Industrialised construction: a solution to housing’s affordability and sustainability crisis?

Europe is experiencing a housing crisis marked by unaffordability and homes unprepared for climate change. It is necessary to increase the supply of affordable and resilient housing, both by retrofitting the existing stock and by ensuring new constructions meet real social needs. However, when it comes to newbuilds, recent increases in construction costs and a structural labour shortage have developers questioning if this is possible. Now, across Europe, many policymakers and businesses are betting on industrialised construction to crack this code. 

While sometimes referred to as offsite construction or pre-fab, industrialised construction is much more than this – it offers an almost total makeover of how the construction sector operates and an opportunity to realign the sector’s investments with people’s needs 

Industrialised construction can help coordinate an entire housing project as one system — design, suppliers and assembly planned together from the start, not just fabricated off-site. It might be better called industrialised development, since it can create new value chains and opportunities to improve workers' and housing rights while lifting sector productivity. 

Propelling such a sector-wide shift requires large upfront investment, which firms can only commit to with long-term stability. Public support has enabled the first industrialised developments, but only a broader social consensus that includes industry and public actors, but also communities and workers, can de-risk investment and advance industrialisation at the scale needed. In reality, communities are worried about the efficiency gains being extracted as profit, rather than resulting in improved, more affordable housing, while workers worry about job loss and call for opportunities to upskill.

The key may lie in business models that integrate industrialised construction to meet people's needs for affordable and green housing, in turn, allowing firms to tap into a stable, sizable market that drives the sector's transformation. 

Emerging lessons from Europe — a focus on Spain: the new match between industrialised construction and public housing

The EU's new Affordable Housing Plan names industrialised construction as a key lever for scaling housing supply, and some Member States are already following suit with their own frameworks. This is the case with Spain's recent 2026-2030 State Housing Plan, which offers direct subsidies to industrialised construction projects, backed by a dedicated €1.3 billion strategic plan. Both policies include social and environmental goals and have enabled the public-private partnerships behind the country’s first large-scale industrialised developments of public housing. 

Indeed, the expansion of industrialised construction in Spain is turning out to be closely related with the new push to increase the country’s public housing stock¹. Over the past 4 years, regional governments like Galicia, Catalunya, the Vasque Country, Navarra, Catalunya or Madrid have all set out plans to develop public housing at scale. Most of these plans are transforming into public tenders that favour proposals including industrialised processes due to their potential to improve sustainability alongside affordability.

The question to ask now is which of the potential benefits of industrialised construction are materialising on the ground, and which ones are yet to be made real. 

Faster delivery, lower financial costs, improved sustainability

Culmia, Spain's first major bettor on industrialised construction at scale, is building almost 4,700 publicly-tendered affordable units across Madrid and Valencia, nearly 4,000 of them industrialised — and delivered its first 1,763 apartments almost a year ahead of other bidders on the same tender. Grupo Salas, Catalonia's leading affordable housing developer, completed 76% of a 130-unit project in five months.

Faster delivery means solving families' housing needs with due urgency, but it also cuts financing costs — a major factor in rental developments funded through long-term loans. Sustainability also benefits: Culmia's Madrid development was Spain's first affordable housing to win BREEAM Excellence, and Salas' projects consistently obtain the highest energy efficiency ratings.

Limited impact on price for now, but promising pilots

Although public housing prices are capped by public authorities, inflationary pressures have developers asking for house price increases to cover rising costs and build new projects. While public and private actors are betting on industrialised construction increasing productivity, the key question remains how to materialise those savings, pass them on to final prices, and avoid further increases in public housing prices.

Developers like Grupo Salas, in partnership with new industrialised providers 011H, are leveraging the digitisation that comes with industrialisation to track material price shifts in near real time. Grupo Salas is feeding that certainty into pricing models, trimming the safety margins that developers usually charge for cost uncertainty. If this kind of practice translates into more affordable homes, it could rally public support for scaling industrialised construction further.

However, Culmia or Grupo Salas, among other developers like AEDAS Homes, report that the overall costs of industrialised development are still higher than traditional construction. This makes it challenging to mainstream industrialised construction beyond developments that have state funding. Developers are calling for funding mechanisms that help lower costs, like public bank guarantees and surety insurance and hope that the implementation of the EU’s Corporate Sustainability Reporting Directive will attract further investment into industrialised construction. 

Industrialised construction - a sectoral revolution but only if works for people and communities

Industrialised construction has so far been treated as a construction technique, when the businesses best placed to capture its full value are those treating it as a redesign of the entire development process — from how projects are financed and tendered to how they are designed, built and managed over decades. Firms that limit industrialisation to how components are manufactured are likely to keep hitting the same ceiling on costs, workforce capacity and tenant outcomes.

Examples from Spain show public-private collaboration is enabling the establishment of a new ecosystem of industrialised construction. Combining technological solutions, like digitised costing and component standardisation, with new partnerships, like social housing providers who can deliver structured tenant support or unions who catalyse collective mediation in large rental developments, those who embrace industrialised construction can gain a first-mover advantage. 

The resulting developments have delivered a first wave of benefits: faster delivery, quality certifications, and early cost visibility. Unlocking lower maintenance costs, effective tenant management, and positive social outcomes now needs greater attention. If industrialised construction does not deliver on both sustainability and the social fronts, communities will soon question to what extent should public authorities continue to support it.

1. In Spain, public housing is called Vivienda de Protección Oficial (VPO). Historically, VPO have been mostly for sale (at capped prices), built by private developers on public land, subsidized, and lost their “public protection” after a number of years, after which they could be sold in the private market at market price. The 2026-2030 State Housing Plan seeks to change this by increasing the amount of VPO for rent, and conditioning funding on VPOs remaining under “public protection” forever. 

Join IHRB’s Roundtables on Housing Rights and Real Estate Action to advance industrialisation and voluntary responsible business practice in Spain (in Spanish only).

To learn more about business decisions that can improve workers’ rights and housing rights across the construction value chain, check out IHRB’s Dignity by Design Framework.

Stay tuned to the latest EU policy developments by learning more about the EU Task Force on Offsite Construction, of which IHRB is a member.