Prefab demand is there – now for supply
If 100,000 Kiwibuild homes are to be built, two things are necessary. First, New Zealand’s high-cost, low-productivity and highly individualised style of housing needs to change. Second, we need enough affordable land on which to build the affordable houses.
The relative absence of affordable land in expensive cities such as Auckland has driven the recent trend to large, high-cost homes since only the relatively wealthy can afford to build them.
Regulatory measures and direct interventions, such as axing artificial urban boundaries, creating an Urban Development Authority with national interest development powers, and redeveloping council- and government-owned property, can help with affordable land supply.
However, the drive for lower-cost Kiwibuild construction will require a much larger-scale prefabricated housing industry, which will only develop if investors are confident of a solid market for their output.
Promising to build 100,000 Kiwibuild homes over 10 years, using a $2 billion fund, is the Government’s answer to creating that demand.
Now, the Kiwibuild secretariat is waiting on expressions of interest in ‘‘off-site manufacturing to aid housing supply growth’’ from ‘‘potential suppliers and consortia’’, due by November 12.
A number of small-ish existing players can be expected to pitch, but one or two big, new entrants will almost certainly be needed if the 100,000 target is to be reached. The first to show its hand was Fletcher Building, whose Living division last week unveiled plans to invest ‘‘tens of millions’’ in a new ‘‘panelised’’ construction process it has developed over the past 18 months, assisted by a fast-track permissions process with the Auckland Council.
Two-storey duplex and terraced houses with latitude for individualised internal layouts and external cladding will be built at the new South Auckland facility over six weeks, and will come pre-plumbed and pre-wired for erection within a day. The average for an on-site build is 22 weeks.
The houses will cost about the same per square metre as current building methods to start with, but Fletcher expects the cost to fall as the new technique hits its stride. The company will produce up to 500 homes a year.
A proportion of those homes would be for Kiwibuild, but Fletcher is wary of relying entirely on government funding and expects to sell prefab homes to private buyers and developers, too.
The other big potential player to watch is the New Zealand Superannuation Fund. Cabinet papers sighted by Businessdesk earlier this year talked about the potential for the fund to invest in a central North Island prefab housing plant. A team at the fund has been meeting international prefab housing industry participants all year and assessing the risks and commercial hurdles.
While the fund is involved with the large-scale Hobsonville residential development in west Auckland, there’s a world of difference between participating in a big subdivision and actually building and owning a house-building factory.
It has to stack up as a money-maker and needs to be a big enough project to meet the Super Fund’s preference for projects requiring at least
$100 million of investment. It also has to invest in partnership since the fund can never go above 50 per cent ownership of anything.
As well as partnering with an experienced international manufacturer, the fund may seek to involve other investors, most notably the groundbreaking $115m Te Puea Tapapa Fund, established by a consortium of 26 iwi. It enjoys preferred partner status with the Super Fund.
Assuming something comes of all this and that a high-output, low-cost prefab housing sector emerges, it will open up another major opportunity for the Government’s stated objective that every New Zealander should live in a ‘‘warm, dry home’’ – one of the top 12 areas of focus in the blueprint unveiled to mixed reviews last Sunday.
That is in its approach to upgrading or replacing the thousands of draughty, mouldy, elderly homes in the state housing stock. Here, also, prefab housing must surely have a place.
One or two big, new entrants will almost certainly be needed if the 100,000 Kiwibuild target is to be reached.