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Extra funding to help local authorities

12 October 2006

Extra funding to help local authorities lift their game on building consents and inspection services

Building Issues Minister Clayton Cosgrove has today announced a $3 million, three year programme to help local authorities process building consents faster, more efficiently and to a higher standard.

Under the Building Act 2004, territorial and regional authorities must be audited and registered to become accredited Building Consent Authorities (BCAs) by 30 November 2007, if they wish to continue offering building consent and inspection services.

Mr Cosgrove said the new regime will bring widespread benefits for New Zealanders.

"We are not just talking about leaky buildings. Inadequate checks in the past have also allowed poorly constructed homes and buildings to be built. This coupled with delays in some building consent work has been frustrating and expensive for consumers," he says. "A home is often the biggest investment that Kiwis make, so it's crucial people
know the house they buy has been properly checked and built right the first time."

Mr Cosgrove said Government recognises that raising standards may bring extra costs.

"Government has listened to local authorities' concerns over the cost of preparing for accreditation. The $3 million will go a long way toward helping them gear up to meet the new requirements by upgrading their systems, capabilities and procedures."

Mr Cosgrove said the Government will be seeking feedback from councils on how the $3 million can be best spent, through the release of the consultation document, "Proposals to set Building Consent Authority Accreditation Fees and for Assistance with Accreditation."

The document outlines Government assistance options that include the development of resources to help local authorities meet accreditation standards and criteria, as well as workshops, training and other support services. It also outlines the proposed fee structure for the accreditation process, which will be run by International Accreditation New Zealand (IANZ), an internationally recognised, independent accreditation specialist.

It is estimated that IANZ will incur costs of $2.3 million from conducting accreditation assessments on all 85 territorial and regional authorities. This money will be recovered from the fees charged to the local authorities. Fees will range from $16,000 to nearly $63,500 depending on the value of the building work consented the previous year.

Mr Cosgrove said the fees are tiered so local authorities that process relatively low numbers of building consents pay considerably less to IANZ. He said the Building Act also allows local authorities to share resources and reduce costs by working together in clusters, or to transfer the function to another authority.

However Mr Cosgrove said it is important to remember local authorities can fully recover these accreditation costs through the fees they charge building consent applicants.

"We are talking about user pays, not an increased burden on the ratepayer," he said. "For the vast majority of councils, any increase in building consent fees would be less than $100 dollars per consent, and for many consumers, I am sure that is money well spent for peace of mind and security over their greatest asset."

Mr Cosgrove said more than two thirds of the $3 million programme would be available in 2006/07 to help cover off the higher upfront costs of preparing for accreditation. The programme will be funded from the existing Building Levy.

Submissions on the consultation document close on 20 November 2006. It is available on the Department of Building and Housing's website – www.dbh.govt.nz - or by calling 0800 242 243. Once the consultation process is completed, the Government will confirm the BCA accreditation fees and the structure of the $3 million programme.

The accreditation programme is part of the Government's suite of changes to transform the building and housing sector, so that homes and buildings are built right the first time.

Other reforms to raise standards and improve services include the review of the Building Code, the licensing of building practitioners while protecting the Do-It-Yourself (DIY) tradition, a major shake up of the Weathertight Homes Resolution Service, the introduction of a financial assistance pilot for the worst affected owners of leaky homes, product certification, proposals to improve the energy efficiency in homes and workplaces, and investigating a home warranty insurance scheme.

Background Information

Why is accreditation necessary?
There have been issues in the past with the quality of building inspection and consenting services that have contributed to problems such as leaky buildings and substandard building and construction work. There has also been criticism of delays in processing consent applications.

What will the introduction of accredited Building Consent Authorities achieve?
These reforms aim to speed up the issuing of building consents, and ensure that authorities are offering top quality, efficient inspection and consent services. Authorities must meet the required standards in order to gain accreditation, in terms of their on-site inspection services and their internal consent processing systems.
Authorities will be better supported in their role by the Government's moves to also raise the standard of construction and design work, through the introduction of licensing for those who design and build.
Accreditation and registration of Building Consent Authorities (BCAs) is one of the reforms introduced by the Building Act 2004, whose overall aim is to ensure New Zealand homes are built right first time. Territorial and regional authorities must be accredited and registered as BCAs by November 2007.

How significant are the proposed fees in the overall context of building and building consent costs?
The fees are minimal in comparison to the value of overall building work. For example, more than $11 billion worth of building work was consented last year, and
territorial authorities received $110 million revenue from building consent fees. The initial accreditation fees ($2.3 million) would be just 0.02 percent of the value of buildings and two percent of territorial authority building consent revenue.

What is the value of accreditation?
Inspection and consenting of building work is done for the protection of consumers, so it is crucial that this service is performed competently. Buying a house is often the biggest investment that New Zealanders make. Accreditation will enhance consumer confidence by ensuring that BCAs have the necessary skills, competence, systems and resources to fulfil their obligations.

Why is the government assisting councils in preparing for accreditation?
The government acknowledges that there is a cost to territorial and regional authorities in meeting the required standards through upgrading their systems, procedures and publications. The assistance will be in the form of a $3 million package over three years, with up to $2.3 million being available in 2006/07.

Will the $3 million programme subsidise local authorities' preparation costs?
Not directly. Grants will not be made to individual councils. However the money will be used to pay for those services, products and training that councils would otherwise have to fund in order to become accredited. The Government has outlined suggested options in the consultation document, but it wants councils to come back with advice on how this money can be best spent.

Why are fees required?
The independent body International Accreditation New Zealand (IANZ) has been appointed to undertake the accreditation work. IANZ must fully recover, through fees, the estimated $2.3 million (GST exclusive) of costs it will incur in conducting accreditation assessments on all 85 territorial and regional authorities. Fees will be lower for the subsequent BCA reassessments carried out by IANZ.

Why does Government not pay the fees on behalf of local government?
The government has worked to establish a fair and user-pays fee structure. BCAs can fully recover the cost of the fees paid to IANZ from those who directly benefit from the enhanced inspection and consenting services (i.e. building consent applicants). Increases in building consent fees would be less than $100 dollars for most authorities, and need not be passed onto ratepayers. It is a user-pays model.

Will the fees lead to increased rates?
There is no reason why the BCA regime should lead to councils raising their local rates. The Building Act allows territorial and regional authorities to recover such costs from building consent applicants through building consent fees. Not all authorities currently set consent fees on full cost recovery. Some choose to subsidise the fees through rate revenue, some by up to 50%.

Why can’t the building levy be used to pay BCA fees?
Under the Building Act 2004, the levy cannot be used to fund accreditation fees. However the levy can be used to support and assist accreditation preparations, as is the case with the $3 million programme.

Will this new regime mean faster turnaround for building consent processing?
Accreditation is about ensuring authorities are offering efficient, consistent and high quality building inspection and consenting services. Authorities will have to have the necessary resources, competencies and systems in order to gain accreditation. These factors ultimately mean a better, more efficient and faster service for customers.

Do all authorities have to become accredited?
No. To carry out consents and inspections work, territorial and regional authorities must be accredited and registered as Building Consent Authorities by November 2007. If they choose not to continue this work, authorities can transfer their building consent authority functions to another authority (and pay no accreditation fees).

Can authorities that choose to be accredited, reduce costs?
Yes. Local authorities can reduce costs by participating in cluster groups with other territorial authorities. This allows them to share resources and make savings.

Why isn't the Government going down the path of requiring councils to offer free building consents if they fail to meet the 20 working day processing time limit?

The Government does not favour this approach. Local authorities would be pressured into putting speed ahead of quality when processing consents, and any penalties would ultimately be passed onto ratepayers.

There is no such thing as a free consent. The cost of processing the consents still has to be paid for. This approach would also push "mum and dad" residential building applicants down the queue, as councils would be pressured to sign off costly building projects first. And this approach also ignores the fact that New Zealand's building boom is partly responsible for the delays.

The Government will not sacrifice quality, so has chosen a user-pays regime that will facilitate faster consent turn-around while maintaining high standards of service.

ENDS

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