Two factory built homes on one block can trigger a land use category most residential builders have never dealt with. Here is where that rule sits, why it stops a project cold, and where the decision actually gets made.
In New South Wales, adding a second manufactured home to a block can change the land use classification of the entire site. Two homes stop being two dwellings. Together they can meet the legal definition of a manufactured home estate, and a manufactured home estate is only permitted on land where a caravan park is permitted. On most suburban residential land, that makes it prohibited outright. A council cannot approve a prohibited use, no matter how compliant the homes are.
That is the trap. It has nothing to do with build quality, energy rating or National Construction Code compliance. It is a definitions problem, and it sits in a corner of the planning system most residential builders never touch.
It surfaced publicly when Wollongong City Council explained why it could not approve a second modular home on a subdivided block at Bulli. The council told the ABC that its local environmental plan permits one such modern method of construction development per allotment, that more than one presently constitutes a manufactured home estate, which is not permissible under the current zoning, and that planning legislation does not allow a council to approve a prohibited use.
The council is describing the law accurately. Here is how that law actually works.
What is a manufactured home estate?
The rules sit in State Environmental Planning Policy (Housing) 2021, Chapter 3, Part 8. The definitions are in Schedule 7 of that policy.
A manufactured home is a self contained dwelling. It has at least one kitchen, bathroom, bedroom and living area, plus toilet and laundry facilities. It is made up of one or more major sections that are constructed and assembled away from the site and transported in for installation. And it cannot be registered as a vehicle.
Read that again, because there is nothing in it about wheels, temporary tenure, relocatability or a lower build standard. A permanent, craned in, fully compliant volumetric modular house fits the description comfortably.
A manufactured home estate is then defined in a single line: land on which manufactured homes are, or are to be, erected.
Plural. That one word is doing an enormous amount of work.
Why the definition matters: permissibility
Being classified as a manufactured home estate would be manageable if the use were permitted in residential zones. It is not.
Section 122 of the Housing SEPP provides that development for the purposes of a manufactured home estate may be carried out on any land where development for a caravan park may be carried out. There are exclusions for certain listed land categories, land reserved under national parks legislation and Crown reserves.
So permissibility is inherited from caravan parks. In most standard instrument local environmental plans, caravan parks are not permitted in ordinary residential zones. In Wollongong, caravan parks are permitted with consent in recreation and environmental management zones. They are not a permitted use in the low density residential zones where most family homes get built.
The result is a hard prohibition rather than a merits assessment. There is no design change, no engineering report and no planning argument that gets a prohibited use approved. The proposal is not weighed and refused. It cannot be considered at all.
The framework was built for something else entirely
Manufactured home estates were never conceived as a suburban infill product. The framework exists to regulate land lease communities, where a resident owns the dwelling and leases the site underneath it from an operator.
That is why the classification drags a whole separate regime behind it. An estate needs an approval to operate from the council under the Local Government Act, assessed against the Local Government (Manufactured Home Estates, Caravan Parks, Camping Grounds and Moveable Dwellings) Regulation 2021. Under that regulation a council must not grant approval unless it is satisfied the estate will be designed, constructed, maintained and operated in accordance with the prescribed standards. Community maps, site standards, flood requirements and fire safety requirements follow from there.
On top of that, the Residential (Land Lease) Communities Act 2013 treats a manufactured home estate as a residential community. Site agreements, disclosure statements, community rules and a dedicated tribunal pathway all attach to it.
None of that is a sensible fit for two families building two permanent homes on land they own. But the definition does not ask about intent, ownership structure or tenure. It asks what the dwellings are and how many of them there are.
So why is one modular home usually fine?
Because in practice a single factory built home on a lot is generally assessed as a dwelling house under the local environmental plan, the same as any other detached house. The ordinary residential controls apply and the project proceeds normally.
The moment a second self contained factory built dwelling is proposed on the same parcel, the estate definition becomes available to the assessing officer, and the answer can change completely.
Where this gets uncomfortable is that the definition is not applied uniformly. Modular builders report delivering dual occupancy work in some council areas and being refused in others on materially similar products. The ABC report describes exactly that pattern. The wording is broad enough to be read either way, and councils are reading it differently.
That inconsistency is the practical risk, and it is not something a builder can price around after the fact.
What is changing, and what is not
The Building (Approvals and Practitioners) Bill 2026 is the reform both the Building Minister and the Planning Minister have pointed to. It was introduced to Parliament on 6 May 2026 and passed the Legislative Assembly on 28 May 2026. TGB covered what the Bill actually changes for builders when it was tabled. Three points in it are worth knowing in this specific context.
First, the Bill defines a prefabricated building for the first time in Australian law. It then states plainly that a moveable dwelling is not a prefabricated building. Manufactured homes sit on the moveable dwelling side of that line.
Second, the Bill inserts a new provision into the Environmental Planning and Assessment Act permitting manufactured homes on land where residential accommodation is permitted, and deeming a manufactured home to be a building. That provision applies to development carried out by the Crown.
Third, the Bill moves the manufactured home definitions out of the Local Government Act and into other statutes, but the estate definition is carried across unchanged. Land on which manufactured homes are, or are to be, erected.
Separately, the planning department has a two phase review of the caravan park and manufactured home estate framework underway. Phase 1, covering flooding standards, fire safety and the structure of the regulation, was exhibited from 17 November 2023 to 19 January 2024. Phase 2 is the one dealing with definitions and permissibility, and the department has stated its aim includes ensuring the planning system is not a barrier to the use of manufactured homes outside parks and estates.
That is the workstream to watch. Permissibility for this use lives in a state environmental planning policy and in each council local environmental plan. Those are planning instruments, and an Act of Parliament does not amend them on its own.
Where the characterisation is decided
The whole question turns on how a proposal is characterised, and that happens before any assessment on merit begins. A handful of points determine the answer.
- The number of self contained factory built dwellings ending up on the parcel is the fact that drives the analysis. One and two are different regulatory questions, not the same question at different scales.
- Characterisation is a matter for the consent authority. Whether a proposal is treated as a dwelling house, a dual occupancy, a secondary dwelling or a manufactured home estate is determined by the council, and pre lodgement processes exist for that purpose.
- The controlling entry in the local environmental plan is caravan parks, not dwellings. Permissibility for an estate follows the caravan park line in the land use table, which is not where most residential proposals get checked.
- Subdivision does not automatically change the answer. Characterisation depends on the resulting lots and how the use is assessed. In the Wollongong case reported by the ABC, a subdivision and resubmission attracted the same finding.
- An approval in another council area carries no legal weight in a different local government area. Councils are applying the same definition differently, which makes precedent evidence of inconsistency rather than authority.
- Where characterisation is unresolved at the point of contract, the cost and time consequences still fall on one party or the other. Which one is a matter of what the contract says.
This is a New South Wales rule
Every state regulates factory built and relocatable dwellings differently, through different instruments and different terminology. Queensland, Victoria and Western Australia each take their own approach to manufactured and relocatable homes, and the New South Wales estate definition does not transfer across borders.
The transferable lesson does. On modular work, the question that determines whether a project happens is often not whether the home complies. It is what the planning system calls it.
Frequently asked questions
It is land on which manufactured homes are, or are to be, erected, as defined in Schedule 7 of State Environmental Planning Policy (Housing) 2021. A manufactured home is a self contained dwelling built in one or more major sections away from the site, transported in for installation, and not registrable as a vehicle. The definition does not require the home to be moveable or temporary.
Because two manufactured homes on one parcel can meet the definition of a manufactured home estate, and that use is only permitted where a caravan park is permitted under the local environmental plan. In most residential zones a caravan park is not permitted, which makes the estate a prohibited use. A council cannot grant consent to a prohibited use.
Usually not. One factory built dwelling on a lot is generally assessed as a dwelling house under the ordinary residential controls. The issue arises when a second self contained factory built dwelling is proposed on the same parcel.
Not automatically. Characterisation depends on the resulting lots and on how the proposed use is assessed. In the Wollongong case reported by the ABC, a subdivision and resubmission still attracted the same finding. Characterisation remains a matter for the consent authority.
The Bill recognises prefabricated buildings in law, but it states that a moveable dwelling is not a prefabricated building, and its manufactured home provision for land where residential accommodation is permitted applies to development carried out by the Crown. Land use permissibility for manufactured home estates sits in the Housing SEPP and in local environmental plans. The planning department phase 2 review of definitions and permissibility is the process to watch.
THE GOOD BUILDER TAKE
The industry conversation about modular construction has focused on manufacturing capacity, cost and speed. This case is a reminder that the binding constraint is often classification. A home can be fully compliant, permanently fixed and indistinguishable from a site built house, and still be captured by a definition written for a different product in a different era.
Until the definitions are updated, the outcome turns on a characterisation decision that is made before a single module leaves the factory. That is where the risk sits, and it sits there whether or not anyone has looked for it.
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Last updated: July 2026
This article is intended for general information purposes only and does not constitute legal, financial, or professional advice. Laws, regulations, and industry requirements vary by state and territory and change over time. Builders and trades professionals should seek independent advice relevant to their specific circumstances before making business, legal, or financial decisions.
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