Over the decades, Mike Fox has witnessed the housing market progressively tilt towards larger, more expensive homes. Without a major overhaul of the current regulatory processes, he says, things will never change.
It’s one of the biggest problems our country faces – we cannot produce the affordable housing that’s so desperately needed. But we can produce an overabundance of expensive homes. So why the massive disconnect between demand and supply?
Without political ownership and a major overhaul of the current regulatory processes, affordable housing will never be delivered.
Over four decades, I’ve built hundreds of homes, and have watched the market progressively tilt towards larger homes on smaller, very expensive lots, with building timeframes stretching out and productivity plummeting.
Unfortunately, this is what our current system and market dictates, but it woefully under-delivers on what we need to house everyone, especially in the dawning era where affordability is paramount.
The current government’s worthy political aspirations to ramp up affordable housing by 10,000 units per annum under the guise of Kiwibuild crashed and burned in spectacular fashion. They soon realised what those of us in the industry have long known – the delivery system is broken. It’s plagued with hurdles, delays, costs at every turn and is inadvertently skewed to only create high-cost land and subsequently high-cost homes.
It’s a pipe dream to think that the current system or market will produce affordable housing without intervention, especially in urban areas.
The sad thing is that the government’s response to fixing the broken system is to change the law so that government projects can sidestep the Resource Management Act (RMA), but leave the rest of the country stuck in the regulatory mire. Why not be brave and fix the problem for everyone, once and for all? Instead, it’s an opportunity lost and the problem kicked down the road because it’s politically difficult.
In New Zealand, we’ve been building a disproportionate oversupply of expensive larger homes with the greatest area of demand – affordable homes, hardly catered for. This needs to change, and quickly. However, if we continue to follow the same regulatory processes, how can we expect a different outcome? It just won’t happen.
If we want affordable housing, we need to produce affordable land free of inflationary minimum-size and design-restrictive covenants.
In reality, these covenants are put in place by developers to raise the price of subsequent section releases. They cut out a large portion of buyers who might be wanting a smaller, more efficient home. Any meaningful changes will come about under current systems only by sidestepping the market and some of the feel-good niceties of planning and simply getting on with pragmatically producing the housing, and centrally funding the infrastructure needed.
If the politicians have not got the wisdom or courage to change the rules that have created this mess, perhaps they should develop their own land that can be used for affordable housing. Previous governments have successfully done it before.
The solution is relatively clear – we need fewer rules and more political fortitude as local authorities will need to be curbed and in some cases, overruled, and not just for government projects.
Take one private enterprise example where a smaller local authority has been sitting on its hands for more than 12 months. It’s a $40m project that will deliver 150 affordable homes to market for less than $400k each, including the land. Clients are crying out for the product, but two star-gazing planners just seem overwhelmed, and the project continues to sit in limbo.
The planners’ strategy seems to be to go slow with the hope the project will eventually disappear. How unjust is that on society? Affordable new homes being kept out of the market on the whim of a planner. All the while, holding costs are pushing up prices by the day and the clients remain unhoused in motels and cars.
Another example is a transitional housing project, with a perfect site and location and the need overwhelming. This time, the neighbours got a bit jittery, politicians circled, didn’t like the heat and the project was canned, resulting in more motel rooms booked.
God only knows what all this is costing the taxpayer. This is the crazy, disconnected world the RMA creates. If they asked me, I would remove all smaller residential projects from the RMA as it is no longer fit for purpose and the planning process is too subjective – often highjacked by neighbours, anti-commercial practices, personal agendas and nimbyism.
More standardisation of design and modular building needs to be increased and the consumer conditioned to not expect a bespoke home if they want affordability and value.
Building companies create the expectation that you can have your home any way you want. However, if the consumer realised that building bespoke added at least 25% to the cost of their home, they may view things very differently. This is even more important now, when people will be cutting their cloth accordingly and looking for homes within their means that deliver efficiency on all fronts.
The social and health costs from not getting more affordable housing into the market far outweigh the cost of providing good housing. All these people forced to live in motels, cars and caravans need a stable, warm place to call home.
Although well intentioned, the RMA has morphed into a major stumbling block. It’s project specific and has no consideration as to what the community actually needs to house its people or what its impacts are on the financial viability of a project.
It is heavily weighted against the party wanting to do a new project. The applicant is made to feel guilty until they can prove themselves innocent. The surrounding homes seem to have an inordinate amount of say and councils often pander to spurious objections.
It’s a cost-plus model with the first person purchasing paying the bill for infrastructure, GST and all manner of other local council fees. The RMA, along with the 70-disjointed individual council district schemes, is an unsustainable model.
In addition to issues caused by the RMA, since the introduction of the Building Act 2004, construction costs have soared, and productivity has plummeted.
Why? Considerable administrative process has cumulatively been forced into place, but it adds very little material value. Risk-averse behaviour has turned once helpful local councils into gun-shy, chicken-little organisations slowing construction down and demanding consumer money be spent to absolve themselves of liability.
The construction industry currently can work only at the speed that the controlling local council can issue and administer consents, and that impacts significantly on productivity and costs. Some local councils are brilliant, others are woeful, and I know in some locations you can wait as long as 21 days for an inspection. How can anyone be expected to be productive or work within constraints like that?
In the last 15 years, the cost of building has increased 110% while the general cost of living has increased only 44%. Much of this extra cost is the result of compounding regulatory change, council fees and unfairly imposed infrastructure cost.
Many good operators have been worn down by the incessant regulatory creep and the growing army of Clipboard Charlies. They are exiting and taking much-needed skills away from the industry.
We need strong leadership, meaningful change and a complete overhaul of the RMA, the Building Act and the Local Government Act so that the drivers and outcomes result in efficient, affordable and sustainable housing.
Change will happen only through collaboration between industry and policymakers, but there must be a catalyst for change. I believe we have reached that tipping point. One would also hope housing can be depoliticised and an across-party accord could be reached.
Housing is too important an issue to be used as a political football. Recent events have opened the gates of pragmatism and we should take this opportunity to improve things for the industry and the people of New Zealand. A full review of the governing acts should be undertaken, and if regulation doesn’t help the delivery of affordable healthy housing or make the industry more productive, the time has come to ditch it.
Mike Fox is co-founding director of EasyBuild House Packs. An extended version of this article originally appeared in June 2020 issue of Building Today.
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