Sydney has ranked as the second most ‘impossibly unaffordable’ city in the world, ahead of Melbourne which has come in as the 7th most difficult city in which to secure housing, according to the 2024 Demographia International Housing Affordability report.

This will come as no surprise to the 122,494 Australians experiencing homelessness on Census night in 2021, nor the 175,000 people on the social housing waitlist, and the hundreds of thousands of low-income Australians currently living in inappropriate or crowded housing or experiencing housing stress (where housing costs are high relative to household income).

Given Australia’s worsening housing crisis and the inadequacy of social and affordable housing stock in keeping up with the needs of many Australians, National Cabinet has set an ambitious new national target to build 1.2 million well-located homes over five years commencing 1 July 2024.

With this ‘once-in-a-generation’ target well above current levels being built in an already tight contractor market, boosting housing construction productivity through Modern Methods of Construction (MMC) is one potential way of alleviating the shortage, among other government policy and strategic industry initiatives.

What is MMC?

Modern Methods of Construction refers to an array of construction methods including prefabrication, off-site manufacturing, modular (volumetric) dwellings, and the kit of parts, as well as new technologies such as 3D printing, robotics, artificial intelligence, and innovative materials. all of which can improve the harmony between standardisation and customisation.

These approaches, in contrast to traditional bricks and mortar construction, can help in tackling labour and skills shortage, weather disruptions, and improving design, construction and delivery time and costs, which are key imperatives in developing social and affordable housing.

Where has MMC been successfully implemented in Australia?

A range of MMC have been successfully adopted by School Infrastructure NSW to meet rapidly increasing school infrastructure needs in high growth areas, yielding better quality, time and cost outcomes. This has included using a kit of parts methodology with engineered mass timber at Fern Bay Public School, delivering a pavilion learning hub featuring four flexible learning spaces and covered walkways. This is a first of its kind for educational infrastructure in Australia, with most of the components manufactured in a factory in South West Sydney before being assembled onsite in around six weeks. In addition to delivering the resulting pavilion, which can now be replicated or adapted across the SINSW portfolio, benefits of this approach include:

• Rapid delivery with minimal disruption to school operations
• Improved sustainability and safety outcomes
• Private sector investment
• Job creation in the manufacturing sector.

Development Victoria has adopted MMC for civic projects, such as the innovatively designed Galkangu Bendigo Government Hub. This project sets a precedent for sustainable timber design with its large mass timber frame helping to significantly reduce carbon emissions.

In its Expression of Interest for the Small Sites Pilot program, issued in July 2024 for the sale and development of 260 new and affordable housing in inner Melbourne, Development Victoria sought innovative solutions to deliver housing quickly and affordably, and encouraged the use of MMC to meet the key criteria outlined in the EOI.

What impact could MMC have on addressing the housing crisis?

Seen by many in the industry as the future of construction, MMC presents significant opportunities for productivity gains and cost savings, particularly on projects involving many repeatable processes, such as large-scale social or affordable housing.

Recognising this, the NSW Government Modern Methods of Construction Taskforce (the MMC Taskforce) was established in November 2023 to help drive, shape, and demonstrate the use and potential for off-site manufacturing in NSW Government housing projects.

Tailoring the MMC strategy to project objectives and building performance targets is imperative. The benefits of MMC need to be weighed not just in terms of the impact on capital cost and scheduling but also in the light of whole-of-life value and improvements.

Building a solution

To date only a small number of government delivery agencies have successfully implemented MMC as part of their capital works programs. A key deterrent for contractors is the upfront investment required to establish facilities for offsite manufacturing.

A pipeline of contracts is therefore crucial to give contractors the certainty required to make a viable investment in MMC infrastructure and capability. Moreover, MMC relies on a well-established network of suppliers and manufacturers and is therefore susceptible to supply chain disruptions which can impact time and cost outcomes.

The future of housing supply

Unfortunately, there are no quick fixes when it comes to the large and complex problem of housing affordability. But with homelessness, cost of living pressures and cost of homebuilding on the rise, the need to capitalise on faster planning, design and delivery of homes has never been more urgent.

We’re currently seeing governments around Australia increasingly recognise the potential advantages of MMC, along with proactively acknowledging their own important role in creating and funding a robust pipeline of affordable and social housing programs and improving building regulations. These efforts are expected to incentivise housing contractors to adopt MMC, capitalising on broader industry insights and innovations.   

In implementing MMC to effectively deliver social and affordable housing it will be important for client and owner organisations to consider:

• The benefits of a programmatic approach to delivery, irrespective of geographical distribution of products, suppliers and manufacturers. This helps drive innovation, continuous improvement, staging to meet market capacity.
• Governments’ social procurement outcomes for the construction sector.
• Embedding design requirements specifications and quality standards into policy and procurement processes. This helps to ensure the client’s requirements and objectives are embedded, and consistency in the product delivered by a diverse supplier pool.
• Engaging with Community Housing Providers to ensure the product design and specification is fit for residents’ needs and maintainable under the CHP’s whole-of-life financial modelling.

The MBB difference

With governments and industry tasked with turbocharging housing supply around the country, MBB can offer the support required to accelerate productivity and deliver whole-of-project value.

Offering our clients strategic and practical solutions to the above considerations, we bring a decade of transferrable knowledge and insights from major renewable energy, education, transport and defence projects around Australia. We provide our social infrastructure clients holistic planning, strategy, development, delivery and operations support across the entire project lifecycle.

MBB’s relevant services include:

• Clearly articulating client requirements
• Innovations in commercial principles and models that unlock the potential for product, market participation
• Supply chain studies and market engagement
• Clearly articulating risk and risk allocation
• Collaborative delivery models and commercial structuring
• Whole of life modelling
• Making a case for investment and setting benefits/performance indicators
• Delivery strategy
• Client organisational capability and operational readiness
• Change management

Who to contact

Katrina Street
Executive Director
katrina.street@mbbgroup.com.au

Noel O’Keeffe
Chief Financial Officer
noel.okeeffe@mbbgroup.com.au

Peter Jones
Executive Director
peter.jones@mbbgroup.com.au

Rob Fields
Executive Director
rob.fields@mbbgroup.com.au