Prefab won’t solve housing woes
Off-site construction generally no cheaper and price of land remains major barrier, writes Bruce Kohn
Acombination of myths and exaggerations have led to a perception that prefabrication of new housing may be the immediate answer to New Zealand’s housing issues of supply and affordability.
The fact is the supply chain of the building industry has been developing its off-site construction operations through a variety of businesses. These include automated frame and truss assembly with a more than 50-year history, provision of bathroom pods, large scale kitchen joinery, window componentry, wall panels and construction of transportable housing.
About 85 per cent of the country’s current home construction involves prefabrication in some form.
The small scale of the New Zealand and Australian markets and the cyclical nature of the industry, dictated by economic conditions, has held back development of automated whole-house construction facilities. Those require significant capital to commission. The houses that come from such production lines are unlikely to be available to new home buyers on site at prices significantly lower, if at all, than those built through traditional means.
The major benefits of these facilities are that they can add efficiencies, cut the time of completion of a new build, ramp up numbers of new dwellings coming to market and offer consistent high quality. A small number of players are leading the way. But against the background of an industry that, over the past four years, has grown from some 12,000-14,000 houses built annually to approximately 32,000 today, the production from prefabrication facilities will be only a small fraction of the market’s requirement. This is especially the case if, as envisaged by the Government, a further 10,000 houses a year is added to demand by KiwiBuild.
Given a greater commitment by KiwiBuild to greater standardisation of design, coupled with incentives to potentially adjust their factory operations to add panel products on to their timber frames, frame and truss operators could almost certainly gear up to higher levels of production. This would be accompanied by greater efficiency more quickly than through development of new automated whole of house production facilities.
Hard won experience in Australia and New Zealand shows that complete off-site construction of housing is generally no cheaper than traditional on-site home building. It may require less skilled labour on site but those cost savings are largely offset by front end costs of factory production and design detailing along with the need to recover invested capital.
In the words of an Australian manufacturer operating an automated prefabricated housing facility, “There is part of a solution to providing well-built and less expensive housing through the prefabrication space. However, the appetite for developers to standardise the built form is not as strong as it needs to be.”
Another challenge is that unlike building on site using “approved” or “deemed to satisfy” solutions, most prefabrication has to be specifically designed. This requires engineering and specialist design skills, then adaptation to the production process. All these costs need to be recovered. Securing a factory and setting up the manufacturing facility are just the start of the process. Overseas companies who consider entering the New Zealand market will need to demonstrate the ability to meet New Zealand’s building code requirements.
They are likely to find conditions on site and construction infrastructure significantly different to those with which they have experience. The building code imposes in many cases special considerations for soil conditions, seismic issues, wind velocity and prevalence and coastal variations.
How often in developed countries abroad do cranes and transporters encounter overhead power lines and road corridors as frequently congested and narrow as in Auckland? There may be less time spent on site but the saving can quickly disappear in the costs associated with site preparation and infrastructure difficulties.
Off-site production of transportable full houses is part of the mix required to meet the higher housing targets. The numbers built would also be increased by simple design, optimising the use of both on-site and off-site materials, and construction arrangements linked to the selection of accredited builders.
The affordability issue raises different questions. The price of available land on which to place homes manufactured offsite, or those built by traditional methods, remains the major barrier, especially in Auckland.
A high quality house may be built and available, whether through off-site or onsite construction, for less than $350,000 even with current high costs of consent and compliance.
It is noteworthy that houses priced in excess of $800,000 in a number of Auckland suburbs are not selling, almost certainly because the cost of the land has inflated the cost of the build to a level not acceptable to buyers when the Government is aiming for an affordable home at $650,000 in the region.