Govt plans attack on high home-building costs

Sunday, 18 February 2024

The cost to build a standalone house in New Zealand is about 50% more expensive than it is in Australia.

Streamlining the consent process and allowing more overseas products will help reduce the high costs of building a home, but the details need to be worked through first, experts say.

Despite the recent building boom, New Zealand still has a housing shortage, and more homes need to be built. But the cost of building a home has increased by 41% since 2019, according to Stats NZ.

Building and Construction Minister Chris Penk says further analysis shows building costs here are consistently higher than in other countries, and it costs about 50% more to build a standalone house than it does in Australia.

In 2022, the cost of building work consented per square metre for a standalone house in New Zealand was $2591, while in Australia, it was $1743, Ministry of Business, Innovation and Employment figures show.

This must change, he says. “High building costs make it harder for people to buy a first home, and have far-reaching economic and social consequences such as higher rents, and increased demand for social housing.”

The Government wants to tackle the problem by streamlining the consent system to boost productivity and reduce delays, and by making a greater range of products available to increase competition and lower material costs.

Penk says the plan is to look at the different elements that go into the high costs, and at what can be done to alleviate them.

Allowing more building products and streamlining consent processes will ease costs, Minister of Building and Construction Chris Penk says.

“Some quick, easy wins in this space will be possible, particularly in areas where changes are in train already, but other reforms will need systemic change.”

Opening up the range of overseas building products that can be used, and making approval of new products easier, is relatively straightforward, he says.

“We can draw on discussion and work on this that has been going on for some time. A lot was thrashed out following the Gib shortage, which we need to learn from.

“But more products, and greater availability of them can only be beneficial for residential building and for costs.”

Another easy win can be found in National’s coalition agreement with New Zealand First. It mandates that very small dwellings, such as granny flats, will not need a building consent if they are of a certain size, and will only require an engineer's report.

But it is also necessary to enable the people who do the work to do it more efficiently, and that requires reform of the consent system, Penk says.

“We need to streamline the process, while being cognisant of local variations, and we also need to get the balance between efficiency and risk right, because we don’t want another leaky homes situation.”

Under the coalition agreement, very small dwellings, such as granny flats, will not need a building consent if they are of a certain size.

Ways of enabling this could include making widespread use of remote consenting for inspections, and the introduction of a more centralised system, or a standalone authority, for consents.

“This would give the ability to distribute paperwork and inspections more centrally, maybe to different councils that are expert in particular areas, or that have the capacity - because one council might be inundated with applications at one time, while others are not.”

He says this thinking is all fair game for discussion, and he will continue engaging with the sector on the best way forward.

But it will not be through the previous government’s Construction Sector Accord, which aimed to get the industry and government to work together to tackle systemic problems in the sector.

Much of the accord was a casualty of the coalition agreement, and the drive to cost savings. Initiatives including the Construction Activator, Māori constructure capability, and cross-agency productivity delivery groups were stopped, Penk says.

“But some other projects, which are half way done and contain valuable work, remain underway, and the ability to engage with the sector pre-dates the accord.”

Master Builders Association chief executive David Kelly was disappointed to see the accord chopped, and hopes aspects of it will be continued as it proved useful over the years.

No-one wants to return to the regulatory environment which allowed leaky homes, Master Builders’ David Kelly says.

But he thinks the new minister has some good ideas, and is pleased he plans to make use of work underway rather than starting everything from scratch again.

The discussion around making more overseas products available more easily is not new, and the Commerce Commission’s report into the building supplies market touches on it, he says.

“In principle, we support the idea, but there’s a fair bit of technical detail to work through, particularly around comparative international standards.

“Products will need to meet standards which are appropriate for New Zealand conditions, so we need the right people to do that work.”

Likewise, the sector has been pushing for a streamlining of the consent process for many years, but there are concerns about opening it up, and returning to the environment which led to leaky homes, he says.

“No-one wants that, but there are ways that we can adapt the system, and fast track the process, without introducing undue risk.”

An example could involve group home builders, such as GJ Gardner and Signature Homes, who work to standardised and documented designs, and who have onsite quality assurance processes, he says.

Distributors of overseas building products must have a local service behind them, Certified Builders’ Malcolm Fleming says.

“Standardisation makes for consistency, so group builders could be given the choice to go to one consenting authority, and MBIE could act as regulator to ensure they meet standards.

“That would take a huge volume out of the broader consenting system and free it up to work more efficiently.”

Certified Builders chief executive Malcolm Fleming says the concepts in the minister’s plans are not new, but it is encouraging he has listened to the sector and picked them up.

Greater streamlining of consent processes with building consent authorities is key, he says.

“There are more than 60 BCAs, so more consistency and clarity is important, but the regulatory system must remain robust. More and better use of technology will also help.”

He supports getting more overseas products onto the market, but with the caveat they must have third party accreditation they are fit for New Zealand’s unique conditions.

Distributors of overseas products must also have a local service to stand behind the product so builders and architects feel confident to use them, he says.

MBIE is already working on changes to the CodeMark scheme to help new products show compliance, and new product information regulations to improve the use of alternative products.

It has also been reviewing the building consent system.