Australia’s modular housing debate has focused too much on speed and not enough on trust. Faster construction matters, but modular housing will not become mainstream simply because homes can be manufactured in factories and assembled quickly on site. It will scale only when banks are comfortable financing it, insurers are comfortable underwriting it, regulators are comfortable certifying it and consumers are confident that responsibility is clear if something goes wrong.

That is the missing policy conversation. Australia does not only need more modern construction capability. It needs the market infrastructure that makes modular housing bankable, insurable and scalable.

The urgency is clear. Australia’s National Housing Accord target is to deliver 1.2 million new well-located homes over five years from 1 July 2024, yet current forecasts indicate a substantial supply shortfall. At the same time, weak construction productivity reinforces the need for faster approvals, more flexible delivery models and scalable innovation.

Modular and prefabricated housing can help address this problem. It can shift parts of construction from unpredictable sites into controlled factory settings, improve quality control, reduce waste, shorten delivery time and allow repeatable designs to be used across multiple projects. NSW has now moved to formally recognise modern methods of construction in law through the Building (Approvals and Practitioners) Bill 2026, which is intended to support prefabricated buildings, streamline approvals and improve consumer protections.

The growing policy significance of modular housing is also evident in the NSW Government’s 2026 Budget agenda, where Premier Chris Minns has positioned modular and prefabricated construction as part of the state’s response to housing supply pressures.

But regulation is only one part of the solution. A modular home may comply with building codes yet still be difficult to finance, insure or value. That is the practical bottleneck. Unless this is solved, modular housing will remain a promising but under-scaled solution.

The bankability problem

Traditional construction finance is designed around visible site-based progress. Modular housing disrupts that sequence because a large share of value is created in a factory before the building is fixed to land. This creates uncertainty for lenders around ownership, security, valuation, manufacturer solvency, transport risk and project failure before installation. The issue is not that modular housing is inherently riskier, but that finance systems have not yet fully adjusted to its production model.

Commonwealth Bank’s recent changes show that this barrier can be addressed. The bank has introduced a prefab home construction loan pathway, including access to progress payments before the home is fixed to land when customers use assessed manufacturers. Its model allows eligible customers using a CommBank Assessed Manufacturer to access up to 80% of the build contract price for off-site construction. This is important because it recognises that value is being created before the building physically arrives on site.

The policy lesson is clear. Modular housing cannot scale if every buyer, manufacturer and lender has to negotiate a bespoke finance solution. Australia needs a nationally consistent approach to modular housing finance, supported by trusted manufacturer accreditation, standard contracts, clear ownership rules and reliable valuation methods.

The insurability problem

Insurance is the second major barrier. Modular housing changes the risk profile of construction because more responsibility may sit with manufacturers, integrated design teams, certifiers, transport providers, installation contractors and vertically integrated developers.

This creates new questions for insurers. Is a defect a design issue, a manufacturing issue, a product issue, an installation issue or a site-integration issue? Does professional indemnity insurance respond? Is it a product liability matter? What happens if one design flaw is repeated across dozens or hundreds of modules?

Insurers need reliable evidence on factory quality assurance, design verification, inspection records, transport protocols, installation procedures, maintenance obligations and claims history. Without it, insurers may price conservatively, exclude key risks or require project-specific due diligence, which slows delivery and increases costs.

The liability problem

Clear liability arrangements are equally important. Modular housing sits between construction and manufacturing. That is its strength, but also its legal and commercial complexity.

In traditional construction, liability is usually attached to the builder, designer, engineer, certifier or subcontractor responsible for the relevant work. In modular housing, a building component may be designed in one jurisdiction, manufactured in another, transported across long distances, installed by a separate contractor and certified through a combination of factory and site inspections.

This raises practical questions about transit damage, poor installation, concealed elements, imported components, Australian standards compliance and recurring defects across a product catalogue.

These issues are manageable, but they should not be left to ad hoc contractual arrangements. Liability must be allocated clearly before procurement starts. Design liability, manufacturing liability, transport risk, installation liability, certification responsibility and post-completion defects must be mapped across the entire delivery chain.

This is where government can play a constructive role. The objective should not be to shift all risk to manufacturers, builders or consumers. It should be to create a transparent framework where each party understands the risk it controls and carries the insurance appropriate to that risk.

What Australia can learn from overseas

The United Kingdom offers a useful lesson. A UK parliamentary inquiry found that lack of confidence among valuers, insurers and mortgage lenders had been a key barrier to the uptake of Modern Methods of Construction (MMC), partly because innovative systems often lacked long-term performance data. The Buildoffsite Property Assurance Scheme, known as BOPAS, was developed to give lenders confidence that homes built using MMC or non-traditional materials will be mortgageable over the long term.

Australia does not need to copy BOPAS exactly. However, it should adopt the same principle: certification must be designed not only for regulators, but also for lenders, insurers, valuers, governments and consumers.

The Australian Building Codes Board’s work on a National Voluntary Certification Scheme for manufacturers of modern methods of construction is therefore highly significant. The consultation focuses on a certification scheme for MMC manufacturers and nationally consistent definitions for inclusion in the National Construction Code. This could become a foundation for national confidence, but only if finance and insurance stakeholders are built into the framework from the beginning.

Proposed policy framework for bankable, insurable and scalable modular housing

Australia needs a national MMC market assurance framework built around five practical pillars. The purpose should be to move modular housing away from project-by-project negotiation and toward a repeatable national model, where certified systems can be financed, insured and delivered at scale.

First, Australia needs finance and valuation protocols for modular housing. These should recognise that value is created off site before installation and should provide consistent rules for staged payments, lender security, ownership of modules before fixation to land, manufacturer solvency checks and valuation methods. This would allow banks and valuers to assess modular projects using a common framework rather than bespoke project-by-project arrangements.

Second, insurance products need to evolve with the delivery model. Modular housing requires coordinated coverage across professional indemnity, product liability, contract works, transport, installation and post-completion defects. Insurers should be able to rely on accredited manufacturing processes, verified quality assurance records and transparent claims data so that risk can be priced on evidence rather than uncertainty.

Third, liability allocation must be made clear before procurement starts. Standard contracts should map responsibility across design, manufacturing, transport, installation, certification, site integration and post-completion performance. The objective should not be to shift all risk to one party, but to ensure that each party carries the risk it controls and maintains the insurance appropriate to that risk.

Fourth, each modular project should be supported by a digital assurance passport. This would provide a single source of truth for design approvals, National Construction Code compliance, factory inspections, material specifications, quality assurance records, transport and installation checks, maintenance requirements and warranty obligations. Such a passport would support regulators, certifiers, lenders, insurers, valuers, governments and consumers with the same evidence base.

Fifth, governments should use public procurement to build the evidence needed for market confidence. Affordable housing, key worker housing and regional housing programs could require certified modular systems, standardised assurance documentation and post-occupancy performance reporting. This would create a pipeline of demand while generating the performance data needed by lenders, insurers and regulators.

Together, these five pillars would turn modular housing from a promising construction method into a trusted housing delivery system. The policy task is not simply to approve modular buildings faster, but to make them financeable, insurable, certifiable and repeatable at scale.

Dr Ehsan Noroozinejad Farsangi is a Senior Researcher and Global Challenge Lead at Western Sydney University, where he specialises in Smart, Resilient & Affordable Housing. He is also the coordinator of NSW Affordable Housing Network and the Secretary of WSROC Housing Taskforce. He has previously received a Policy Challenge Grant from the Australian Public Policy Institute on affordable and Net Zero housing.

Professor Greg Morrison is the Lang Walker Endowed Chair in Urban Transformation and the Co-Director of the Urban Transformations Research Centre at Western Sydney University. Greg is a leader in environment and environmental engineering who has made demonstrable impact in circular economy, Net Zero, living labs and climate adaptation and innovation at national and international levels.

Barrie Harrop is an Australian placemaker and entrepreneur with over 50 years’ experience in large-scale premium housing and building developments. He serves as the Executive Chairman of Thrive Construct, a company dedicated to innovative, sustainable and affordable housing solutions.

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