A year out from 2023’s general election, Minister of Building and Construction Dr Megan Woods gave a keynote address outlining her thoughts on the construction sector at the Registered Master Builders Association-led Constructive Forum 2022 held in Rotorua in August.
Here are excerpts from her speech, and responses to some of the questions from the floor during the Q&A sessions that followed.
In my capacity as the new Minister of Building and Construction, I have been working closely alongside RMBA chief executive David Kelly on the ministerial plasterboard task force that I set up.
The task force is a great example of where government and industry have worked together to help address a critical supply shortage. And I’m pleased to say we’re already seeing positive change.
Hopefully the sector will see it as a sign of my commitment to listening to your voices, and working through problems as they arise and as quickly as we can.
I’m passionate about the house building and construction sector. What I’ve learned is that innovation flourishes when it’s linked with purpose. I learned that housing is more than building — it’s about skills, it’s about jobs, it’s about place and it’s about well-being.
Following World War Two, Peter Fraser and his Labour Government saw a problem and a massive housing shortage. But they also saw an opportunity to train a generation with skilled trades and to rapidly build the houses that the country so badly needed.
Today, our overarching vision for housing and urban development is for every New Zealander to live in a home within a community that meets their needs and aspirations.
This vision is outlined and detailed in the government policy statement on housing and urban development, and sets the scene for all of the reforms that we have underway.
The key results that we want to see are:
• thriving and resilient communities,
• well-being through housing,
• buying housing through partnerships in an adaptive and responsive system where housing supply is responsive to demand, and is well planned and well regulated.
I know it can be challenging to balance the competing requirements of running a business and complying with new regulatory requirements. The Government is committed to working with you to meet our shared goals for the sector, including through the Construction Sector Accord, which has become a vital forum for government in industry, to together tackle the critical issues of the day.
I’m very focused on the delivery of affordable housing in my role as the Minister of Housing, and our wider government reform programme is aimed at transforming our housing market to unlock growth, stimulate urban development where needed, and make houses more affordable.
We know that some of these initiatives will have an upfront cost, and we’re working to cut that red tape, and in other areas such as building more density in our urban areas where more people want and deserve to work and live. I’m confident the RMA reform will deliver more improvements in this area.
We also have a number of initiatives that are aimed at supporting the delivery of affordable housing, including the affordable housing fund and changes to KiwiBuild.
Rotorua has a chronic shortage of housing as a result of a dire mismatch between population growth and new housing, which is a hangover from previous government inaction.
Since 2013, Rotorua experienced a population surge of 9000 people while only issuing 1500 consents, and that is why we are having to work to help fix this problem by making sure we are backfilling the resource required in the city.
Across Rotorua, around 300 public homes are under construction or being planned, and out of the Government’s 10,000 additional public homes, 209 of those have already been built in Rotorua.
This is starting to unwind nearly a decade of a failure to properly commit to public housing in this area. When we came into government in 2017, there were 44 fewer houses than when we left government in 2008 in this area, so not only were houses not added, houses were removed.
We’ve also recently announced government funding of nearly $85 million for stormwater works to enable 3000 more houses in Rotorua, on top of $55 million to enable eastside development from shovel-ready funding.
This investment should give you confidence in terms of a pipeline of work, and we’re mindful of some unease in the sector around the lessening of demand and cost pressures you’re facing.
Once again history has taught us. We know that the residential construction sector is particularly vulnerable to demand shock. There is a history of pronounced boom-bust cycles that means that even when the general economy recovers from a shock, house building activity usually lags demand for many years.
We saw this after the global financial crisis when employment in the sector dropped 20% to 30% between 2008 and 2011, and house building activity declined by about 50%.
We’re keen to ensure that we can manage some of the impact this time around. The MBIE’s national construction pipeline reports high levels of construction activity to continue through the next six years, though with a lower level than experienced in the past two years.
Residential construction is expected to peak in 2023, with some commentators warning house building activity may fall more sharply after that. Dwelling consents have already come off their historic peaks, and it will take some time for the current backlog to filter through to lower levels of activity.
Given a potential for decline in the sector, we have several initiatives underway to support strong construction activity, including delivering the affordable housing that New Zealand urgently needs, changes to KiwiBuild price and income tax to increase the number of houses built for first-time buyers. The Infrastructure Acceleration Fund will work to enable the full potential of the sector.
The new build-ready development pathway of the Affordable Housing Fund will help to secure affordable housing and build-ready developments that may not have gone ahead without government support.
From today, this pathway will provide developers with a point of access within the Ministry of Housing and Urban Development to either apply to purchase land under a government late acquisition programme, or apply for pre-purchase commitments or underwrites for homes and eligible developments where construction hasn’t yet started.
This is a targeted and, we acknowledge, limited initiative that will see homes continue to be built in places where they’re needed the most, and made available at prices that mean people can afford not just their housing costs, but food and other necessities.
The Construction Sector Accord is a great place for the sector to have constructive conversations about how we build a strong future together. It’s been an invaluable forum for ministers to hear directly from industry on how government policies impact your projects and your businesses.
If we want to be smart about how we address the challenges we face, and build a truly transformational sector, we need to seize the opportunities that technology and innovation provide.
Q&A:
Q: How can you talk about affordable housing but then bring in changes like H1?
Woods: I think the H1 is a really good example of how we’ll be able to work with the sector. What we understand is to have brought H1 in now while there are constraints applying around some of those materials would simply be too difficult. And why we were able to bring in some of the insulation requirements around it and pushing them out by six months.
We’ve got to do several things at once here. Affordability is absolutely top of mind and something we have to do. We also have to make sure that we’re constructing buildings as energy-efficiently as we can to meet our emissions reductions plan as well.
I think we all know that, in terms of the way in which, historically, we’ve insulated houses in New Zealand, it hasn’t been to a standard that we’ve seen in other parts of the world.
We’ve got retrofit programmes for existing properties. But we also have to think about the kinds of new properties that we’re building that will be those warm, dry, secure places that people want, that keep them healthy as well.
Q: How does the Government view the H1 changes that equal $30,000 to $50,000 price increases? Does that counter making new housing affordable?
Woods: Well, I think one of the things that we also have to look at is the whole of life cost of the building, in terms of making sure that we are building the most efficiently that we can. Building a home that isn’t up to the best standards that we need as a country in terms of its efficiency is actually going to be a more expensive building to operate. And I think that that’s something that, increasingly, consumers are starting to look at as well.
Q: The apprentice fees support scheme is ending in December 2022. Given that we need more skilled workers, will the Government continue targeted support for apprentices?
Woods: That is something I can’t answer for you today as that sits outside of my portfolio responsibility. What I can point to is that it is a scheme that we are incredibly proud of. What we have been able to do, in terms of making sure that we’ve taken the most of this opportunity, is to set those young people up for such a good future, as well as addressing our skills shortage.
Q: With a shortage of more than 200,000 construction industry workers, what is your view on migration filling this gap?
Woods: I think what you’ve seen is we’ve recently announced the immigration reset and the opening of the borders, and that many construction trades are on the green list. Construction is one of the sectors where we’ve asked for exemptions to the minimum wage requirement, because we understand there is a need for more people in the sector, and we will continue to work with the sector to identify those areas of need.
Q: Can an average Kiwi family actually afford the government’s nett carbon 2050 aspirations.
Woods: The average Kiwi can’t afford for us not to meet them. And I think that’s one of the critical things we have to look at. If we do not meet climate change targets that were signed up to at the Paris agreement under the previous government, we will be forced to buy international credits from other places.
I would much rather that we are investing that money locally. Meeting climate goals is always going to be more expensive. If I have a look at the whole of life of a house for someone living in it, a more efficient home is going to be a cheaper home for a family to live in.
Q: The panel made the point earlier that housing only becomes a political issue in a crisis. It’s more important than this. Is this changing? Can you help?
Woods: I think our housing crisis is something that’s been growing for a very long time. But it wasn’t acknowledged as a crisis until our government did so when we were in opposition. And we came into government and have always been willing to call it a crisis.
But I think that a belief that the market is necessarily going to fix everything in housing is not something that we subscribe to. I think, for example, something like KiwiBuild has been the easiest political hit in the country. But in terms of a softening market, it’s a policy whose time has come in terms of the ability for the Government to help stimulate some of those developments to go ahead.
We are trying to set up the fact that we have to, as a country, get some political consensus about public housing not being a political football.
Q: Some in the audience are saying stop blaming the previous government for some of the challenges that we’re currently facing.
Woods: I actually haven’t just said the previous government. For decades, there hasn’t been enough done in housing. The fact is that since the 1970s we haven’t seen direct government investment in infrastructure. It’s been left to councils to do and been linked to development and, quite frankly, it just hasn’t kept up in places where it’s needed to.
That’s why our government has introduced the $3.8 billion housing acceleration fund, which is all around housing infrastructure.
And we’ve fully acknowledged that that is something that goes back to the 1970s. That is something that crosses over multiple governments, and if you’re in a crisis, and I do believe we are facing a housing crisis, there are problems that have to be resolved.
If you pretend they’re not there, then you’re not going to ever grab that crisis by the horns and start solving it. We are in a housing crisis — we need to build more and we need to find ways to do that. And we need to not repeat mistakes from the past.
Q: Could Kainga Ora build homes faster if they opened up to builders outside of the Contract Partnering Agreement?
Woods: The number of houses we have built since we’ve come into government, the gross number of houses that Kainga Ora has built, is somewhere around 7000 houses.
First of all I’m going to reject the notion that Kainga Ora isn’t building fast. I think there’s some mischief that is made in the media around this. But we are working really closely with builders. We do have strong procurement processes around us, but we are always open to doing things better and doing things differently.
Project Velocity is an example of this. And I encourage you to keep talking to Kainga Ora about that.
Q: What support measures can the Government put in place to ensure that we aren’t continually losing our skilled labour offshore?
That’s one of the things that happened when we saw the huge reduction in the workforce that was all tied to the GFC, and it absolutely correlated with building activity decreasing.
People having job security is one of the most critical things that we can do. So we’re keeping our programmes in place to make sure we are doing what we can to stimulate activity. We are using our procurement as the Government to make sure that there is certainty in order to keep those people from moving on.
