Building levy threshold raised to lower costs

Minor building work will be exempted from paying the building levy as part of the Government’s fight to lower building costs.

The cost of building a new home has skyrocketed in recent years, and the expense has been cited as a contributor to the slowdown in the sector.

Last month, Building and Construction Minister Chris Penk announced the Government would be “tackling out-ofcontrol construction prices” to help provide more high-quality, affordable housing. Now, the Government will be exempting building projects under $65,000 from paying the building levy, the minister has announced.

Currently, any building project worth $20,444, including GST, or more is subject to the levy which is paid at $1.75 per $1000 of building work value. From July 1, that would change, and the exemption would “remove unnecessary red tape”, and save people making small improvements to their homes, such as bathroom or kitchen renovations, up to $113, Penk said.

“Building costs are too high and have risen 41.3% since 2019. Analysis shows it is around 50% more expensive to build a standalone house in New Zealand than in Australia – this must change. High construction costs have made it harder for families to get into their first home and have exacerbated NZ’s housing crisis.”

The change was a small step in the Government’s plan to address the issue, but this week the Cabinet had agreed to “an ambitious work programme” to reduce costs, streamline the consent system and make it easier to build, he said.

There would be announcements around what the work programme would involve over coming weeks, a spokesperson for the minister said. “You can expect to see changes that address the cost of building, like building products and steps to streamline the building consent process to reduce delays and red tape.”

Previously, Penk has said quick, easy wins in this space would be possible, particularly in areas where changes were in train already, but other reforms would need systemic changes.

Opening up the range of overseas building products that could be used, and making approval of new products easier, was an example of a “quick win”. Another was in the National-New Zealand First coalition agreement, and mandated that very small dwellings, such as granny flats, would not need a building consent, and would require only an engineer's report.

But careful and innovative reform of the consent system to streamline the process, but get the balance between efficiency and risk right was also necessary, he has said.

The Ministry of Business, Innovation and Employment has work on some changes under way already, after they were initiated by the previous government.

These included work on changes to the CodeMark scheme to help new products show compliance, new product information regulations to improve the use of alternative products, and a review of the building consent system.

The Labour government also agreed to eight of the recommendations from the Commerce Commission’s investigation into competition in the building supplies sector, including ensuring a greater uptake of offsite manufacturing.