New Zealand has a $2.5b building defect problem. Will self‑certification make it better or worse?

By Mark Kirby*

New Zealand has no shortage of stark statistics that illustrate the scale of its housing crisis.

Its average house value currently amounts to nearly six times the average household income. Around 20,000 households remain on the social housing waiting list, while the government spends billions of dollars each year on temporary accommodation.

The country also has fewer homes per person than the OECD average, contributing to an estimated shortfall of tens of thousands of homes over the past few decades.

There is another set of numbers, however, that receives far less attention. That’s the 20,000-plus building inspections which fail each year, creating tens of millions of dollars in avoidable costs while making housing even more expensive.

Part of the government’s response to the crisis has been to make the building consent process faster and cheaper by expanding self-certification for trusted residential building companies.

The reforms are intended to reduce consenting costs, inspection delays and regulatory bottlenecks by allowing approved firms building simple residential homes to certify that their own work complies with the New Zealand Building Code.

But building better depends on more than a trade qualification. Unless these reforms are accompanied by structural, data-driven measures that improve quality on building sites, they risk treating the symptom and not the cause.

A system that normalises failure

In Auckland, around 160,000 building inspections are carried out each year – about 800 every working day. Depending on the inspection stage, between 14% and 37% fail the first inspection.

This isn’t unusual across the rest of New Zealand, where most new homes are handed over with defects ranging from minor fixes to more serious compliance issues. Failure has become so routine that it is often treated as part of the building process rather than something to be prevented.

In almost any other industry, this would be unacceptable. In construction, however, it has become business as usual. The system relies heavily on councils to identify problems after they occur, rather than preventing them in the first place.

When an inspection fails, the consequences are immediate. Work must be repaired, materials are wasted and labour repeated. With a typical three-day wait for council re-inspection, projects often stall, delaying work up to ten days across the build programme.

Even on a standard NZ$500,000 home, short delays and rework can add thousands of dollars before any replacement materials are needed. Across large public housing programmes, those costs can quickly add up to millions of dollars in additional financing costs, reducing the capital available to build more homes.

Too often, the extra work becomes embedded in construction contracts and passed on in the price of new homes. These issues are likely to become more apparent as the government expands its voluntary self-certification scheme for trusted residential building companies.

Although participating companies will need to satisfy strict eligibility criteria and remain subject to government audits, it remains to be seen whether the scheme will improve quality as well as productivity.

If the system continues to assume that some level of failure is acceptable, removing external checks might solve one problem while leaving another unresolved. In other words, defects may simply be missed instead of prevented.

Those changes are also likely to coincide with proposed reforms to proportional liability, which would place greater responsibility for defective work on those carrying it out.

New Zealand has already seen the consequences of poor building quality. The cost of defects and rework is estimated at around NZ$2.5 billion a year – enough to fund around 5,000 new homes.

The legacy of the $47 billion leaky homes crisis shows what can happen when oversight and accountability fail.

Getting it right the first time

Addressing defects requires catching them long before formal inspection. At Auckland construction sites, my recent field trial applied my PhD research directly to framing inspections – one of the industry’s most failure-prone build stages.

As work progressed, builders were guided through standards-based quality checks designed to identify problems before the council inspection, rather than relying on checks once the framing was complete.

Across 193 framing inspections using this approach, we found first-time failure rates fell from around 32% to 27%. Cutting down on fixes and delays kept projects moving smoothly, directly boosting subcontractor profits because more work passed inspection the first time.

Although the gains were relatively modest, they show there is obvious scope to improve quality by preventing defects before inspection.

In the long run, a greater focus on this area would mean less wasted labour and materials, lower construction costs and more homes delivered with the same resources. It would mean fewer costs being passed on to homeowners and help ease pressure on housing supply, in turn helping to improve affordability.

The government’s reforms offer a chance to shift New Zealand to a smarter way of building – and the industry already has the tools and capacity to support it.

Ultimately, success should depend not on reducing inspections, but on reducing the need for them.

*Mark Kirby, Construction Industry Consultant, Auckland University of Technology.

This article is republished from The Conversation under a Creative Commons license. Read the original article.