IKEA-style homes unveiled in Albanese government's $40million trial to help solve the housing crisis

By JACOB SHTEYMAN AND ZAC DE SILVA FOR AUSTRALIAN ASSOCIATED PRESS Published: 06:51, 28 May 2026 | Updated: 06:52, 28 May 2026 A $40 million plan to develop modular construction methods is the federal government's latest pledge to build homes faster and cheaper.  Australia is banking on a Scandinavian-style solution to its housing problems. The government has promised $39.3 million for a trial of modular, premade building components - similar to IKEA flat-pack furniture - which could speed up construction times while driving down costs. Housing Minister Clare O'Neil said Australia needs to think outside the box when it comes to getting homes built faster. 'Most homes use the same basic components - walls, windows, roofs, bathrooms, kitchens,' she said ahead of a major speech defending controversial changes to tax concessions for investors. 'So instead of designing everything from scratch every single time, we can standardise some parts of the process and make construction more efficient.' Ms O'Neil has taken inspiration from Sweden, the home of furniture giant IKEA, where about 80 per cent of detached homes are built using prefabricated parts, compared to just five per cent in Australia. The funding announced on Thursday will go towards a 'kit of parts' - a system of home components which can be built off-site and assembled like a supersized IKEA flat-pack.  A $40million plan to develop modular construction methods is the Albanese government's latest pledge to build homes faster and cheaper (Pictured, a mock-up of a prefabricated home) The system is the brainchild of Building 4.0 CRC, an industry-led research group partly funded by the federal government.  It is open-source, meaning businesses across the country can participate without relying on a single proprietary company.  Ms O'Neil said the federal funding would help the states and territories with pilot projects, design work, technical advice, training and supply chain development. 'When parts are designed to work together efficiently, you can build things faster, cheaper and more reliably,' she said. National Shelter, a housing advocacy nonprofit organisation, said the funding would help tackle one of the most stubborn barriers to delivering modern construction methods at scale. 'There is simply no pathway to meeting our future housing needs without the adoption of new and innovative housing,' the body's chief executive Jackson Hills said. The government also wants more social housing to be made from prefabricated parts as this would create a pipeline of work for the so-far nascent industry in Australia. Labor hopes prefabricated buildings could help make housing more affordable, with new dwelling prices rising an average of 4.7 per cent in the year to April, according to Bureau of Statistics figures released on Wednesday. The Commonwealth Bank expects home-building costs to peak at eight per cent by September. Housing Minister Clare O'Neil (pictured) said Australia needs to think outside the box when it comes to getting homes built faster  Building 4.0 CRC chief executive Mathew Aitchison said his organisation would work with governments and industry to help roll out the kit of parts. 'While many industries around the world have transformed over the last 100 years, we still make buildings very much the same as we have previously, and in that same period costs have gone up and productivity has continued to fall,' he said. The announcement came as Labor continues to face criticism for changes to tax concessions for property investors introduced to parliament on Thursday. Opposition housing spokesman Andrew Bragg called it a 'crazy policy', saying Treasury's analysis found it would reduce housing supply by 35,000 homes. While he supported the government encouraging prefabricated and modular construction, the overstuffed National Construction Code was making it too difficult to build cheap homes, he said. 'In Australia, it is illegal to build a cheap house,' he told ABC Radio. No comments have so far been submitted. Why not be the first to send us your thoughts, or debate this issue live on our message boards. By posting your comment you agree to our house rules. Do you want to automatically post your MailOnline comments to your Facebook Timeline? Your comment will be posted to MailOnline as usual. Do you want to automatically post your MailOnline comments to your Facebook Timeline? Your comment will be posted to MailOnline as usual We will automatically post your comment and a link to the news story to your Facebook timeline at the same time it is posted on MailOnline. To do this we will link your MailOnline account with your Facebook account. We’ll ask you to confirm this for your first post to Facebook. You can choose on each post whether you would like it to be posted to Facebook. Your details from Facebook will be used to provide you with tailored content, marketing and ads in line with our Privacy Policy.