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Gerry Brownlee and Nick Smith criticise Christchurch Council decision to increase building consent fees 89%; ask for reports

Property
Gerry Brownlee and Nick Smith criticise Christchurch Council decision to increase building consent fees 89%; ask for reports
<a href="http://www.shutterstock.com/">Image sourced from Shutterstock.com</a>

By Bernard Hickey

Housing Minister Nick Smith and Canterbury Earthquake Recovery Minister Gerry Brownlee have criticised a proposal from the Government's own appointee inside Christchurch City Council's building consents department for a new fee structure that could nearly double building consent fees.

The Press reported Crown Manager Doug Martin had proposed a new fee structure that would increase consent costs for a NZ$100,000 to NZ$300,000 home build by 89% to NZ$3,310. The proposal came after a benchmarking study found other large city councils were charging around that level.

Martin was appointed into the Council by the central Government in July last year because of concerns consents were not being issued quickly enough to ensure a speedy rebuild. As recently as late October the Government had said Martin was "on the right track."  

But speaking to reporters before National's weekly parliamentary caucus meeting, Smith and Brownlee said they were concerned to hear of the increases and had asked officials for more information on whether they could be justified.

"I am concerned that local government costs are part of the broader issue of housing affordability. The Productivity Commission identified that increased council charges was one of the factors affecting affordability, so it's concerning to see such a large increase being proposed in Christchurch," Smith said.

"There is no question the there has been a problem within the Christchurch City Council around the processing of building consents and it's absolutly pivotal for the recovery that we get it right. I've asked for some work to be done by officials as to whether the hike in charges can be justified," he said.

Asked what options the central Government had to over-rule the Council, he said: "The question of the level of charges is one ultimately for the council, and there's an interesting complexity with the Crown Monitor in there trying to get that City Council's building consents system operating well. In the first instance I want to get good information as to whether the proposed increase in charges is well justified."

Smith said he had asked for officials in the Housing ministry to report back to him within a week or two.

The Government is pushing through a bill aimed at limiting the ability of Councils to charge development contributions without challenge, and has repeatedly argued over the last year that council fees and obstructive town planners were a major factor making housing unaffordable in New Zealand's biggest cities.

Brownlee said he had not received a full report from Martin on the new fee structure, but would be asking for one.

"One of the interesting things is that as you're seeing such a huge replacement of housing stock in Christchurch, the rates levied against those properties are going to significantly increase," Brownlee said, referring to one case he had heard of where a house being demolished had seen its rates bill rise from NZ$3,500 a year to just over NZ$8,000 a year.

"So there is a huge cashflow benefit to the Christchurch City Council. So I would have thought in the normal business sense that building consents were an investment in your normal cashflow, so I'm going to be asking the Crown Monitor for an explanation," Brownlee said, adding however that he was not the 'reporting' minister for Martin.

"I'm also somewhat surprised that the Crown Monitor is making an announcement that should have been made by the Mayor (former Labour MP Lianne Dalziel)," Brownlee said.

Doubling of commercial consent fees

The Press reported that the cost of commercial building consents for projects worth over NZ$1 million was proposed to more than double to NZ$13,920.

Councillors are also being asked to consider raising other fixed service fees within the building control unit by 17-18% and an increase in the standard hourly charge-out rates for building consent/control officers by a similar amount. The hourly rate for a level 1 building consent officer would rise from NZ$140 to NZ$165. The rate for a specialist building consent officer would increase from NZ$240/hour to NZ$280/hour.

The Press reported the Council had benchmarked what other councils with a significant level of new home building were charging. 

The council  asked what the consent costs would be for a single-storey 200sqm house built to a national home builder's standard design with a project value of NZ$350,000. It found Auckland charged NZ$4,648, Ashburton District Council charged NZ$3,530, Tauranga City Council charged NZ$3,263, Queenstown Lakes District Council charged NZ$2,735 and Nelson charged NZ$2,700.

The Council proposed a consent cost in Christchurch for a similar sized house of NZ$3,850.

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41 Comments

"increase consent costs for a NZ$100,000 to NZ$300,000 home build by 89% to NZ$3,310"

 

THATS SO CHEAP - we pay more than $3300 in auckland to permit a single deck!

 

My father in law built a deck recently (over 1.5m high), materials were around $1000, labour was free, but consent and the plans required for the consent were about $10,000!!  Can't they just send someone around after you build it and jump up and down a couple of times to check it's stable?

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One of the interesting things is that as you're seeing such a huge replacement of housing stock in Christchurch, the rates levied against those properties are going to significantly increase," Brownlee said, referring to one case he had heard of where a house being demolished had seen its rates bill rise from NZ$3,500 a year to just over NZ$8,000 a year.

"So there is a huge cashflow benefit to the Christchurch City Council. 

 

I am having a dumb day, but I don't get this bit. Surely the RV of a house only indictaes what share of the total it pays - the total for the year being divided by the number of houses and then a cost given to each. If all houses went up 15%, the share per house we remain the same?

Maybe there would be a year end residual benefit, but not much and then the new financial year it sets the total again.

Having said this, CCC are reviewing the RV of all houses in CHCH this month anyway.

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I think you are on the right track. The level of rates in a community are ultimately determined by what the lowest income group of home owners can afford, not the average value of the properties. That is usually the elderly on fixed incomes. House values vary a lot around NZ. But what people pay in rates doesn't change so much because Council services and regional income do not vary as much.

 

The government is picking a fight on small issues, so they can blame LG for housing unaffordability because they will not touch the big issues like 'right to build' and properly funding transport. This is just a repeat of Auckland Council warns of 8.5% rates hike and $480 mln of debt due to Govt changes on development contributions . That had over 200 comments. So maybe we don't need to go there again.

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Basically Yes (at least for most councils as I understand it). Putting aside fixed charges, the general rates are (council budget) * (value of particular property) / (total value of all property).

So in the normal course of events, a rates bill for a single property changing like that (and not for all properties) would be caused by something like knocking down a 2 bedroom shack and building a mansion in its place. 

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Re: "So there is a huge cashflow benefit to the Christchurch City Council. So I would have thought in the normal business sense that building consents were an investment in your normal cashflow, so I'm going to be asking the Crown Monitor for an explanation," Brownlee said, adding however that he was not the 'reporting' minister for Martin.

 

That is rich.

 

Financially the earthquakes have been disaster for CCC. There is little or no extra ratepayers so no rise in revenue for LG and a massive increase in costs for the rebuild.

 

Whereas for central government they are getting taxes on eveery insurance payout spent. GST on every new build and repair, PAYE on every extra construction worker. Of course central government is contributing to the rebuild but they did have insurance and given Canterbury generates something like 15% of GDP then the rebuild is just as much as investment for Central government. More so, because central government taxes are more aligned to current incomes.

 

Brownlee is a bully. Christchurch and Canterbury would be better off without him. Give LG (all not just Canterbury) a higher proportion of taxes and let us get on with rebuilding our regions ourselves.

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It all becomes self-reinforcing and self fulfilling

 

Christchurch increases 89%

 

Next year, Auckland says, heck, Christchurch raised by 89%, we will raise 80%

 

The year after, Christchurch says, heck, we are out of step again

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Yup, just like CEO and boardroom renumeration.  It's an old boys club

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By the look of it it was badly mis-managed and under charging....that is my first take on it anyway.  

The interesting thing will be when councils have to justify their costs in a court....wont be soon enough.

regards

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It's hard to read but the only thing I can extract from the article is that the reason for the rise is to match other councils prices.

That is truely an irrevelant reasoning.

Unless of course you are a monopoly council with a philosophy that you should extract the most you can from where you can, justified or not.

They truely are getting into volume house consenting in Christchurch.   How about a fee of $10 per house. 

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Many of these houses being built are just simpe mchouses off the plan, using basic standard details, so I can't see the justification for consent fees being so high. 

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Because the fees are "standardised" I assume.

regards

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They aren't though. One council charges $200 for the erection of a green house, while anohter charges $500. I think they are moving towards contracting out the consnet process to private comapnies, which will also possibily  shift future liabilities.

One reason I think why fees are so high, is becuase people are paying for the leaky building problem.

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Indeed:  the value-add of consents and inspections is minimal on a typical residential build:  relatively low risk, standard materials.

 

Ask yourself - what value can yer average Inspector deliver, that a competent PM (who is already costed in) could not?

 

And, sure, there were cowboyz about, but the LBP process has closed That loophole - much too tightly it could be argued - we now have created yet another buncha monopolists....

 

After all, the Chch earthquake sequences have shown up an Interesting fact.

 

No-one was killed in a residence, because of dodgy structure.   (Yes, yes, URM and brick chimneys plus external agents like rockfall did kill some people, but they are well-known hazards regardless of structure.)

 

And many of those residences were put up well before consenting, fee-gouging, Elfin Safety or many of the overheads now evident.

 

So consents and inspections need to be seen for what they are - a self-perpetuating racket (racket is traditionally defined as the raising of a 'threat' - nice little house y'have here, pity if anything wuz ter happen to it - and the offer to mitigate or avoid it, by the transfer of mucho readies.)

 

After all, a factory-built house will be far better QC'ed, tighter, more weatherproof, and built to a Plan, a BOM and by well-controlled machines and the occasional staffer.    What possible value can a Clueless Council Minion, add in that situation?

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so PMs are all 'competent' while council staff are all 'clueless'?

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Generaliising magnificently, yes.

 

After all, consider the chances of an incompetent Council minion getting fired, reprimanded, or otherwise censured.

 

Whereas an incompetent PM will be out and on the dole by tomorrow lunchtime.

 

Public vs private sector have differing incentives, y'know....

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I dont follwo this,

""One of the interesting things is that as you're seeing such a huge replacement of housing stock in Christchurch, the rates levied against those properties are going to significantly increase," "

why? if its an insurance job you more or less get the same house so relatively speaking there shouldnt be much change?

regards

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It does seem crazy to use the charges in other localities to justify charges in Christchurch. Presumably they will be really busy issuing thousands of consents and can thus spread their  existing overhead over lots more consents and charge miles less.

More to the point, the information that they are charging a specialist consent officer out at $280 / hour is a shocker. What are these people? Neurosurgeons looking for a pay rise?

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Roughly, wages are the same, utility costs the same, IT costs the same etc etc hence I'd expect similar costs/charges.

More consents = more ppl = more costs.

regards

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> they will be really busy issuing thousands of consents and can thus spread their  existing overhead over lots more consents and charge miles less.

 

If approving consents was an unskilled job that would apply.  (cue: claims that all council workers are monkeys). Trying to scale up a job that requires specialist skills in a city with a population of 350K is a bit more challanging.  You can't just throw more people at it, that actually slows things down in the short-term, as those with the knowledge have to stop their work to help the newcomers out.

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Not brain surgery..No....but maybe after banging yer head against a brick wall, that may be what is required for poor Christchurch people.

However, I would like confirmation of a few facts, before a huge rise in rates, if I was in Christchurch and under the thumb of that Council.

Not that they ever stopped paying their rates, I hear, even when no water, no sewerage, house falling down around their ears.....etc.....and banging their heads over arguing the toss, with Gerry and his cronies, Insurance Co-s and the like.

Council even had the temerity to try and follow my leader and get huge rises, out of a falling city.

Jeez you wouldn't read about it....poor journalism, poor Christchurch.

(Lucky we have Hugh to put us in the picture).

So, just where is the money being wasted?...this time??.

Surely the CCC was well insured, they were always well paid in the past, our second city.

(Must have been the amount the bleeders were paid, but over spent)

It is not like Awkland, stuck with the bill for damage control for its over paid elite.

Or is it.?

Where is the Hugh and cry.??

Pray tell.

Is it that the overheads have got too big for their britches.

Or shall we skirt that point.

 

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Re: "I am concerned that local government costs are part of the broader issue of housing affordability. The Productivity Commission identified that increased council charges was one of the factors affecting affordability, so it's concerning to see such a large increase being proposed in Christchurch," Smith said.

 

National won their first election partly on the back of promises of affordable housing. A year ago their Finance Minister said the problem was inelastic supply.

 

So what are they doing about it other than blaming CCC for increasing one charge to $3,310? This charge did not increase developed sections costs in Halswell ChCH from $70,000 ten years ago to $240,000 now as Mike Greer recently pointed out. Exploding land prices is the problem. National could easily fix this by introducing some 'right to build' legislation and reforming the local taxation and provision of new transport infrastructure along the lines of Alain Bertaud's proposed reforms (See Hugh Pavletich's last housing affordability forword)

 

National are doing too little too late and trying to blame others for something they promised to solve.

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$3500 as part of a 350k house isnt exactly huge....now whether thats high or low I odnt know.  But when developers seek to make 100% clear and land owners seek to make 100% clear, then we have the materials duopolie than frankly $3.5k even reducing it buy say 50% isnt the issue.

Private greed is far more of an issue.

regards

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it's not exactly huge, but over 50% of the costs of a 350k house aren't huge - a builder probably makes less than $30/hr doing the work... but it all adds up

 

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After the shortest retirement ever this story is too delicious to let go by without comment.

 

Yes Brownlee has managed to spend two years working closely with CCC without learning anything about what they do or how. Nick Smith (former Rangiora District councillor) must have cringed when this one got reported.

 

Craig, Brendon, dh, steven, you are all correct there is no direct link between the assessed value of a property and the rates it pays. The valuation introduces a small amount of progression into the system so that some property owners pay more than others. Note that some councils operate land-value rating rather than capital value so it doesn’t matter what you build on your section it’s not taken into account.

 

Now to building consent charges. This is a story of stupidity, arrogance, fear, laziness and stupidity but, above all, the public sector credo: “putting self before others”.

 

In 1991 parliament unanimously passes the Building Act which strips local government of all their power to set building standards and hands it over to its own creature, the Building Industry Authority. Fast forward ten years and we discover that buildings constructed using government sanctioned materials and fastening methods leak like sieves, are rotting into the ground and poisoning their inhabitants on the way. The government has two choices: man up and fix the damage or blame someone else. Hence the Building Act 2004, the subtext of which is “it’s the councils’ fault but this will fix it”.

 

The Act has some interesting provisions. The number of mandatory field inspections more than doubles. The building work must comply with the consented plans in every detail with no variation. The application must comply with the Act and the Code in every detail before it can be consented. Every certifier must run a quality assurance system that provides the evidence of their fitness to be certified as certifiers. Not only do consent fees sky rocket but applications now spend more time in the post going back and forth for corrections than it takes to construct the actual building.

 

There was also an unintended consequence: all private certifiers went out of business immediately and councils came very close to having to operate without liability insurance. The government should have seen this giant red flag waving in their face but somehow they missed it. Given that there are some ways of bypassing the worst of the Act’s provisions (or so bob says) councils won’t use them because they don’t want any negative outcomes that reflect on them. They will take no risks so that they can guarantee maintaining their certification and insurance.

 

Still doesn’t mean the fees councils charge are fair and reasonable given the legal environment. When it comes to staffing, councils are like crude oil tankers: fantastic at going in a straight line forever but don’t ask them to turn hard a’ starboard. They can end up overstaffed then they have to put up rates or charges instead of letting someone go, and then they have to make work and so on it goes. As we have noted elsewhere councils are incentivized to sneak charges up to ease the pressure on rates. They can’t make a profit in building control and siphon it over to Roading but they can cross-subsidise the bits of their own function that should be rates-funded. In building control that means enforcement. The inspectors who follow up on complaints and issue stop-work notices cannot be funded out of building consent charges. If any council funds their building control function entirely from consent fees then they are breaking the law. And,sometimes it’s just laziness. They are supposed to charge reasonable and actual costs but sometimes it’s just easier to work out how much money you need, set your charges and if they aren’t too far out of line with other councils then that will do. There is no incentive at all to look for cheaper ways of doing things.

 

But ultimately any Minister of Building and Construction (uh that’s Maurice Williamson) who wants building consent charges to drop holds most of the power in their own hands right now: unwind the lunacy of the Building Act 2004.

 

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Kumbel... your comments give me a real understanding into all this..  thks

What u say makes alot of sense

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Yeah, I thought you had gone fishing

 

The triumvirate, including the energiser bunny, and the spraypainter, are on furlough at the moment cooking up the next deluge.

 

Question: They are supposed to charge reasonable and actual costs

That is identical to the current legal cases being run against the banks in both AU and NZ for "excess fees and charges" that bear no relation to actual costs incurred in providing the service

 

Wonder if Andrew Hooker will look at it. Doubt it somehow.

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The Auditor-General is possibly a better option. The AG probably exerts more power over LG than central government. A class action suit could be problematic whereas the AG may have a strong interest if the cumulative impact of overcharging is in the tens of millions.

 

In all likelihood there is some serious overcharging going on that the AG should look into. Here's some back of the envelope costing:

 

Let's charge out our building control officers at $75/hr. Assuming an annual salary in the range of $75K plus on-costs (holiday pay, ACC, sick leave, training, IT, accommodation, superannuation, other overheads) at about 50% of base salary this implies the cost of employing an officer is about $110K p.a. There are a nominal 2,000 odd hours of chargeable time possible for a full-time employee which translates to $55/hr. So $75/hr is incredibly generous. Before you infarct you do not want to know what EY charged out their 22 year old auditors to AC for to do the Len Brown inquiry.

 

Back to building. Not 100% sure of these numbers but, for the standard single-story residential build,  let's allow 2 hrs for admin, 1 hour for the PIM (including planners review of the application), 8 hrs to process the plans and issue the BC, 16 mandatory inspections at 1hr each. Grand total of 27hrs for a total charged out of $2,075. Add GST and we end up with $2,328.75. Interesting, eh?

 

You can apply the same analysis to planning and environmental services.

 

Update: the $140/hr charge-out rate mentioned in Bernard's story would be an actual cost if the officer were paid an annual base salary of about $110K

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I had better clarify a few things in my ad-hoc analysis. There are costs just associated with employing someone: ACC, holidays, sick leave etc. In the council environment these costs will be about about 30-40% on top of base salary. So someone on $70K costs about $95K to employ. Note that the employee doesn't get paid extra to go on holiday or be sick the allowance lets the employer hire in a replacement to do the employee's work while they aren't there. In specialised positions like building officers it really means the individual costs more per hour to employ because they are available to do less work than their position requires.

 

The Building Control unit has its own overheads and the "earning" staff have to be charged out a rate that not only covers their own costs but contributes to the overheads. In building control these overheads will include: unit/senior management, HR, IT, accounting, public relations, policy analysis, telecommunications, vehicle, general insurance, liability insurance, accommodation, certification, customer service. Looks like a long list but I am confident that the final number should certainly come in around $75/hr, definitely under $100/hr. And $165/hr still looks a lot like gouging to me.

 

On the other hand if $100/hr was realistic then the consent example I gave above would cost about $3K. There is an outside - and I do mean outside possibility - that CCC are within the ball park.

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The article talked about $280 per hour for the top dogs. That seems like gouging on a scale even lawyers would be embarrased by and is just an abuse of monopoly power. There are costs of employment over and above salary , and those producing chargeable hours do have to cover the support staff and management as well as some hefty insurance premiums, but this rate is just silly. My earlier comment about them being able  to reduce charges if they are busy is valid. Councils in parts of the country without much building activity still have to maintain capacity to process consents without any surety of income at all. Christchurch must know they have years of work ahead.

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The bigger the council the less efficient it is and the higher the overheads. I know it flies in the face of logic but bear with me. Councils are 40 businesses that just happen to be housed in one spot. The bigger the council the higher the costs of co-ordination. Also bigger councils hire more specialists who dream up more "essential" programs to be undertaken by themselves of course. You get the picture. CCC is on its third core computer system in 15 years; small councils are still running the same one they bought 20 years ago.

 

When you pay $280 an hour for a lawyer, accountant, consultant you pay for the three 'A's:

  • Ability
  • Affability
  • Availability

 

When you contact a lawyer you expect that they will be yours right now and that they will be easy to deal with. For that you pay a premium. If you are lucky you get the first 'A' at a council and that's it. So you shouldn't pay a premium.

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Kumble  " I know it flies in the face of logic "   Not so I think.  There are heaps of examples where bigger is more efficient.  But heaps of examples where bigger is hugely inefficient.  Councils as you point out.

But we are kept being whitewashed with the mantra about bigger is better.  You gotta wonder why.

Bigger works for some enterprises because that gives market control.  Even if it is inefficient.  And the costs to the citizens can be more than dollars.  Supermarkets for example - the veges are terrible.  Big councils are terrible in the quality of services and local knowledge.  etc etc.

But they have enough control of the system to get away with it. 

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Update attached to 90@9

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Agreed.  The councils (and thus the people) need to start standing up to central government foolishness else they will just keep paying the increasing price.

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Kumbel - Good to see that the retirement was short, well said, and hopefully will hear more in the future.

Cheers

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This maybe a song for Christchurch, then expand Nation wide..

http://www.youtube.com/watch?v=WSIUf2hD6Io

Never mind a new flag, we need a new National Anthem.

This one just might just do the trick. At least it might raise the spirit.

We need a new political party, this one seems right on the button.

So hit it and have a think.

 

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This one just might just do the trick. At least it might raise the spirit.
We need a new political party, this one seems right on the button.

 

Indeed.

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Love that link Alter Ego.....catchy little number.

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I think that TLA's in general have passed Peak Absurdity in terms of value delivered for fees/rates/taxes charged.

 

I'm inclined to think that the way forward (especially thinking about FHB's and Awkland Apartments) is factory builds

 

This approach needs only localised foundations (geotech, private sector assessment well out of the limited scope of Councils):  because what's then planted on top - house, modular units, what-have-you -  need have precisiely zero Council input:

  • Nationally type-certified as to design, materials, etc
  • QC'ed at source:  this could easily be an ISO style deal
  • Serial-numbered, plans, BOM, machines, staff utilised can all be stated/certified at source
  • Guaranteed - in exactly the same way that cars, boats, ag machinery and construction gear is - and all these without Council minions poring over the details

 

So the rise of 'real' factory builds will, slowly but surely, starve the beast...

 

Maybe....

 

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Have just had an Interesting conversation with a MoBIE type.  The very issue I raise:  that factory builds should not need consents in the traditional sense - is a big topic of discussion right now.  Main issue is that such factory builds needs runs of several hundred units to justify the initial capex. 

Still, I woulda thunk that the Awkland shoebox builds to come, should provide such an opportunity??

 

Secondary issue is that Clueless Councils still demand their full consent quid for such serialised units.

 

Cannot see That lasting......

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Do it now, waymad, do it now. There is nothing stopping a building company setting up its own  consenting/certification unit today. It has been legal for 22 years.

 

What is a Certifcate of Code Compliance anyway? It's a ten year warranty issued by the council. It probably covers less than the warranties issued by the building companies.

It's all CNC these days so the factory houses don't have to be identical. 

 

In this model the consenting officers work with designers as they go so that by the time the designer has completed the design the company knows the design is code-compliant. So you can have pre-approved designs and modules both of which could be used as the basis of custom houses.

 

The inspectors act as building inspectors and QC/clerk of works. Handy if the company has subbed out the actual build.

You still need to get a PIM off the council but I would apply once for a bulk PIM covering all sections in a subdivision.

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Great posts Kumbel and Waymad!!! 

Setting up a consenting/certification unit is sounding very appealing.

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