Sunday Star-Times

Housing is capability bound

Auckland’s housing crisis has taken years to build up to its current state.

- Rod Oram

Arecord number of homes – precisely 13,332 - will be built in Auckland next year, Building and Housing Minister Nick Smith forecast last week when he released the latest annual National Constructi­on Pipeline Report.

Three serious problems arise, however:

❚ This will barely beat the 2003-05 record of around 12,000 a year.

❚ By 2022, the completion rate will ease back to the 2003-05 level, the report forecasts.

❚ At this inadequate level, demand for Auckland homes will continue to outstrip supply. So, why can’t the constructi­on sector turn out more homes? And what are builders and the government doing to overcome the constraint­s?

The best guide to builders’ woes is the 2012 report on housing affordabil­ity from the Productivi­ty Commission, available at nz2050.com/ProdCommHo­using.

Chapter 10 analyses a long list of failures, from the small-scale jobbing nature of most home constructi­on and failure to embrace innovation, to weak competitio­n in the supply of building materials and inadequate business and constructi­on skills.

The constructi­on sector’s productivi­ty has flat-lined since the early 1990s, while economywid­e productivi­ty has risen by some 25 per cent.

The Key government was long aware of the problem. In 2010, it establishe­d the Building and Constructi­on Productivi­ty Partnershi­p, to lift the sector’s productivi­ty by 20 per cent by 2020.

This became a massive exercise involving people in the sector and government. The early work was encouragin­g. For example, the Partnershi­p believed it was possible to cut the time from concept to completion of a house from a typical industry average of 49 weeks to 28 weeks.

But after the Partnershi­p released its first reports, the government shut it down in 2014. Its work plan and some of its reports are still available at

nz2050.com/MBIEprod. Sadly web links to some key research no longer work.

MBIE cites gains and ongoing work. But these are heavy on data collection, guidelines and informatio­n systems. They are very light on innovation, productivi­ty and capacity building.

The Partnershi­p foundered for a variety of reasons, says the industry leader of one of the workstream­s. Three key ones were: the sector was swamped by the Christchur­ch rebuild; there was ‘‘no real ownership and leadership’’ of the process; and MBIE ‘‘did not deal with the issues from a whole-of-system perspectiv­e.’’

‘‘We’ve gone backwards for the past 10 years,’’ says a constructi­on company owner, who is a respected industry leader. One particular problem was the loss of the Department of Building and Housing when it was absorbed by MBIE.

There is progress, at least in Auckland. Land supply is increasing sharply, thanks to the creation of Special Housing Areas and fast-track consenting processes.

However, small companies building only a few houses a year dominate. They are incapable of higher volume or even moderate innovation. Those two challenges will fall to a handful of companies. But they face acquiring capital and skills to build faster and better.

Even current constructi­on activity is straining builders and regulators. Auckland Council, for example, is reporting a rising trend of shoddy practices. No wonder, the constructi­on sector has been irresponsi­bly muted about the housing crisis.

These crucial issues of capacity, capability, innovation, cost and quality are less intense in nonresiden­tial constructi­on. but its constraint­s are very real too.

Yet, according to the government’s 30-year infrastruc­ture plan, central and local government­s will spend over $110 billion over the next 10 years on assets.

Clearly, the constructi­on sector and government can’t meet the nation’s needs.

The constructi­on sector's productivi­ty has flat-lined since the 1990s.

 ??  ?? Demand is likely to continue to outstrip supply in Auckland.
Demand is likely to continue to outstrip supply in Auckland.
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