It’s fair to say many of us were glad to see the back of 2020. But as we look to the year ahead, our sector is still dominating news headlines.
Housing, and in particular housing prices and supply, is one of the most significant issues facing New Zealanders in 2021.
Right now the demand for housing is driving residential construction to record levels, and the outlook for 2021 looks very positive for builders.
However, it is not a rosy picture for people trying to get on the property ladder but, equally, it is not an easy issue to solve.
Every week I read yet another article from a commentator claiming if we just did this “one thing”.
But it is not just about finance, or land supply or access to skilled labour — these are all important parts of the puzzle — but addressing these individually will not make the difference we need. Unfortunately, there is no easy answer.
Registered Master Builders sits at the coalface of our housing issue. Our primary focus for 2021 is working with Government and others in the sector to try to think differently, to ensure a greater focus on planning and a significant system change to address these issues.
Continuity of supply at the heart of the issue
Continuity of supply is a key focus. Our sector’s boom and bust cycle is well known, but the impact is often downplayed.
The fallout of this cycle means a lack of innovation and skilled talent when we need it.
During the GFC, the residential construction sector lost 25% of its workforce. It took seven years for sector employee levels to recover to pre-GFC levels. As a result, we haven’t got the capacity and skills we need today.
The new apprenticeship boost is a good initiative and is helping to bring talent on board today. But if we don’t ensure the pipeline of work continues, we will still be in the same place following the next bust.
When there is no work, employers simply cannot take on apprentices.
The impact is also on what we build, and has directly led to the lack of affordable housing we are seeing right now.
The Government has recognised the problem. Housing Minister Megan Woods stated last year that she is looking for ways to avoid a repeat of the GFC, “where the development sector retreated to some of the safest bits of the market, large single-storey homes on single sections, and affordable housing wasn’t really a part of it.”
Last year the Minister announced a $350 million Residential Development Response Fund to underwrite stalled or at-risk developments.
We agree this may be needed when the predicted bust cycle begins to appear, and are pleased to see this fund is still in the wings to be called on if it is required.
We are already seeing a major decline in bank lending for property development. The value of loans to the sector fell by 22% in the year from November 2019 to November 2020.
Private funding is now responsible for much of the current development. With interest rates so low, investors are looking for opportunities for stronger returns. Finance continues to be a risk we will monitor on behalf of our members.
Another key casualty in the boom and bust cycle is innovation.
A great example is prefabrication. We constantly hear that this is the answer to building at scale. But this requires large-scale investment.
With the threat of a bust cycle ever present, we will struggle to get the level of investment required to really make a difference. Until we address the continuity issue, innovation and investment in technology across the sector will suffer.
A steady and consistent pipeline of work
Working to ensure a steady and consistent pipeline of work across all regions of New Zealand is a fundamental focus for the sector.
While large scale developments show progress and create great media headlines, they can often contribute to the problem.
They demand an immediate influx of capability for a short time. This is always more difficult to resource. Many of our regions would be better off with a steady pipeline, ensuring local people have ongoing work.
This requires a different approach to what we have done before. It is not about a single solution delivered everywhere, but more about understanding the needs of a region and ensuring we develop a long-term solution to address that need.
We are very supportive of work being done on “place-based building” within the Ministry of Housing and Urban Development.
RMA reform a good opportunity
The Resource Management Act (RMA) review is another area of focus for the year ahead, with the availability and affordability of zoned residential land continuing to be a key issue for members.
Details on the RMA reform process are only now starting to emerge, and the first exposure draft is due to be released by officials for public consultation in May.
Already we are seeing the opposition calling for emergency legislation to rezone land.
Our focus is on ensuring we use the opportunity of the RMA reform to address these underlying issues, rather than short-term fixes that fail to address the ongoing issues.
There are plenty of challenges and opportunities for all of us in the year ahead.
Registered Master Builders is focused on ensuring we do not lose sight of these bigger, thornier issues, while we also tackle the short-term challenges we face.