Housing Minister Nick Smith is putting together a radical overhaul of the house construction industry in New Zealand.

And he is hoping international companies who become involved in his plans to build new houses in Auckland will use cheaper imported building materials and thus introduce more competition into the New Zealand building supplies market.

Mr Smith told POLITIK the companies would have access to new overseas-based supply lines.

The role of the overseas companies is just part of a major package of measures the Government is working on to bring down the price of building a house.

But the move will only be able to go so far — as Housing Minister Nick Smith concedes because land is a major cost and can be as much as 50% of the final price.

They main moves the Government is working on are:

  • The introduction of overseas companies into large scale home building projects in Auckland.
  • The imposition of liability ceilings for Councils faced with claims such as the leaky buildings claims.
  • A rework of New Zealand’s building standards.

The Government moves, which have been in the pipeline for some months now, come after a TV investigation at the weekend into building material costs and questions in Parliament yesterday from Labour’s Phil Twyford.

Mr Twyford claimed there were rorts and kickbacks in the building materials supply industry which were reflected in high building costs.

But attempts by the Government to try and introduce competition into the plaster wallboard market thus trying to limit the ability of Fletchers’ Gib brand to raise prices has had only limited success.

A paper released yesterday by Mr Tywford and obtained under the official Information Act showed that the suspension of anti-dumping duties on imported plasterboard had seen some increase in supplies from Thailand but even so, the Ministry of Building, Innovation and Employment estimated these would eventually amount to only about $900 a house.

It is for that reason that the Government wants to kick-start more competition within the building supplies industry by involving overseas companies in its home building plans in Auckland.

OVERSEAS BUILDING COMPANIES USING OVERSEAS BUILDING PRODUCTS

Mr Smith said there was already quite a high level of overseas interest by companies wanting to be involved in the development of housing on the surplus crown land in Auckland.

“The Government is keen to use the crown land programme to get some scale,” he said.

“This would become a platform for bringing into New Zealand higher levels of productivity and lower cost building products.”

Mr Smith is also concerned about what he calls the way Councils are “pedantic and risk averse” when it comes to issuing building consents.

“The reason for that is if a building project goes wrong then everybody sues the Council and on average they have been paying out 50% of settlements,” he said.

But he pointed out that typically building consent fees were set at one percent of the value of the House.

LIMITING COUNCILS’ LIABILITIES

For that reason he is picking up a recommendation from the Law Commission last year which would see Councils have a cap on their liability — the Commission recommended $300,000 for a stand-alone house — and in turn, there would probably be a universal building guarantee scheme to assure the builders’ customers.

The Law Commission referred to the New South Wales scheme where the Home Warranty Insurance Scheme provides a minimum of $340,000 cover if there are faults in a building or if the builder disappears or becomes insolvent. Premiums typically range between $2000 – $3000.

Mr. Smith said that if the Councils faced a limited liability then there could be other advantages.

“You’d be able to get competition in terms of building consent authorities.

“And you’ll actually get them being more reasonable.”

He said he would have a discussion paper on building liability and strengthening commercial accountability published before Christmas.

REFORMING BUILDING STANDARDS

Major changes to the way New Zealand’s’ building standards are designed already underway.

Legislation is waiting its third reading to change the structure of Standards New Zealand which designs the standards to give it more independence.

Mr. Smith said that because Standards’ New Zealand funding was essentially user-pays it did not have the resources to bring in independent experts into the standard setting process.

“As a consequence the major players who are prepared to volunteer to serve on the standards’ committees tend to be people from our domestic industry,” he said.

“And they’ve done a pretty good job in making sure that the standards are set in such a way that only New Zealand products comply.”

The new legislation will provide some funding from the building levy which is payable on all new construction.

“This will enable us to update those standards, and to ensure that while we don’t end up with dodgy product, they are not specified in such a way that it’s only the New Zealand product that complies.”

But as Mr. Smith keeps emphasising, changes to construction costs can only go half the way to reducing the price of houses, particularly in Auckland.

Ultimately the biggest impact will come with a greater supply of land for housing and he is relying on the Urban Development National Policy Statement which will take precedence over the Resource Management Act for that.

That statement is expected by the end of next year — by which time the other measures should also be in place.