However, councils have expressed grave reservations about quality and liability falling on ratepayers.
"We believe this needs to be considered further with urgency before the head regulations are put in place and that it is not something which can be resolved by detailed regulations later - if the skeleton of the process is fundamentally flawed," the Auckland Council email said.
In the email was a link to a video by a much-lauded BBC documentary team, about how UK council tower blocks were built so badly that mass demolitions were needed.
The email said the documentary, despite being more than three decades old, was worth watching for similarities with New Zealand here and now.
"It ... has similarities of a drive primarily for 'faster and cheaper' construction ... which is of course a good objective, but not if it is at the expense of quality," the email said.
The Government for months has been lauding the potential of "modern methods of construction", but this requires scaling up a small industry; for this, regulatory certainty and less red tape would help.
Its plan is to remove one of two layers of council consenting controls, to try to halve the number of inspections by limiting these to on-site installation, while factories came under a certification scheme.
"A second consent won't be required for the design or factory work," MBIE said.
Some prefabrication factories are in New Zealand; at least two are part of companies that have recently failed.
Many others are in Asia, where New Zealand building standards do not apply, though some of these have already been building for the New Zealand market for some years.
Behind closed doors, the Auckland Council officers warned MBIE there were "currently huge gaps in understanding" and that it was not in building owners' interests to let factories build houses without councils consenting them.
Publicly, the council issued a statement to RNZ saying its exchange of ideas with the ministry was "very much part of the usual process around regulatory changes".
Auckland Council's general manager of building consents, Ian McCormick, said: "We are continuing to work closely and constructively with them to discuss possible improvements".
The ministry in a statement said it had taken on board feedback "wherever possible, and a preferred approach has been identified".
"The quote from the email you reference in your query was only one part of a very productive conversation with Auckland Council."
These conversations were par for the course and "they have not slowed down our process", he said.
