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New Model: CBA Eases Lending Rules to Drive Flat-Pack Housing

The Albanese government is pushing to have up to 15% of Australia's housing stock built using prefabrication over the coming decades


Mon 03 Feb 25

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The Australian government is challenging big banks to relax lending rules to finance flat-pack homes after the country’s largest bank, the Commonwealth Bank of Australia (CBA), moved to make financing easier for houses built using prefabricated parts. Announced on Friday, the CBA said it would address barriers to financing prefab construction following a Treasury roundtable in November, which committed to making it easier to lend for prefab homes that are quicker to build than homes built with traditional methods:

“There’s a national effort needed … to come up with innovative and creative solutions [to address the supply of housing’],” according to CBA’s executive general manager of home buying, Michael Baumann, who toured ModSpace, which makes prefab homes, in Essendon Fields.

However, until now, homeowners have been required to stump up 90% of construction costs for prefab homes, with banks lending the balance (10%) once the house is transported to the site.

CBA to provide progress payment loans and a new prefab construction contract.

Under the new policy, a first for a major bank, CBA will provide progress payment loans of up to 80% for construction costs before the home is affixed to the land, a move welcomed by Industry Minister Ed Husic. In addition, CBA will provide a maximum loan of $1.5 million to construct homes over 30 square metres and develop a standard contract for “modern methods of construction”, streamlining the process for builders and borrowers applying for loans.

“As a government, we’ve been working with the building industry to cut red tape while encouraging banks to remove financing barriers holding back prefab and modular housing,” Minister Husic told the Sydney Morning Herald on Friday. “CBA has thrown out the challenge to the other banks with this move to see what more they can do to smooth the path for homebuilders interested in these methods.”

The fight to solve Australia’s crippling housing crisis is gaining momentum. ‘Kit homes’ are emerging as part of the solution, with a big bank joining the push to accelerate thousands of new builds. Footage courtesy of @7News.
Can Prefab help solve Australia’s housing squeeze? The Albanese government says yes!

Last year, Wood Central reported that the Albanese government has turned to prefab homes to help deliver its target of building 1.2 million houses by the middle of 2029, which is behind schedule as construction costs remain high and potential buyers struggle due to high interest rates. In November, the Treasury convened a roundtable to help drive capital into housing…with the Albanese government funding a voluntary certification scheme to simplify the process of getting prefabricated housing approved under the National Construction Code.

Federal Minister for Industry and Science, Ed Husic, with representatives from Building 4.0 Cooperative Research Centre.
Federal Minister for Industry and Science Ed Husic met with representatives from the Building 4.0 Cooperative Research Centre in Melbourne last year.

Mathew Aitchison, CEO of Building 4.0 Co-operative Research Centre and a professor of architecture at Monash University, welcomed CBA’s move, describing it as a breakthrough that he hoped would spur other major lenders to follow suit – stating that financing had been a “thorn in the side of this industry”.

“I had a friend caught up in the northern NSW floods. He sourced a prefab building that he could afford and that responded to the design needs he had, only to find banks wouldn’t lend him the money because they didn’t have anything to secure it against like they would in a traditional build,” Aitchison said. “Lending on things that aren’t physically located on one site is not novel to almost every other part of the economy, but given the ways banks lend on mortgages … it felt like a vestigial remnant of pure inertia. The fact they addressed this finally is common sense.”

As it stands, the construction industry says about 5% of homes in Australia are made from prefabricated parts, with the Albanese government hopeful that modular homes will make up 15% of Australia’s housing supply in the coming decades. According to Prefab Aus founding director Damien Crough, the industry hopes CBA’s new lending rules will significantly increase the number of people buying prefabricated homes.

“We have a significant challenge with the housing crisis, but we have a lot of really positive things happening … and there’s a lot of government incentives to push towards re-industrialisation and creating a sustainable industry in Australia,” Mr Crough told the Sydney Morning Herald.

Why “elemental prefabrication” is key to driving the prefab boom

Mr Crough’s comments come after Prefab Aus published a new roadmap in September 2023, which stated that up to 80% of all building materials could be made from prefabricated parts. At the same time, and despite strides in volumetric construction, Australia should not forget its “affordable, dependable and reliable” frame and truss supply chain. That is according to Dr Alastair Woodard, Managing Director of Wood Products Victoria facilitator of the FTMA’s Strategic Technical Group, who last year told Wood Central that Australia’s 280+ strong frame and truss industry is well-equipped to meet the country’s demand for detached and semi-detaching housing.

According to Mr Woodard, many of these multi-generational businesses are excited about embracing ‘elemental prefabrication’ to deliver hundreds of thousands of one-to-three-level houses and townhouses needed to meet Australia’s chronic housing shortage. Dr Woodard said ‘elemental prefabrication’ is all about the frame & truss supply chain working with customers to find value solutions to improve productivity on-site, “it means we can build more homes quicker.”

Meaghan Scanlon, Queensland Minister for Housing, Local Government and Planning and Minister for Public Works, with Cameron Dick, Queensland Treasuer and Steven Miles, Queensland Premier, announced that more than 600 modular houses will come off the production line by the end of the year. (Photo Credit: Queensland Government)
Last year, Meaghan Scanlon, Queensland’s former Minister for Housing, Local Government and Planning and Minister for Public Works, with Cameron Dick, Queensland’s former Treasurer and Steven Miles, Queensland’s ex-Premier, announced that the Queensland government was building hundreds of modular houses to offset Queensland’s housing shortage. (Photo Credit: Queensland Government)

“What we’re saying to the frame & truss sector in terms of new offsite prefabricated solutions is ‘start simple and add value,” Dr Woodard said, “talk to your builders about what they want and what they value, and are prepared to pay for to make their construction process more efficient, and add that into your value offering and process.” And the best thing is that it doesn’t need to cost an arm and a leg:

“From a frame and trust perspective, you don’t necessarily need a high level of investment in machinery,” Dr Woodard said. “A growing number of Australia’s mature frame and truss market is very interested in moving into offsite elemental prefabrication offerings,” according to Dr Woodard who stressed policymakers “should be thinking about prefabricated elemental solutions, and not just volumetric.”

For example, using a wall frame, an elemental prefabrication process could involve asking, “What can the frame and truss business do in the factory that benefits the builder on site and improves their productivity?”

“And it might be as simple as putting on the vapour barrier on the wall frame before it goes out to the site…so that it is a high-quality way to protect the wood when assembled on site.” Or for windows, which can be assembled in the factory as part of the frame and truss before they arrive on site: “This is crucial in a climate like Victoria, where, thanks to the requirements for seven-star energy efficiency standards, we will need high-performance windows.”

Author

  • Jason Ross

    Jason Ross, publisher, is a 15-year professional in building and construction, connecting with more than 400 specifiers. A Gottstein Fellowship recipient, he is passionate about growing the market for wood-based information. Jason is Wood Central's in-house emcee and is available for corporate host and MC services.

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