Report confirms construction laws are a mess!

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The Loopy Rules Report confirms what the industry has known for years — laws around land development and construction are a mess!

 

The Government should be congratulated on commissioning the recent report on Loopy Rules and the impacts they are having. It is the first step in realising that something is seriously wrong with the laws we are operating under.

 

The Loopy Rules Report was managed by a Task Force that travelled around the country to hear from people in their communities, as well as councils, sector interest groups,  tradespeople and government agencies.

 

It will also come as no surprise to anyone who carries out land development or construction projects, or who has had a project completed, that the laws and implementation of such are creating unnecessary complexity, expense, confusion, delays, loss in productivity and risk-averse outcomes that could never have been the original intention.

 

There were 2000 topics submitted in the Loopy Rules Report and, not surprisingly,  78% of them impact on construction. The breakdown is as follows:

Resource Management Act 32%

Building Act 27%

Local Government Act 12%

Health and Safety Act 7%

 

A common denominator in all of the above, with the exception of the Health and Safety Act, is that the laws in question are all administered by local authorities who, given the amount of disquiet around the implementation of such, are struggling with the complexity and consistency of delivery of what they have been charged to do.

 

Submitters were consistent in saying that they seldom felt valued in their dealings with local authorities, let alone being considered or treated as actual paying customers.

 

Readers might remember the discussion in my earlier columns about how petty rule enforcement is driving good builders from the industry, and that a full regulatory rethink is necessary if we want affordable housing and a sustainable industry.

 

The response I had to those articles was immense, and the Loopy Rules Report just reinforces the stark reality of operating within our industry.

 

Quite honestly, the industry is not going to survive in a productive format unless there are some major structural and cultural changes to how the rules operate. If these changes are not seen, no one will want to continue working within the industry.

 

Low financial returns, dealing with a mountain of inefficient bureaucracy, boom-bust cycles along with 10 years of liability is not a sustainable formula and, of course, provides no incentive to stay in or enter the industry.

 

The construction industry contributes to the health and strength of the overall economy, and if it operates well the spin-offs through employment and investments are huge.

 

It is imperative that we have sensible and workable rules that enable this massive driver for the economy to work efficiently. A nation of 4.5 million people should not be drowning in excessive and inefficient regulation.

 

Implications of the Health and Safety Act

The one Act that local authorities don’t directly administer is the Health and Safety Act, which is reserved for WorkSafe NZ. Once again, submitters were consistent with their condemnation, especially around falls from height, which is also in line with previous articles I have written on the subject.

 

At meetings, the Task Force heard from people who have serious concerns about the negative impacts of the current health and safety regime.

 

They were told of high compliance costs, overzealous enforcement, disproportionate fines, excessive paperwork, a lack of personal responsibility for safety, lost productivity, and general confusion about how to comply. The Task Force is sure that Parliament never intended any of this — however, this is the real world.

 

The language used by WorkSafe NZ — “all practicable steps” — a requirement of the Health and Safety in Employment Act 1992, is so broad that neither employers nor employees know what to do to comply.

 

In addition, WorkSafe NZ’s extensive list of more than 400 guidance documents can make it difficult to identify what is actually required in any given circumstance.

 

For example: the 64-page Working from Heights guide refers to 32 New Zealand and Australian standards, 10 European standards, six codes of practice and 10 best practice guidelines, but it does not state exactly what is required in any given circumstance.

 

Again and again, submitters describe their difficulty in finding understandable information to guide them through what they need to do. They feel swamped with inaccessible information and, at the same time, feel over-regulated. Clearly, WorkSafe NZ has work to do here.

 

I have stated many times over the past 18 months that the falls from height campaign has been foisted upon us with little or no thought as to its cost, benefits or on-site practicalities. It has resulted in a $10,000 increase in cost to the consumer for a 200sq m single level build with no real substantiated benefit.

 

The Australian Code of Practice for falling from height is proven, covers the majority of what the submitters have raised, and also saves the consumer 75% of the costs we are currently lumbered with.

 

Time and again I will say it — WorkSafe NZ would be doing everyone a favour by adopting the Australian Code of Practice.

 

Implications of the Building Act

At the time, the Building Act 2004 introduced a whole new approach to building controls. As part of the new approach, most councils have become building consenting authorities, requiring them to interpret the Building Code when assessing consent applications and to inspect and approve the work done.

 

Councils are liable for any errors they make under the “joint and several liability” regime, which has cost them millions in legal actions.

 

Councils have become more risk averse since incurring these losses, and this approach leads to arguments with designers and builders over, for example, acceptable solutions, as well as detailed and repetitive inspection processes. The situation creates undue cost, frustration and delay to those applying and working under the consents.

 

Risk-averse behaviour and poor service is likely to continue as an underlying driver of decisions as long as councils remain in charge of consenting and have no competition.

 

The continual changes to the rules, like the most recent one implemented on January 1, 2015 to do with warranties and disclosure, was implemented with little thought, unnecessary haste and against industry advice.

 

For example, why develop new regulation for builders in late November — the busiest time for the industry — and then force them to have systems and rewritten contracts in place for a launch on January 1? It demonstrated a complete disconnect from the way the industry operates.

 

Accordingly, facets of this regulation go largely ignored by the industry as unworkable and unenforceable. This is a prime example of a well-intentioned but Loopy Rule, and one would hope that, going forward, this type of thing will be avoided.

 

Furthermore, politicians have been quoted as saying the panacea for the current malaise of the Building Act is for builders to sign off their own work. There may be some merit in this statement and, in time, we may get there.

 

However, the industry is not ready for this. The Licensed Building Practitioner system has not yet matured to a point where this can happen, and a knee jerk, politically expedient response might just create more unintended consequences. It could end in tears, with substandard work and out of pocket consumers being the result.

 

A more sensible response would be to address the risk-averse behaviour that is clogging up the system and get some reality, sanity and service back into the consent approval and inspection system.

 

The Ministry of Business, Innovation and Employment could take a much stronger leadership position around best practice and cutting out the nonsense, rather than leaving it to local authorities to interpret and administer the rules in the most risk-averse way that they possibly can.

 

The joint and several rules that plague our industry and drive perverse outcomes not only affect local authorities, they have decimated the lives of many tradespeople who have unfairly carried the can for errant manufacturers and others who have folded their tents.

 

The joint and several regime, where it relates to the construction industry, needs a serious overhaul by pragmatic people looking for a pragmatic solution.

 

Asking a bunch of lawyers if it should be changed is no different to asking a bunch of turkeys if they want an early Christmas. Of course the answer will be no, as the gravy train of lawsuits with wide nets would be cut right back.

 

Implications of the Resource Management Act

The biggest area of concern with submitters was the Resource Management Act, and not solely with the legislation itself — implementation was a big complaint too.

 

It is an overly complex area that disguises a raft of issues to do with district plans and other documents developed by councils and the Ministry for the Environment.

 

Resource consents have become more and more complex with consents needed for such minor things that the only thing impacted is the time line of the project and the applicant’s wallet.

 

The RMA has morphed into something that was probably never envisaged by the original legislators, and the inflexibility of the Act and the number of minor matters now covered have reached a paralysing state.

 

A recent example of how ridiculous the RMA can be in operation was a builder making a set out error when excavating for a foundation, and inadvertently taking out an extra metre behind the foundation wall.

 

It had no effect on anyone except himself having to pay to fill it back in. He did the backfill work under an engineer’s supervision so everything was reinstated exactly as it was.

 

You’d think this would be the end of it, but no. The local authority concerned requested the project stop, a fee of $1500 be paid for a resource consent, and an assessment of effects be produced retrospectively.

 

The final eventual outcome was that nothing changed, the resource consent was approved and the builder had to pay three times — once for the mistake, again for a needless resource consent and again for the delays while the project was stopped and an assessment made of something that had already been returned to its pre-existing form.

 

I severely doubt this is what was ever intended by the RMA but it’s what it has descended into. There is no space for common sense.

 

There are many who naively defend any changes to the RMA. However, my challenge to them is try applying for a resource consent with the raft of expert opinions and peer reviews that will be required by ideologically-driven planners, and then see if your position remains as steadfast.

 

It is an Act that seems to be completely devoid of any commercial considerations or common sense where it relates to a current landowner or applicant, and this needs to change.

 

Where to from here?

The Task Force wisely recommended 10 fixes, as follows:

1 Make it easier to get building consents.

2 Get serious about lifting skills in the building sector.

3 Make it easier to get resource consents.

4 Reduce the cost of consenting fees.

5 Sort out what “work safety” means and how to do it.

6 Make it clear what the rules are and what they actually mean.

7 Establish a new customer focus for the public service.

8 Departments should introduce a stakeholder engagement approach to developing local government policies and regulations.

9 Reform the Local Government Acts.

And, most important, and the one that the Government can have the most immediate impact on:

10 Stop making loopy rules by:

developing a coordinated pipeline approach to regulation,

including a cost-benefit analysis prior to development,

creating a mechanism to actively review central and local government regulations, and

extending Treasury’s annual review of departmental regulations, and incorporating an assessment of local government regulations.

 

The work has been done in exposing the shortcomings of the current systems and rules. The challenge for the politicians now is to carefully consider these findings and then swiftly enact change that is consultative and meaningful.

 

Ignoring the findings of this Task Force or just giving them lip service would be indefensible. Inaction will continue to drive people out of what is rapidly becoming a very unhappy, poorly-regulated, risk-averse driven and increasingly non-productive industry.

 

Read more about The Loopy Rules Report here: www.dia.govt.nz/Rules-Reduction-Taskforce-Report.

This article contains the author’s opinion only, and is not necessarily the opinion of the Registered Master Builders Association, its chief executive or staff.

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