Allowing competition in building consents will help make houses more affordable
Both the prior Labour government and the current National-led coalition have wanted to deliver more affordable housing. But getting there is like trying to traverse an overgrown forest path. You can’t get anywhere until you clear the first fallen branch, but clearing it only takes you up to the thorny brambles a little way down the track.
There is broad cross-party agreement that housing supply fails to keep up with demand for housing because councils have not zoned enough land for apartments, townhouses, and new subdivisions. Prices go up instead.
Fixing the problem isn’t simple. But zoning is hardly the only problem.
Wellington Council has proposed a fairly ambitious district plan for Housing Minister Chris Bishop’s approval. I would have preferred that the plan also make provision for new subdivisions that can cover the cost of the infrastructure needed to service them. Ability for cities to grow at the fringes helps make land for downtown apartments more affordable.
Nevertheless, Wellington’s proposed district plan is a substantial improvement on the current plan. It enables a lot more housing in places where people want to live.
That clears the first fallen branch. Like the more enabling Auckland Unitary Plan, it will do a lot of good. The Government seems committed to enabling competitive urban land markets more broadly.
But we then run into the next bramble thicket. Councils do not just zone land for housing. They also issue building consents, inspect buildings as they’re being constructed, and issue final codes of compliance certification when building is complete.
Councils have been local monopolies in signing off on buildings. The country has a single Building Act, but developers warn that council interpretations of that act vary considerably. A building that would be compliant in one area might not be in another, making it harder to use standardised designs and methods to bring down costs.
And council reluctance to sign off on buildings constructed using unfamiliar materials or methods can be understandable. If anything goes wrong with the building years later, council is jointly and severally liable for the damages, along with the builders and subcontractors. If those builders have exited, council is left on the hook. Work by Sapere for the Ministry of Business, Innovation and Employment found that, in just under half of cases in which the courts awarded damages, council had to cover the entire settlement.
Getting building consenting authorities out from under joint and several liability would help. And especially where the government is keen on encouraging the use of quality lower-cost materials certified overseas. But so too could easing the local monopoly on building consent and code of compliance issuance.
Government has already recognised that building consents and sign-offs are part of the problem. Kāinga Ora, the Government’s housing provider, has its own arms-length consenting authority: Consentium. It provides consents for Kāinga Ora developments along with building inspections and code of compliance certificates.
Consentium then provides a small bit of contestability in the market for building inspection certificates. Kāinga Ora developments can ignore idiosyncratic local interpretations of the Building Act and build to a common national standard. It can also decide to try out new and innovative materials to help bring costs down while improving quality.
But only buildings that will be owned and retained by Kāinga Ora can apply for consenting through Consentium. If a private developer is building two adjacent identical houses, one for Kāinga Ora and the other for private sale, Consentium would only provide consenting services for the Kāinga Ora home. One potential reason: Kāinga Ora is not likely to sue Consentium if it discovers a problem down the track.
It’s a bit of a shame. Consentium is hardly perfect. It was reported earlier this month that it took almost two years for Consentium to decide that an aboveground stormwater storage tank didn’t impose a fire risk. But council consenting systems can be even more broken.
If building consenting authorities had to compete for business, outcomes could be different. If private developers had the option to seek consent from Consentium, both Consentium and councils could have reason to improve performance – so long as the liability issues were sorted out.
I recently returned from Vancouver where the Squamish Nation has autonomy over an apartment tower development near Vancouver’s downtown. A New Zealand equivalent could allow iwi to establish themselves as building consenting authority on iwi-held land. In places where councils were underperforming, iwi might take up consenting for their own construction projects. That too would provide greater competitive discipline on building consenting.
Moving towards competitive urban land markets is critically important.
Bringing some of the benefits of competition into building consenting would help clear the next bit of bramble along the way.