Building homes in factories: construction productivity in Spain and industrialised housing

Industrialised housing, where walls, facades, bathrooms or whole modules are made in a factory and assembled on site, is Spain's main bet for building faster and cheaper. This piece looks at the data on construction productivity in Spain, what factory-built housing delivers today, and what a radical-centre policy would add to make it work at scale.

Miriam González put the problem plainly at the launch of Democracia 21 in Madrid on 10 October: a lot of regulation, much of it absurd, pushes up the cost per square metre built until social housing stops adding up (we covered the whole speech in our overview of Democracia 21's proposals). Rules are one half of the cost per square metre. The other half is the productivity of the people and firms doing the building.

A sector that produces less than it did

BBVA Research published the uncomfortable numbers in July 2024. Measured as real value added per hour worked, construction productivity in Spain had fallen by more than 20% since 2013, while productivity across all sectors rose 5%. The level was back where it stood about twenty years earlier. Part of that is the cycle, since productivity in construction tends to rise when jobs are being destroyed and fall during expansions. The rest is structural.

The workforce tells the story. In 2007 almost 30% of construction employees were under 30. By 2023 only 10% were. Almost 70% of people working in construction have no upper-secondary education, a share that has barely moved in fifteen years, and unfilled vacancies in the sector have risen by 300% since 2016, more than in any other. The firms are tiny too: according to the figures given when the government approved its industrialisation plan, reported by Legal Today, half of Spain's construction companies have no employees and another 30% have one or two.

Edward Glaeser, the economist behind Triumph of the City, looked at why building gets less efficient while other industries improve. A 2024 NBER paper he wrote with Leonardo D'Amico, Joseph Gyourko, William Kerr and Giacomo Ponzetto traces American construction over a century. Homes built per worker were flat from 1900 to 1940, climbed after the Second World War and fell after 1970. The fall coincides with the rise of local land-use regulation. The mechanism is simple and very relevant to Spain: rules keep projects small, small projects keep firms small, and small firms have neither the scale nor the reason to invest in better methods. The authors estimate that if half the link between firm size and productivity is causal, US residential builders would be around 60% more productive with the size profile of manufacturing.

The OECD's housing report Brick by Brick (2021) reaches a compatible conclusion from the policy side. As EFE summarised it, the OECD recommends removing obstacles to construction, such as height limits and overlapping administrative procedures, alongside more public investment in social and affordable housing.

What factories deliver today

The government says industrialised construction accounts for under 5% of the sector in Spain, against about 20% in Germany and the Netherlands and 10% in the UK. CoHispania, a valuation company approved by the Bank of Spain, monitored industrialised projects in 2025 and put them at 2.3% of housing developments, with the sector aiming for 10% by 2030.

Its results are encouraging. Build times fell by 30–50%, and by up to 70% for prefabricated bathrooms and facades. None of the projects it analysed suffered delays caused by the industrialised system. Traditional builds overran their budgets by 7.43% on average, and by up to 12.5% in housing cooperatives, while factory work runs on budgets closed at the plant.

The catch is cost. In 2025, building industrially still cost 3–5% more per unit of construction than doing it the traditional way, mainly because factories have not reached economies of scale. A factory is a fixed cost that only pays off with volume. Without a full order book, it runs half empty and the homes come out dearer.

The PERTE, and what it still needs

Pedro Sánchez announced the PERTE for industrialised housing at the Rebuild fair in Madrid on 24 April 2025, and the Council of Ministers approved it on 6 May. It puts €1.3 billion of public money behind the sector over ten years, €1 billion as financing and €300 million as capital for firms, and expects about 15,000 industrialised homes a year, rising to 20,000. Support for affordable housing is a condition for financing. It also fills a real gap: an industrialised builder spends months producing in the factory before anything stands on the plot, so banks have less collateral to lend against. The plan includes a training hub on state land in the port of Valencia and work with universities and vocational colleges, and a tender by the state's public housing company for 1,600 homes was announced as the first to score industrialisation, worth up to 10% of the evaluation.

That is a good start, and it can be made sharper. The radical-centre position combines three pieces that only work together.

The first comes from the left. Public housing programmes should act as anchor customers for factories. A public developer that commits to buying several thousand homes a year from industrialised builders, over several years, gives a factory exactly what it needs to invest, and that volume is what closes the 3–5% cost gap. Tie the contracts to training and proper employment conditions, and the sector that lost its young workers can offer them stable indoor jobs with fixed hours.

The second comes from the market-liberal tradition. Productivity rises with competition, scale and private capital, which is Glaeser's whole point. A factory in Valencia has to be able to sell the same product in Madrid, Galicia and Andalusia with no redesign, and public orders should go to whoever builds best and cheapest, open to every firm in the EU.

The third fits neither camp: standardisation as a public good. The state should fund and maintain a common catalogue of certified components and dwelling types, with a type approval granted once and valid in every region and every town hall, and eventually across the EU. A repeat design that has passed its checks should not be reviewed from scratch each time it is built. That turns public demand into a market for many producers, and gives competing firms a shared standard to build to. It is also the most direct answer to González's complaint about the cost per square metre.

This connects with the week's other pieces on three years of permits and on Spain's social housing stock. A factory can turn out a module in days. The homes arrive faster when land, permits and approvals move at the same speed.