also likely attract new entrants. Across the decade, modelling indicates around 44,000 additional MMC dwellings above baseline which would be a mix of ongoing demand via Government procurement and industry actions. Over time, other elements of the policy mix such as improved product customisation, better matching of consumer preferences and better access to finance are progressively driving uptake. 10-20 By Year 20, MMC’s share is projected to accelerate to around 22% At this point, in year annual MMC output is around 20,000 dwellings annually above the baseline, compared to 8,000 above the baseline in year 10, with scale efficiencies supporting sustained highervolume production. Across the 20-year period, this scenario indicates approximately 192,000 additional MMC dwellings above baseline. 41 / 41