Why we need the Ikea approach to the housing shortage
Prefab housing, the next part of the KiwiBuild plan, faces some well-entrenched hurdles, writes Catherine Harris. But it has been done overseas, and on a much bigger scale.
One hundred thousand houses. If you think the Government’s KiwiBuild target to fix the housing shortage is overly ambitious, just look at Sweden.
In 1965, with a population of 8 million, the Nordic country began its ‘‘Million Homes’’ plan to build 10 times as many houses as New Zealand’s target, within 10 years.
By the end of 1974, it had exceeded its target by 6000.
Huge concrete apartment blocks are most associated with the programme, but many were medium-density townhouses and family houses.
How did they do it? Largely through prefabrication.
The Million Homes scheme is an example the prefabrication industry likes to point to when it comes to the KiwiBuild programme.
Research suggests offsite manufacturing can slash 15 per cent off the cost of building and speed up the time it takes by 60 per cent.
But the prefab industry can’t reach those sorts of heights without scale, meaning it needs KiwiBuild as much as KiwiBuild needs it. A recent chance for industry players to pitch for KiwiBuild contracts drew more than 100 responses.
Prefabrication could have a big impact in a country where having a custom-built house has become the norm, says Mike Fox, director of Masterton flat pack housing company EasyBuild.
‘‘You will lower costs because you’re replicating the same details over and over again, the same materials, so the efficiencies of scale really kick in.
‘‘And that’s one of the issues New Zealand has. We actually need a two-tier industry, and we’ve got a one-tier industry.
‘‘Everyone expects a bespoke home and what they don’t realise is they’re paying to have [it], whereas in the US and Australia, they have homes at a price point and they have very little choice, or you have a bespoke home and they have quite a difference in price.’’
Prefab NZ chief executive Pamela Bell says three things are preventing her industry from getting any bigger, and KiwiBuild has the muscle to overcome them all.
‘‘Our members need certainty either of land provision, or certainty of funding to help them scale up, or certainty of orders.’’
Getting some consistency around building consents has been a big problem. A South Island prefab company that recently put up a hostel in Queenstown said it took just four months to make but over a year beforehand to get it consented.
‘‘Some local authorities are very good but others are just overwhelmed,’’ Fox says.
Mike Greer, of building firm
Mike Greer Homes, believes tangles with regulation and compliance now take up about 25 per cent of the cost of building.
‘‘They’re the big killers in our industry. A lot of that is brought about by the [territorial authorities] taking on all the liabilities.
‘‘They don’t understand that you can build a house lots of different ways.
‘‘They’re consistently trying to make us use solutions ... the same as an on-site house, and you can’t do that when you’re prefabricating to an advanced stage.’’
But Greer says he can understand why councils are cautious. Stung by the leaky building crisis, councils are liable for shonky work, unlike other countries where a state or central body carries the can.
‘‘I can get a consent in central Otago that is completely different to a consent in Auckland for the same house.
‘‘There’s no reason why that couldn’t be controlled at one point and then you could use the same plan over and over. We’ve got to redo it for each territorial authority.’’
Bell says another, less obvious obstacle for the industry is certainty of finance.
Banks and insurers get nervous about releasing funds on houses that aren’t being built on the land they’ll stand on.
‘‘The KiwiBuild unit has told us they’ve met with the banking association so we’re very hopeful that they’ve got the mana to pull a wide variety of banking constituents into the room at the same time,’’ she says.
When it comes to getting some scale, Fletcher Building and Mike Greer Homes are both understood to be looking at factories in Auckland. And one area, south Waikato, is even keen to become a regional prefabrication hub. Its regional investment trust, Swift, already has one factory
interested in moving into Putaruru and its chairman, Ian Elliott, hopes more will follow.
He thinks south Waikato is an ideal location, close to the Auckland, Hamilton and Tauranga markets.
Once the Huntly bypass goes in ‘‘you could have a truck with a house on it to Auckland in the middle of the night in three hours’’, he says.
But while few who pitched to the Government are keen to mention it, there is concern that the goal posts that the industry is aiming for don’t change.
National has given assurances that any contracts with the current Government would remain. But this hasn’t completely allayed those fears.
‘‘National thinks the use of innovation works to create excellent housing at a decent price,’’ Judith Collins, the party’s housing and urban development spokeswoman says.
‘‘We favour enabling the private sector to get on with the job and not getting in their way.’’
Another concern is that the new Ministry of Housing and Urban Development (Huda), will favour big overseas players.
The thought of a flood of overseas materials or even fully built houses is a prospect that makes traditional builders and building material suppliers nervous.
‘‘There is talk within industry that Huda will look offshore for answers to its housing provision objectives, both in terms of prefabricated structures and materials supply,’’ Geoff Hunt, chairman of the Construction Strategy Group, says.
One of the first mountains the prefab industry has to conquer is its perception problem. Drafty temporary classrooms or no-frills, low-quality housing still linger in the popular memory.
Bill McKay, a senior lecturer in architecture at Auckland University, says one of the first steps towards prefabrication was the state house.
They didn’t use panels but did have a certain amount of standardisation like their distinctive windows, which all came from a single factory.
Today those houses are recognised for having ‘‘good bones’’.
But suspicion about prefabs remains. ‘‘After the leaky building crisis, we’ve got a population who are very wary of innovation and experimentation because either they themselves or a friend or relative have been burned by a leaky building.’’
McKay agrees prefabrication is more about technique than any particular building style. Today entire readymade bathrooms or kitchens are regularly being used in hotel and student hostels.
But it’s more likely to take the form of panelisation, precision-cut frames held together by a rigid board.
This is the industry’s great opportunity, Bell says. ‘‘Instead of bringing open frames to site, we could be bringing partially or fully closed panels.’’
‘‘It means you’ve essentially got a closed in, not entirely watertight but much more protected, building envelope.’’
Alas, not everything went to plan with Sweden’s Million Homes plan. Halfway through the 10 years, the housing shortage was replaced by a housing surplus.
There was also criticism about the uniform design and poor architecture.
Many of its communities were considered unsightly and undesirable by Swedes, and the newly constructed units became places for waves of new immigrants.
There are lessons here, Bell says. Some prefab designs might be rejected by the middle class if they are pushed to live too differently to their cultural norms.
‘‘We couldn’t just pick up and use the Swedish model, because they’ve used a greater density than we’d have appetite here for in New Zealand.
‘‘I think what we could really learn from Sweden is they did a really good job of setting up public transport hubs around which they created the new housing. That’s a great precedent for KiwiBuild.’’
Sweden also brought in tougher land acquisition rules, an echo of our recently announced Urban Development Authority.
It took a stiff line on investors, ensuring that people could only own one of the new houses at a time.
And it helped people into homes with ‘‘soft loans,’’ at lower than the market rates, with a property tax when they sold.
But when it comes to actually building fully kitted-out portions of houses, as Sweden did, there’s doubt that New Zealand has the scale.
Economist Shamubeel Eaqub says KiwiBuild is not ambitious enough.
‘‘My view is that we still need to be aiming for half a million houses. And KiwiBuild roughly aims for 300,000, because the market typically builds about 200,000 houses a decade ... and it hopes there will be additional.
‘‘We haven’t seen any evidence of it yet. I think we’re still 200,000 short.’’
Eaqub says history has shown that when New Zealand took the foot off building rates in the 1970s, it stopped building for the poor.
Supply is the answer, but he feels KiwiBuild is ‘‘a distraction’’.
What will move the dial, he says, will be urban redevelopment – which requires deep pockets – and changes to council liability, ‘‘which really stops the council from being faster, cheaper, more open to innovation’’.
Fixing the financing of infrastructure, so it’s paid for over 100 years rather than upfront, would also make a big difference.
‘‘If we could really get [prefabrication] going, it would bring down the cost of construction.
‘‘But really the thing we have to work on is how do we get more density close to the transport corridors and urban amenity.’’