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Jones: Outlook for Building and Construction

Hon Shane Jones
Minister for Building and Construction
Associate Minister in Charge of Treaty of Waitangi Negotiations
Associate Minister of Immigration
Associate Minister of Trade

11 June 2008 SPEECH


To: Colliers International Conference, Hyatt Regency, Auckland.

"The Outlook for Building and Construction 2008 & Beyond"


Managing director Colliers International: Mark Synott;
Colliers Director of Research: Alan McMahon;
Marketing Manager: Lex Perry

Kia ora tatou, Tena koutou katoa, greetings all….

With 293 offices in 61 countries and boasting 11,000 employees Colliers International is a recognised real estate brand which has, since its inception in Australia in 1976, grown to become a true global giant.

Firms like yours however, rely on the knowledge and expertise available in the housing and building sector in any country you operate in and so I am pleased to announce today that in New Zealand we are working extremely hard at ensuring our real estate is of genuine, reliable quality.

Since the liberalisation of our Building Industry regulations here in the early 1990s we ran into the same problems as other developed countries such as Canada and Australia, namely the Leaky Homes Syndrome.

Understandably there was loud public outcry and the immediate reaction to that was to swing the pendulum completely the other way and impose heavy, restrictive regulation to curb the rogues who had brought the sector into disrepute.

When I was appointed Building and Construction Minister last November, I was made acutely aware by stakeholders of all forms from your garden variety DIYers to mega-home builders that there was far too much red tape and paperwork which was stifling the building and housing sector.

The message that has come through time and again was that builders were fed-up with unnecessary rules and regulations and frustrated by delays.

At the same time the Prime Minister, as part of the package on Housing Affordability, asked me to look at ways of increasing flexibility and tackling regulatory cost in the sector.

In March I announced plans to cut red tape and make the consents process for starter homes simpler and more flexible.

Central to the simple starter Homes programme was
• Simplifying the design and approval of simple starter homes
• “Multiple-use” consents for building work that is to be replicated on a large scale
• Reducing the number of building projects that need a mandatory Project Information Memoranda (PIM)
• Reducing the number of building activities that require a building consent based on the level of risk involved, primarily where work is minor

While these alone will not solve all the Housing Affordability issues, they are a good start in improving processes and reducing costs for building simple starter homes.

Therefore, tonight, I am pleased to announce that as promised, I have taken the chainsaw to the red tape.

I have approved the extension of the list of building work that does not require a building consent, for example:

• removal/alteration of a wall that is non load-bearing and not a bracing element
• alterations of dwellings for access purposes, including doorway modifications and access ramps, but excluding wet area accessible shower
• internal shop or office fit out where the work does not modify, or require modifications to, any specified system or means of escape from fire
• Increasing from 30m² to 100m² the size limit of tents and marquees where they are for private use and to 50 m² when they are intended for public assembly.

This list should be in place in the next couple of weeks and incorporated in Schedule 1 of the Building Act.

I will also be introducing changes to the Building Act that I am confident will increase flexibility and reduce costs.

The changes will:

1 Ensure that PIMs are voluntary in the future
2 extend the Department of Building and Housing’s functions so they can issue national multiple use consents
3 Improve the process for managing variations to consented building work.

I am also pleased to announce that cabinet has wholeheartedly approved a new blueprint for starter homes, which is now ready for public consultation.

The blueprint for simple housing brings together all the technical and compliance information needed to build a standard, simple, low-cost home. It represents a “horizontal cut” across the entire Building Code in a way that has not been provided before.

More importantly, it represents an innovative step change towards encouraging the market to produce more modest, affordable homes.

Ordinarily, my officials have focussed their Compliance Documents on individual Clauses (technical areas) of the Building Code, such as energy efficiency. As such, this blueprint represents a first for New Zealand and provides a useful prototype for future, similar Compliance Documents dealing with whole building types.

The blueprint for simple housing focuses on the “three Ss”: standardisation, simplification and (the appropriate selection of) size.

There is strong evidence from the sector that the absence of all three is contributing to affordability problems. For example, a great majority of new homes in New Zealand are highly customised, one-off projects. This undermines efficiency, makes pre-fabrication difficult and increases costs.

Sizes of homes, as well as their design and technical complexity, have also increased with changing population and market trends.

The average size of a new home is now more than 200 m2, twice the historical size for “starter” homes. This Government wants to demonstrate that simple, standardised homes are possible without undermining appeal or amenity.

The document also incorporates a number of sustainability features, such as energy efficient hot water systems, good insulation, the optional use of rainwater collection systems and solar water heating.

This should help increase consumer confidence in designs delivered using the Compliance Document, and should help lighten the burden of liability on the building sector.

I can also report that Independent costing by a group developer has confirmed that an affordable home could be delivered using this Compliance Document with a total build cost within $1,400 per m2 (including GST) for a 120 m2 house, or $168,000 total cost. This includes double glazing, floor coverings and allowances for services connections of $9,000.

I hope by facilitating the design and consenting for simple, modest homes we are able to send a signal to the market that will encourage construction of more affordable homes in volume than the complex individual homes currently being designed and built.

Together with other supporting initiatives such as multi-use consents, it is anticipated that increased volume of modest homes will improve the supply of affordable houses through increased efficiency of the building process and economies of scale.
We also are looking at a number of initiatives to improve the building consent process, so that developers and builders can enjoy a better service, through the Councils being provided with more flexibility and assistance.

This includes:
• Better use of technology to support the building consent process, including investigating online consenting.

• Regional consent processing units which will pool expertise and process complex consents.

• Improving collection and sharing of information on building products and product performance.

These initiatives were developed as a result of the Government listening to industry’s views.

There are no quick fixes to housing affordability but these measures are a priority and I believe will deliver long-term tangible benefits.

The Government has also responded in other ways to meet the demands of a rapidly changing property market by introducing two bills in Parliament recently, the Residential Tenancies Amendment Bill and the Unit Titles Act.

The existing Residential Tenancies Act 1986 does not provide adequate protection to those living in boarding houses and some rented retirement accommodation where meals or cleaning services are provided.

Amendments proposed in the new bill will give that protection. Boarding houses with six or more tenants will become subject to the Act, as will some rented retirement accommodation.

Another key proposal will introduce sanctions for landlords who fail to meet their maintenance responsibilities. Landlords will also be able to seek damages for some tenant breaches.

The Unit Titles Act has will bring existing legislation up-to-date and clarify the rights and responsibilities for both unit title owners and bodies corporate.

Current legislation dates back to 1972 and no longer meets the requirements of modern apartment ownership.

At the moment, a body corporate is required to get unanimous resolution for a range of things, including maintenance and spending. If people don’t attend meetings or don’t vote, this holds up the process for everyone.

Reducing the voting threshold to 75% agreement means the body corporate can act in the interests of the majority of unit owners for the good of the development as a whole.
The Unit Titles Bill will allow people to use mediation and adjudication through the Tenancy Tribunal to sort out their disputes.

Because multi-unit living is expected to become increasingly necessary it is essential to provide flexibility and certainty to those who are developing and building multi-unit developments.

The Unit Titles Bill will streamline development processes and allow flexibility for those who are building the really big developments. This will mean up-front costs are reduced and developers can make changes to their plans more easily.

That trend is expected both to continue and to accelerate, particularly in the Auckland region, where it is estimated that within 50 years 500,000 people will be living in apartments, townhouses and high-rise buildings.

There are currently an estimated 16,422 unit title developments in New Zealand comprising 95,416 units. Approximately 88 percent these developments have nine or less units. Approximately 70 percent of all unit title developments are residential. The rest are commercial, industrial and a small number in the horticultural, agricultural and mining sectors

These two bills will encourage sound property management practices that will protect the long-term value of investments by introducing requirements for long-term maintenance plans.

As you can see now, we have set a cracking pace to overhaul the building and housing sector so that companies like yours are reassured that we are doing everything we can to provide you with reliable quality stock.



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