The much-vaunted Kiwibuild programme isn’t going to come close to reaching the initial house building targets. So what has gone wrong? And can it be salvaged? AUT expert Professor John Tookey answered some of our questions.
The numbers on Kiwibuild are bleak. Thirty three houses built to date. A target of 1000 for the first year being revised down to more like 300. And somehow, it’s meant to reach 100,000 in ten years. For Phil Twyford, the minister overseeing the programme, it’s a disaster.
Putting aside the politics of what has gone wrong, what does it tell us about the construction industry? And are there solutions that would allow the Kiwibuild programme to be salvaged? We put the following questions to AUT professor John Tookey, an expert in construction industry procurement and productivity.
The Spinoff: What has gone wrong here? Is it the structure of how Kiwibuild has been designed, or is it to do with the personalities tasked with delivering it?
John Tookey: I’m not going to critique personalities, it’s just not worth it. But the reality is when you’re dealing with an industry this diverse and massive, messing around looking for the perfect solution is never going to cut it. You go with a workable plan, executed with ferocity, rather than a perfect plan. Basically the government and various different ministers were more in the first instance concerned with reorienting the departments involved with housing, and playing those internal games, rather than actually getting runs on the board. It was always going to be a hostage to fortune, but the reality is they needed to put in a lot of energy up front. Assuming something can still come from Kiwibuild, we’re going to be so far into the election cycle that politically the government is going to get hammered for it.
I think they might already be getting hammered, really.
Even more hammered, then.
In your view, is the Kiwibuild programme as it currently exists salvageable at all?
It depends on what your definition of success is. If it’s to create more housing affordability, if you look at the way house prices have flatlined as more supply has come online, actually housing affordability on a day to day basis is improving. Which is a good thing, at the same time that it starts to erode the value of people’s primary asset. But is that the definition of success as far as Kiwibuild is concerned? The programme was not really predicated on building capacity. If it was, you’d get the upfront investment of industry, who were looking at government and expecting them to start throwing largesse around, and big contracts happening quickly.
The housing sector is not monetised in quite the same way that you’d think it is. Consequently, building companies have to wait for the order to come in before scaling up. So this is the paradox – just saying there’s money available isn’t the same as money coming in. Builders live not exactly hand to mouth, but not far off it. Their strategic depth is minuscule.
So there hasn’t been any sense for builders that Kiwibuild could give them constant cashflow?
Absolutely, and you can’t take on board additional technology or people to build capacity, just in case the government pulls finger. It was always going to be a very turgid process with a long lag time. When comments were made last year with regard to new housing on the former Unitec property about how soon we’d be turning the first key, they were just setting themselves up for failure.
You made some comments on Radio NZ about how Kiwibuild so far has basically been fighting over scraps, rather than huge developments like the thousands of properties planned for Unitec. Should any of those smaller developments have been bothered with at all?
It’s very hard to criticise attempts to make things happen. Back in the day, Napoleon Bonaparte said “lead, follow, or get out of the way.” You’ve actually got to do something, you’ve got to get some runs on the board. And if you’re just sitting around, by the time you’ve decided everything is happening, you press the button and you’re stunned that nothing is going to happen for months. The building industry is not sitting around, shovels poised, waiting for you to decide that something is going to happen, it just doesn’t work that way.
Well the building industry itself seems to have just been getting on with building – according to Judith Collins the private sector has managed more than 30,000 builds over the same period. How?
The market has reacted, as the market will react. If you’re a builder, are you going to target marginal stuff down to a budget, or are you going to target high margin stuff, where you can sell a lot of additional services related to that job? That’s what the market has been doing. The bulk of the work goes to companies like the group builders, who have large bespoke housing, they have guaranteed finance from people with pre-approval, and they can press the button and go. Those people who have guaranteed finance and the ability to repay are low-risk for a builder. We shouldn’t be surprised by this.
Okay, if the government wants to come out of Kiwibuild with some success, what are a few things they could do from here?
They’ll have to go multi-modal, and expand the programme to cover a whole range of different initiatives. The obvious examples would be the likes of The Housing Foundation, who in effect front-end load developments, part-own properties, do a bit of wheeling and dealing on the side to generate revenue, and it’s a non-profit making entity. They do a tremendous job of producing high quality homes at affordable rates, with long term commercial relationships with the builders they have on their jobs. And they have to compete with the commercial market for land from (Auckland Council’s urban development agency) Panuku, for example – they have to pay market rates, which changes the mix of solutions they can produce. So if I was in government I’d want to give special dispensation to not-for-profit entities building mixed developments.
I’d also look at freeing up planning consents, so that if you build a standard size house with a standard design, consents are free, or very cheap. I’d also put the onus on very large houses to fund the fast tracking of cheaper houses, which would put the finger on the scale somewhat.
And in the background you need to run programmes up-skilling and expanding the number of tradies. At the moment building is perceived to be risky, cold, wet and miserable. Why are we not rebranding the industry so that people feel they can have meaningful careers? I’d throw serious coin at the BCITO – the Building and Construction Industry Training Organisations – to upscale what they’re doing and getting them into schools.
And finally, one of the big problems with the building industry is that every house is an individual project, set up from scratch and built to the specification of the client. Which means that there’s no economies of scale, or strength in depth. If you go to a major development site, there’s loads of small builders, each one with their own vehicles and tradies, organised according to need on a daily basis. So we need to get to a situation where there can be economies of scale brought to bear.