Crisis? What crisis?

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Two building industry topics dominating the news throughout 2016 have been the housing crisis and faulty building materials.

Both are important issues and both need a thoughtful and considered approach to their resolution.

The response from the Ministry of Business Innovation and Employment, or from its subsidiary Housing New Zealand, has been muted.

Response from industry groups, specifically to the faulty building materials issue, has been reactive (ie solve the current issue and move on), with no attempt to find real solutions.

 

The housing issue

New Zealand is a country built on a social contract of home ownership. Progressive governments have supported the stabilising influence of people being able to buy their own home.

More recently, this has stretched to ownership of an apartment or townhouse — not quite the “quarter acre paradise” but near enough.

As more people see the advantages of living close to the centre of a city or town, apartments or town houses are a more practical way to increase population within a restricted land area.

Home ownership is also seen as a way of creating personal wealth. The Government has recognised this as being, on balance, positive, and has avoided taxing capital gain from housing.

Not surprisingly, some people have seen the advantages of owning more than one home, offering these to a growing rental market.

Why is the rental market growing? A growing gap between the relatively wealthy and the relatively poor. Plus some younger couples and singles wanting to retain their freedom and their equity for other investments.

New Zealand and Australia currently lie somewhere in the middle of the home ownership statistics at about 65% — a long way from what might be most people’s view of us as property owners rather than renters.

By comparison, in Switzerland, a very stable and homogeneous society, home ownership stands at just 44%.

Why no solutions?

There is clearly a current shortage of housing of all types — except crappy little central city apartments — and in all price bands.

There is also price pressure on the Auckland housing market, verging on, if not actually being, speculative rather than reflecting value.

The crazy prices now being realised in the more desirable areas of Auckland are now being reflected right down the housing supply chain.

However, solutions to the so-called housing crisis require solutions from the bottom up — what, in another time, was called social housing. At the upper end, people might, in some instances, be required to rent a bit longer, but at the bottom, families are living in cars or on the street.

Solutions can only be found via direct government action. This is how a lack of affordable housing has been solved in the past.

State houses built by, or for, the New Zealand Government during the 1920s are now some of the most desirable and durable on the current market.

Expecting private developers to see affordable housing as a business opportunity just doesn’t make financial sense. Cramming the biggest and flashest McMansion on to what is ridiculously expensive developed land produces the highest and most secure profit.

So if the Government doesn’t act there will continue to be a severe shortage of homes in the bottom half of the market.

 

Shonky materials

There is a growing lack of confidence within the industry in the quality of building materials. This problem is not confined to New Zealand, with Australia also suffering from the often late discovery of substandard materials.

Saying the problem is only about imported products is unhelpful, as the majority of our building products, or at least the raw materials, are imported.

The comments about imported materials seem more about products imported directly by a builder or developer, outside the small and powerful group of merchants and our major local manufacturers.

Whatever the source of the problem, it is frustrating that, again, government agencies seem unwilling to seriously address the issue.

It is frustrating because the solution is simple. In 2013, the Building Act was changed to incorporate a number of key improvements and clarifications.

Included in this was a new clause — 14G Responsibilities of a product manufacturer or supplier (see box below).

Having two subclauses proved to be its weakness. If a manufacturer or supplier decided not to meet the first subclause — stating that their product complies — then it didn’t have to meet the second subclause — proving compliance with the Building Code.

The second subclause also omitted the key word “how”, so a manufacturer or supplier need not prove how the product met the code.

There are a range of mechanisms manufacturers could use — the Government-supported Codemark system, BRANZ Appraisals and the more recent Product Technical Statement (PTS) approach. All involve a manufacturer in both technical effort and cost.

So without correcting and strengthening clause 14G, manufacturers and suppliers will continue to avoid their obligations.

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