By Bernard Hickey
Housing Spokesman Phil Twyford has argued Labour's 'Kiwibuild' policy of building 100,000 houses in 10 years could prove the catalyst for a structural shift lower in building costs as it would generate the economies of scale in pre-fabricated building and bulk buying of materials that could reduce costs by NZ$47,000 or more than 20% per home.
"I think Kiwibuild offers the chance, not just to build the affordable new homes that we need, but to lead structural change within the building industry that will help to permanently lower costs and increase quality," Twyford said in a speech to the Prefab NZ National Conference in Auckland.
He referred to a report titled "Value case for Prefab: How offsite construction can deliver better cost-effective housing to more New Zealanders," and released at the conference by Prefab NZ and BRANZ, which estimated the use of pre-fabrication and bulk purchasing could reduce costs by NZ$47,000 per house. This included NZ$32,000 of savings on the building of a 157 square metre house, and NZ$15,000 of savings due to bulk-buying of materials to build a house that would currently cost NZ$246,000 to build.
"By taking a leadership role, and working alongside the experts in the building industry, Kiwibuild will let us implement these techniques on a large scale, and deliver the cost reductions and quality improvements that New Zealanders need," Twyford said.
New Zealand's house building industry was fragmented and unable to generate the economies of scale to produce affordable new homes, he said. He pointed to a Productivity Commission study that showed in the 2009/10 year, 4,604 firms built just one house during the year, while only 30 firms built more than 30 homes and just 5 firms built more than 100 houses that year. The Commission study also pointed to research showing building materials cost 30% more in New Zealand than Australia.
"How do you incentivise change in an industry in which hundreds of mostly small to medium enterprises make a myriad of disconnected decisions on investment, plant and productivity? It is here that Kiwibuild offers a once in a generation opportunity," Twyford said.
A government-backed building programme opened the door to bulk buying that required or incentivised the the use of pre-fabrication and offsite manufacturing.
"What’s more Kiwibuild delivers the scale needed for offsite manufacturing and prefabrication to work. It will be difficult for a builder producing 200 homes a year to justify the investment in plant and technology. Build 1000 or 1500 a year and it becomes viable," he said.
Twyford said he expected savings from bulk buying of building materials to be greater than the NZ$15,000 per house cited by the Prefab NZ/Branz study.
'More hands-on Government'
Labour would bring regular amounts of greenfields land onto the market and the Government would take a more hands-on role in the development process, he said.
"By utilising available Crown land, master planning new developments and by foregoing the developer’s margin, we can exercise more control over land price," he said.
"But I believe that one of the most important tasks, is that together we must use the scale of Kiwibuild to usher in a new era of sophisticated offsite manufacturing and prefabrication that will build better and more affordable homes. And create a more innovative and productive construction industry into the bargain," he said.
"I will go as far as saying that only through a Government backed building programme of the scale of Kiwibuild can we make the step change that is needed. Our Kiwibuild programme is a once in a generation opportunity to lead our housing industry in a new direction. To take advantage of economies of scale and bulk buying that our thousands of individual smaller firms can’t do by themselves."
'Faster, warmer and drier'
Twyford pointed to the Prefab NZ/BRANZ study showing lower amount of defects in pre-fabricated housing, and the homes could be built 50-75% faster in a factory than on-site, partly because weather delays forced delays of more than 13% of construction time.
The use of pre-fabrication could improve industry productivity by 2.5%, the report said.
Here is an article from David Hargreaves on Fletcher Building's plans for pre-fabricated houses.
(Headline corrected to make clear savings of NZ$47,000. Amounts already correct through article.)
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