New prefab certification scheme to streamline consenting

Property

Building Act reforms to see new certification scheme reduce prefab consenting requirements, improve building product information disclosures, hike penalties for non-compliant builders, and reduce the building levy

11th Oct 19, 10:31am by Jenée Tibshraeny

The Government is committing to introducing a new certification scheme for manufacturers of prefabricated houses that will streamline the consenting process.

Certified manufacturers will only need a building consent for the installation site of a prefab, rather than also requiring one for design or factory work.

This could halve the number of building inspections required, saving manufacturers and consenting authorities time and money, and brining more affordable homes to the market.

Currently about 10% of newly built home are prefabricated offsite.

Legislation to enact the certification scheme will be introduced to Parliament early next year as a part of an overhaul of the Building Act 2004.

Reforms don't address problems people can have getting mortgages to build prefabs. Banks can be hesitant to lend against property held at a factory rather than the mortgage holder's site.

This issue might not be as pronounced for large-scale, government-procured developments.

Product information disclosure requirements to be introduced

Reforms confirmed by the Government on Friday will also see building product manufacturers and suppliers be required to disclose set pieces of information about their products.

They will have to provide descriptions and information about how their product should be installed and maintained in plain English.

They’ll also be required to provide evidence for claims they make about their products' performance.

The Ministry of Business, Innovation and Employment (MBIE) expects these changes will improve the quality of building work and reduce the number of inspection failures, saving up to $1.5 million a year.

It's working with stakeholders to finalise the requirements that will be set in regulations.

Penalties for Building Act breaches to be hiked

Thirdly, the Government has confirmed penalties for Building Act breaches, many of which haven’t been adjusted since 2004, are going up.

MBIE said there was widespread agreement among those it consulted with that penalties weren’t high enough to promote compliance.

While a breach of a builder’s “defined responsibility” currently holds a maximum penalty of $5000, this will go up to $20,000 for an individual and $60,000 for a company or organisation.

Maximum penalties for wilful breaches and significant safety risks will increase from $5000 and $10,000 respectively to $50,000 for an individual and $150,000 for a company.

The timeframe for filing charges under the Act is also being extended, from six to 12 months to give enforcement agencies enough time to do thorough investigations.

Building levy to be cut

Coinciding with reforms to the Building Act, the building levy will be reduced from mid-2020 from $2.01 to $1.75 per $1000 of consented building work above a threshold of $20,444.

This will lower building consent costs by around $80 for the average new build, and by $5200 for a $20 million commercial project.

While MBIE in April also started consulting on building-related issues around risk, insurance and liability, announcements in these areas are only expected in 2020.

See MBIE's website for details.

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59 Comments

by Advisor | 11th Oct 19, 10:39am 1570743571

Great news - prefab seems to be a no-brainer.
Issues currently facing our construction industry from the top of my head: build quality, skill shortages, high construction costs, compliance downtime, bad weather, health & safety - prefab construction within a favourable building regime could solve or mitigate several of these.

by Pragmatist | 11th Oct 19, 10:45am 1570743926

Yep, finally this govt is starting to do a few things that will actually help solve the rediculous housing prices.
Bad news leveraged up "investors", another move that is going to keep capital gains off the table for quite a few more years.

by Houseworks | 11th Oct 19, 1:37pm 1570754239

I doubt that but you're welcome to believe it

by Solidname | 11th Oct 19, 6:20pm 1570771238

Aww bless! There’s a little word called “legislation” that’s been in your favour for 30 years, and this other word called “democracy“ when one meets the other they change. You’re welcome.

by Nzdan | 11th Oct 19, 10:58am 1570744736

No doubt Simon Bridges will be scurrying into the office as we speak to write up another retort.

by Advisor | 11th Oct 19, 11:14am 1570745682

National might try to spin this around as more "tinkering". To that I would say is that our housing woes aren't a result of a single glitch in the system, so a single, pervasive solution is unlikely to get us across the line. A combination of several minor improvements ("tinkering") is the way to go to release more housing stock into the market.
The effects of further reforms such as Kiwibuild and RMA overhauls, fast-tracked construction and infrastructure skills visa, government's procurement guideline changes, etc. are going to further improve the construction landscape in NZ.

by Dgm | 11th Oct 19, 11:00am 1570744803

wow....wow....wow....wow....wow....

ive been saying Prefab is the next big thing

by Uninterested | 11th Oct 19, 12:44pm 1570751078

How about refurbished old shipping containers being stacked upon one another next door?

by Good Samaritian | 11th Oct 19, 11:09am 1570745375

Good Move.

What would also help is if Councils billed the land developers for more infrastructure costs, rather than loading a significant component it on the home build. This has a number of advantages; including:

1. Reducing the holding cost on Councils, would have effectively been bank rolling the developers risk until houses are built. The Mangawhai mess wouldn't have happened if this was in place.
2. Facilitates the production of prefabricated homes offsite; including removing the issue of tiny transportable houses, and whether they are permanent or not.

by bw | 11th Oct 19, 11:19am 1570745990

You've lost me. Surely lumping more costs onto the developer - at any stage- is going to jack prices up?
Isn't the solution to remove those infrastructure costs from the developer, entirely, and have the costs borne by 'the Council' who then get reimbursed by issuing, say, 30-year Infrastructure Bonds' to spread the costs over the lifetime of the development? The Bonds are then repaid from future rates, yes, but by all future occupants and not just the front-end one?

by Yankiwi | 11th Oct 19, 12:14pm 1570749242

The infrastructure required for new construction should rightfully be placed where it belongs, on the new construction. I do not think it matters much as to whether this comes from levies on the new build or the developer, as the money in both cases will come from the person purchasing the property. Yes, this could be done with a targeted rate on the new development. This results in the council borrowing money to pay for the infrastructure with the hope that the targeted rate will pay these funds back in the future. Pay now, pay later...

How to avoid this requirement for paying for additional infrastructure? Well, maybe reduce the demand??? That is, reduce immigration. There were a couple parties that ran on this idea, anyone seen them lately?

by bw | 11th Oct 19, 12:54pm 1570751673

It's a Lifetime Cost accounting thing.
The cost of the roads, sewers, fibre, water, footpaths etc could be installed and paid for 'upfront' by either a Council or a national Government Infrastructure Body. They in turn, 'get their money back' by issuing long term (30 year) Bonds into the money markets ( all sorts of businesses - insurance co's etc want to lend monies for longer-term as part of their money management); no accumulated debt to an individual Council. That stops all of those cost being added to the price of the first sale of any block in a subdivision to repay the developer, and so the initial sale price should be lower.
The Council or Government Body issues Bonds that cover the expected lifetime of that infrastructure ( issuing them now at the lowest interest rates in our history!) that are repaid over the timeframe of the bond by a targetted levy on whoever the property owner is at the time.
If the fist owner lives there for, say, one year, they pay 1/30th of the cost of the infrastructure through that levy, not all 30/30 'up front. If they live there for the whole 30, then they pay it over the Lifetime of their ownership at an accrued rate instead of the whole lot upfront ( in the purchase price)
It's not a new or novel idea! It's done elsewhere in the World and seems to work fine....

by The Person | 11th Oct 19, 5:46pm 1570769186

And it doesn't just lower the cost of new sections. If new sections are cheaper it makes existing land cheaper too, win win.

by bw | 11th Oct 19, 2:03pm 1570755810

Question:
If you had the choice between paying $300,000 now for a fully serviced block of land, to build your house on, or $200,000 for exactly the same block of land ( the $100k being the cost of all services installation) plus $75 per week for every week you lived there, for up to 30 years, and use the 'spare' funds now to go into your house, what would you do?
You could even have the choice of either option - pay $300k upfront, and no ongoing fees ( repay the Bond issuer in effect) or go with the staged payments.
The problem, of course, is that such a scheme would lower the cost of land and those existing block around it, and that can't be allowed to happen, can it?!

by Yankiwi | 11th Oct 19, 8:45pm 1570779909

Let me go through your operating assumptions. By inference, you think that the infrastructure incremental cost requirement is $100k in current year $. If the interest on the bond that is issued was 3%, then the weekly additional cost would be a bit more than $75. Your $75 assumes that the interest on the bond was 0.53%. I'm not certain that there is any entity that would purchase that bond in the current environment. If the bond interest was 3%, which is rather low, then the weekly cost would be a bit more than double your $75/week.

The obvious answer to your question is to take the $75/week as that answer is the equivalent of paying less than $50k in current year dollars. The equally obvious answer is that this choice will not be available as it will not fund the required infrastructure so the $75 option is a false option.

Paying upfront, or going via the weekly payment plan results in the same overall cost. That is, unless you are one of those people that get sucked in to the no down payment, easy monthly payment plans... The property price will reduce to match any additional levies in a rational market. Of course, we see how irrational people get sucked into the "low monthly payment" stuff without understanding the increased overall payment. Fools and their money, well, stuff happens. The overall market tends to price to match reality despite what RE agents claim.

by Good Samaritian | 12th Oct 19, 1:55pm 1570841736

The market sets the price, rather than the developer.

While some developers are capitalised to hold the sections back until they get what they want, delays affect their profitability. There's a opportunity cost in holding assets that dont provide cashflow.

The government can always move into this space, if big developers are sufficating growth, and are introducing legislation to do just that. Charging significant rates on future residential land would force the hand of these ring fences also.

While infrastructure bonds could make things work, all this end up doing is subsidising well capitalised developers who have ring fenced growth cities already. Playing extra cost on the end section buyer could force the price of sections down, but this is unlikely.

Unfortunately these well capitalised developers who have ring fenced growth cities play by a different set of rules, and abuse the yes culture of the less than useless professional politicians.

by Chris-M | 11th Oct 19, 11:14am 1570745642

Great
But why has it taken so long to do something so simple and obvious.
They will have lost the next election before any of these are built

by Advisor | 11th Oct 19, 12:24pm 1570749883

Simply lifting residential consent approvals by another 20-25% in the months leading up to the election next year will be well-received. I do hope you're wrong the Kiwi voter is smart enough to understand that the coalition with their implemented changes are far better than the alternatives who fail to even acknowledge the looming crisis; not to mention their obvious vested interest in aggravating the crisis.

by Chris-M | 11th Oct 19, 2:59pm 1570759166

So do I, but good intentions will not keep you warm and dry.

by Nzdan | 11th Oct 19, 4:51pm 1570765863

Neither will no intentions.

by pin3cone | 11th Oct 19, 11:24am 1570746248

Hmmmm. How does the government indent to break down private developers' walls of rules about adhering to strict design and material standards "so as to not devalue the development or the aesthetic of neighboring properties"?

by Pragmatist | 11th Oct 19, 11:32am 1570746753

Well, if they start deploying these prefab in the affordable housing developments in the various govt run/supported schemes, then giving buyers a choice should in theory result in developers losing customers for their overpriced builds.. we shall have to watch and wait.

by Advisor | 11th Oct 19, 12:23pm 1570749834

by Averageman | 11th Oct 19, 11:35am 1570746952

Makes sense. It should contain full liability for construction and materials that transcends company liquidation. Oh my goodness - what will normal builders and developers do now!!!!

by Uninterested | 11th Oct 19, 12:47pm 1570751220

Don't forget architectural designers and architects

by CourtJester | 11th Oct 19, 3:13pm 1570760019

Time for a career change. There's always a need for more real estate agents!
Oh wait...

by dictator | 11th Oct 19, 11:38am 1570747081

While the Government is proposing reform it is still only for a small portion of building consents. This still does not address the unnecessary hold ups that the various councils are creating for the other 90%+ of consents.

by Good Samaritian | 13th Oct 19, 10:29am 1570915762

Its the boom and bust cycles created by the banksters and politicians that aid and abate that create the biggest damage. By controlling the supply of money, the overseas owned banks have controlled NZ inc economy. Thet have been economic terrorists, who privatise the profits, with the government picking up the tab for the destruction their overlending has created.

Regulation of overseas banks is long past due, to limit the supply of credit to not more the same percentage as sustainable population growth. This would create a stable workforce, including the equivalent consent officers to deal with predictable growth; rather than that manipulated by banksters.

by lastlegs | 11th Oct 19, 11:48am 1570747734

positive sign for those locked out of the property market anything is better than renting.

by Dgm | 11th Oct 19, 11:45am 1570747533

This will push builders to move towards Prefabs, as Prefabs will now require only 1 inspection!!

Fletchers will soon announce their OSM facility...

by THE MAN 2 | 11th Oct 19, 12:52pm 1570751521

Will reducing the number of inspections really reduce the cost of building by much?
May speed up the building time by a bit, but can’t see it reducing costs by anything worthwhile!

by Dgm | 11th Oct 19, 1:09pm 1570752584

time mate, time..that is the win with this solution..

- Quicker build time
- Build starts while ground works underway, massive time saver
- Inspections cause huge delays.. the council are unable to cope with the inspection work.. this will speed up the process BIG TIME
- We all love NZ's (Auckland's) weather.. this saves huge time as build work continues irrespective of the weather

by Pragmatist | 11th Oct 19, 1:10pm 1570752645

Hmm, whats faster, a guy with a tape measure and a skilsaw, or an automated production line in a factory?

by Nzdan | 11th Oct 19, 4:53pm 1570766014

...............come to Christchurch we always buy under value, you make money when you buy. Christchurch is the desirable place to be, people are flocking there in droves. Etc etc.

by Uninterested | 11th Oct 19, 12:47pm 1570751275

Yey! An $80 dollar saving per house!

by Pragmatist | 11th Oct 19, 2:33pm 1570757601

The big savings are in the off-site building, not the inspections. If someone gets an efficient factory setup, the time savings will be huge. And costs, things like all the site safety, hiab crane work on site, scaffolding etc.. those all suck up a huge amount of time and money.

by redcows1 | 11th Oct 19, 12:49pm 1570751353

Re building act breaches - penalties. I don't recall ever seeing any imposed, has there been?

by Basil brush | 11th Oct 19, 1:17pm 1570753068

"This will lower building consent costs by around $80 for the average new build".
Am I missing something here? Is this intended as a joke?

by Houseworks | 11th Oct 19, 1:44pm 1570754687

All of the coalition's ideas are jokes they didnt expect anyone to believe.

by positivelywallstreet | 11th Oct 19, 1:45pm 1570754719

I don’t believe they will be cheaper, less labour is offset by expensive machinery.
But the production rate will be higher than hand crafted homes.

by Advisor | 11th Oct 19, 2:50pm 1570758647

A prefab manufacturing facility in my neighbourhood is hardly any more mechanised than a construction site in the next suburb.
Think along the lines of manufacturing a car in a factory vs producing one from scratch in your garage. You'd probably need the same tools and equipment in both situations but the former is way more productive, efficient and scalable than the latter.
Plus, the savings from not having to hire construction workers for all activities; any machinists will do. Also, less wastage because the production happens in a controlled environment. You could also spread out compliance costs (design and materials), architect's fees, etc. by getting those for a single design and applying that over 100s of houses.

by positivelywallstreet | 11th Oct 19, 3:06pm 1570759607

Oh,
I thought we were gearing up for mass production.
http://www.triadmachines.com/wood_panel.html

by positivelywallstreet | 11th Oct 19, 3:35pm 1570761316

Or https://www.buildmagazine.org.nz/assets/PDF/Build118-46-Learning-Lesson…

by positivelywallstreet | 11th Oct 19, 3:51pm 1570762309

Or $5 million in Christchurch https://www.stuff.co.nz/business/industries/71107790/homes-prefabricate…

by Pragmatist | 11th Oct 19, 7:31pm 1570775519

Maybe they can ship that gear north, if what several commentators round these parts say about chch having an oversupply of unsalable new builds is true.

by positivelywallstreet | 12th Oct 19, 5:24am 1570811081

By now they probably have skilled operators who could train others in Auckland.

by mfd | 11th Oct 19, 4:15pm 1570763715

I read the 80 dollar saving as being from the reduced building levy. The shorter build time and fewer inspections should have a dramatically larger impact, at least once we have reasonable scale.

by THE MAN 2 | 11th Oct 19, 5:43pm 1570769003

You are absolutely dreaming if you think that it is going to be the savings that you are saying.
Firstly, where are these prefab houses going to be put?
You will not be able to put them in subdivisions in ChCh as there are covenants that wouldn’t be permitting basic prefab houses or apartments.
You may get away with it in Auckland where some tear downs may allow it from council.
The time to build is not a major cost in the context of building as interest rates are so low nowadays anyway.
Look, this governments of non business people continually spurt out stuff and very little of it ever happens.
Weeks ago we had the KiwiFlop reset and where is that at?
No targets, no details on anything and nothing since.
This COL have no idea on how to run any business successfully.

by THE MAN 2 | 11th Oct 19, 6:30pm 1570771833

Just seen on NewsHub some prefab homes that are being built.
They are so cheap looking it is not funny!
They certainly should be affordable to most people if you are able to put them on land.
They wouldn’t get approved in any subdivision in ChCh that I know of though!

by frazz | 12th Oct 19, 9:42am 1570826573

Probably not MAN..the snob snob number would kick up a fuss. That said you have a glut down there and rents are going now where. Keep up the vested interests rant though always good for a giggle.

by THE MAN 2 | 12th Oct 19, 7:50pm 1570863045

Rents are just fine in ChCh.
Best place to invest in NZ done right.

by The_4th_estate | 11th Oct 19, 6:28pm 1570771687

putting a few of the worst LBP offenders on home D wouldn't go amiss, the lowball tactic is essentially fraudulent activity and should be treated as such. As for Pre Fab....c'mon NZ and catch up. For all the claims this country makes about innovation the building sector simply has no idea. Walk onto any building site and ask if anyone has ever referenced a time and motion study to organise the layout of their essential equipment and materials on site and you will see what I mean.

by JimboJones | 14th Oct 19, 9:42am 1570999333

I don't get whey they don't have panels that are pre lined with Gib, have the doors/window already in place, and you just piece it together like Lego. Prefab of the whole house seems like an unnecessary step to me - just build standardised panels and the builder can just slot them together in whatever configuration they want in a couple of days.

by Dale Smith | 11th Oct 19, 6:42pm 1570772547

A prefab is hopefully more than a box build in a factory as they showed on TV1 tonight. There is no reason why bespoke cannot also be built in a factory.

But really this is only arranging the deck chairs on the Titanic as anyone with a simple understanding on land/build economics knows that any saving in one apart of the system is automatically capitalised into that part of the system where there are bottlenecks/monopolies.

In this case it is land zoning restrictions rules which are only going to get worse due to land sensitivity rules administered by council.

Any saving that the build industry might produce by prefabbing will be fought over by landbankers and council, with nothing getting through to the end user in the way of am more affordable home.

by Podcast | 11th Oct 19, 9:01pm 1570780869

Good step in the right direction. Only in NZ could we require 2 consent processes for the same building, what a joke. Obviously no one from the building sector seem to have watched the 5th Impossible builds TV program, (https://www.tvnz.co.nz/shows/impossible-builds/episodes/s1-e5) on prefab houses, where the finished house wouldn't look out of place in a top price suburb. The one factory in Poland, Danwood homes, (https://www.dan-wood.co.uk/en) produces 20,000 - yes TWENTY THOUSAND house a year. One factory like that here would have fixed Kiwibuild in under 5 years with better, cheaper houses.

by Glitzy | 12th Oct 19, 12:15am 1570792546

I discovered today that Auckland Council classifies installing wall insulation (replacing plasterboard and inserting insulation) as structural works requiring the same process of consent as for example building an extension. Isn't this absolutely insane? How many more crazy ass issues are there to address with currently building consents here ??

by JimboJones | 14th Oct 19, 9:31am 1570998708

Its not Auckland Council that make the rules, its MBIE. Installing wall insulation is a consented activity according to MBIE. And there is no such thing as a simple consented activity (e.g. ring council and say "I'm installing insulation in my walls, can you come and check its OK please"). Consents require drawings, architects, etc. In fact you may also find you must have a licensed building practitioner do the work (Gib is often used as bracing and hence considered structural).
This is the thing with over regulation - the fear of taking it away. Yes if they removed the regulations there would be cowboys doing all manner of dodgy things with houses. But there will also be a lot of people doing good things with houses - like building them, insulating them, double glazing them, etc. And all with a lot less cost. I doubt there would be any real safety issues (esp single story wood framed houses) - especially if you compare it to say transport where we find it acceptable to have 400 people die a year and tens of thousands injured.
My gut feeling is that if they did away with the building code we would actually have better housing stock on average then we do now - and a lot less money being thrown away.

by waymad | 15th Oct 19, 10:05am 1571087145

How do they ever find out that such an activity has happened? It's by definition indoors, no scaff, fences, etc needed so no exterior indication......

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