Why building consent changes are a big deal

Wednesday, 30 October 2024

ANALYSIS: The leaky home crisis of the early 2000s has cast a long shadow on building regulations.

It resulted in many homes built between 1988 and 2004 that were not fully watertight and sometimes rotted from the inside out. There are many estimates of how much the end repair bill will be, ranging from $11b to $47b.

It required a unique political solution as it touched on the broad issue of unhealthy, unstable homes, while personally also smashing the value of most people’s biggest asset: their home.

It has meant that any changes to the Building Act 2004 - the legislation designed in the aftermath - are viewed with fear and suspicion, with voters and consumers rightly concerned about a repeat.

That was 20 years ago. Now Building and Construction Minister Chris Penk - widely expected to be elevated to Cabinet next time a spot comes up - is venturing into the fraught terrain of trying to speed up building and consenting, while also protecting consumers and ensuring high standards.

Specifically, allowing for self-certification of builders, plumbers and other tradespeople with sufficient indemnity insurance or professional guarantees.

Interestingly, while Penk and his officials were working on changes to the Building Act, the Hastings District Council was doing its own work, driven by the chief executive, To’osavili Nigel Bickle, who commissioned a report by the former CEO of Master Builders, David Kelly.

Both men were veterans of the Department of Building and Housing (now MBIE) in the wash-up from the leaky buildings crisis. But 20 years on, it became clear to them that something had to change.

Bickle, who was a long-time public servant and held various executive roles in Building and Housing, Immigration and Regional Economic Development, says that for new large-scale builders, there is no reason why the council should have to consent their building work at all.

Bickle says that the council’s Building Consent System Report “highlighted that whilst we're a very technically-proficient building consent authority at Hastings, we are very risk averse, and had lots of opportunities to take a more risk-based, customer cost-effective approach”.

“A number of us sort of thought, OK, it would actually be quite good to look at what's happened, basically in the national system, and why we can't sort of take a risk-based approach, and so that was the guts of the report.”

That report was not relied upon by the Government, but reached many of the same conclusions in a single paper.

The original Building Act 2004 was a response to the leaky building crisis and was described as a ‘belt and braces’ set of reforms, which Leckie calls “a pretty massive market failure”.

But he says that 20 years later, the time for re-examining the system is now.

“If you are a group home building company with a strong balance sheet that might be underpinned by registered Master Builders Home Warranty insurance that's offered to consumers; you've got a track record in building the same repeatable, low-risk residential homes, why do you even need a consent?

“Other than the planning rules, you know, they could be exempt from even needing a consent. We simply need to furnish the paperwork to the respective councils.

“We should be able to take cost out of the system for both the building firm, but most importantly, the consumers and support the supply of affordable homes.”

Bickle says currently councils are just the agent of the central government. There is costly occupation regulation, builder, designer and architect licensing, all run by MBIE, which doesn’t mean much in a legal sense because councils still end up holding the can.

“It’s almost like, what’s the point of that?”

The general view, as described by Bickle, is that the joint and several liability model (which has, in effect, often meant councils were the legal last man standing for redress) has driven perverse outcomes.

“Councils are risk-averse because they're often the last man standing when things go wrong and litigation happens.

“I think one of the central things of the report was saying, well, let's start somewhere. Because, you know, if we keep trying to tackle things that are almost too big to solve, like, you know, joint and several liability, why can't we start somewhere?”

As with everything in building regulations and consenting, the devil will be in the detail.

Crucially, the proposed reforms are not about changing building standards or the building code - one of the key areas that failed badly in the leaky homes era.

Separately, the Government has been looking at how to improve the market for building products from new sources and to get them approved quickly - this will take time in order to satisfy the market and voters that new materials are up to snuff.

Key areas of debate will be how long warranties and consumer protection last for and how it can be accessed.

Penk told The Post that sorting out how to structure it all given that building firms regularly fold and pop up elsewhere will be a big part of the work.

“I think it [insurance or indemnity] would need to be a clear avenue for the comfort of the consumer, that … in the event of something going wrong, there would be somewhere that they could go to for advice and redress.

“It might be that the tradie doesn't want to answer calls - and then you might get the benefit of insurance - and they might try to disappear and pop up somewhere else under a different name, which is a general phoenixing problem that the Government's sort of trying to work on elsewhere.”

In any case, the pendulum is clearly swinging back towards valuing efficiency in the system alongside reliability and quality and a recognition of the time cost of waiting for sometimes unreliable inspections.

The initial phase of this appears clearly aimed at the larger building companies that specialise in doing a few designs of the same relatively simple house, with few alterations available in larger developments.

While it appears that smaller renovation jobs such as relining (sticking insulation in external walls with building paper and then regibbing) will likely be covered, many larger renovations including second storeys could still come under the purview of councils because they are, by their nature, more complicated.

The proposals also highlight some of the current system’s inconsistencies. Master Plumbers CEO Greg Wallace told The Post a plumber can gut, change and certify an existing entire bathroom without getting a consent, while four consents might be needed for a new build.

“Only about under 40% of the work a plumber does is actually what we call consented work and requires inspections … 63% of the work done is non-consented and it's self-certified anyway,” Wallace said.

This is a big change and credit to the Government for being willing to tackle it. But it does come with challenges.

The leaky homes crisis is like the original sin of New Zealand’s modern building industry. Atonement is not really possible, and it has brought with it a severe scepticism of human nature, represented in the public imagination by lax regulators, cut-price tradespeople and dodgy builders.

Regardless of where exactly this all ends it will create a new competitive environment for self-certification.

While the Government is looking at an ‘opt-in’ scheme, and some customers will want the assurance of a council inspection, it is difficult to see too many consumers choosing the time delays and sometimes hefty fees associated with that, compared to a building/drainlayer/plumber finishing their work, certifying it with the backing of some form of insurance and everyone moving on with their lives.

There will also be tougher sanctions for poor quality tradies or repeated offenders.

These changes are potentially a very big deal and if done right should help drive building prices down and provide better redress for wronged customers. If done wrong, the unintended consequences may not show up for many years.

But each generation of government needs to try to fix the problems in front of them without creating more. Leaky buildings was then, this is now.