Modular Housing: Everyone’s Favourite Idea, Nobody’s Project

Modular has long been held up as the golden child of Modern Methods of Construction options to speed up housing builds, but good intentions have failed to translate into large-scale action. What is behind this inaction is complex, Mitchell Brandtman partner Caitlin Shields told The Urban Developer ’s Brisbane Residential Developer Summit earlier this month. “Not one person has told me that MMC, and its golden child modular construction, is a bad idea. But there’s not many people going out and just doing it,” Shields said. “That’s because there are cultural issues at play and it’s also about the fundamental basics of how do we procure it, how do we fund it safely, and how do we get it on site safely?” Tentative steps towards modular construction Balmain &amp; Co head of strategy and business development Jessica Jones attested to the interest and said she has at least one phone call a week about modular and how it would work. “Some of our developers want to sit down and discuss it, especially those in China who have factories over there and are considering a hybrid model for their project and who would be willing to take a bit of a punt on the first one,” Jones said. “But none have gone ahead that we have looked at. “[The reason behind that is] a combination of a lot of things. Our industry is notoriously slow to change and move away from how we’ve always built and what we know as safe [and] compliant to standards. ▲ Mitchell Brandtman partner Caitlin Shields during the Brisbane Residential Developer Summit. “As a builder, quality assurance is huge for us. We’re the ones that get the phone calls 5 or 10 years later. So just dipping that first toe in the water ... it’s a bit scary for people.” The Queensland Government has historically thrown its weight behind MMC initiatives; QBuild’s Modern Methods of Construction program was introduced in 2022 to speed up the delivery of off-site manufactured housing, and funding in July 2024 promised 600 modular homes as part of its housing big build. But initial government enthusiasm has faded as feasibility concerns take hold. Putting modular feasibility to the test “Ultimately, [for] most of the feasibilities that we’ve looked at, it’s been the same, if not cheaper, to do a traditional build, even despite the cost saving,” Jones said. MMC can help in the construction program phase, she said, but those time savings don’t automatically translate to a better financial outcome once you factor in how a project is funded. With modular, you might have to pay 75 per cent, or at least a large chunk, of the total contract value earlier, while modules are still being built and have not even arrived on site, she said. “So how are we making sure that it gets here and we’re getting paid throughout the journey? Because we all know cash flow is key. So there’s a few steps to get there,” Jones said. “There are some great developments happening in Brisbane and Geelong that are of a slightly smaller scale, and are giving people confidence that it can work. We can build up from there.” ▲ Brisbane City Council’s Tania Orr, Balmain &amp; Co.’s Jessica Jones, Ray White’s Mark Creevey and David Stone from Centure Bass at the summit. But indirect project costs—from site establishment and management costs to temporary services like utilities, scaffolding, cranes, and other general head office overheads—are something developers should consider factoring in, Shields said. “Preliminaries, at the moment across the board and in a very generalised number, represents between 20 and 30 per cent of construction costs of a project,” she said. “So I’d say one quarter of our construction costs are given to something that is not tangible, which, at the end of the project, goes away. “[There needs to be] a way that we can make our projects more productive, make them more feasible and have less prelims. “[We should analyse whether] we can build the things and bring them on site and get it over and done with quickly.” The challenges of funding MMC projects From a funding perspective, the interest is there but the scale is not, Centura Bass managing director and co-head of lending David Stone said. “We’re in discussions at the moment with some groups in and around modular,” he said. “It’s not without its challenges. The concept of modular has been around for some time, but you either have to work with almost an institutional size developer that’s got the appropriate level of cash flow, or we need to get creative around financing. “It’s definitely something that we’re looking at, but we don’t have a solution at the moment.” The housing construction problem remains unsolved, but the path forward demands courage. “We have to build so many houses, we don’t even know how we’re going to do it without something changing,” Shields said.

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Clare Burnett
Mon 25 May 26

Modular Housing: Everyone’s Favourite Idea, Nobody’s Project

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