Parties promise more housing - but can the industry deliver?

Some parties, including Labour, believe the best way ahead is to build at scale.

Some parties, including Labour, believe the best way ahead is to build at scale.

OPINION: Promises of extra housing are flying thick and fast by the two main political parties, but perhaps it's time to ask the construction industry about whether it can deliver.

While building companies are working flat out, and construction workers can virtually pick their employers, the industry is showing signs of hitting a peak. Building consents are starting to level off, and building activity is beginning to dip.

It's more obvious in the non-residential space, but to industry watchers, issues of a lack of finance and lack of workers with the right skills are coming home to roost.

There are big differences between National and Labour and their plans to meet the desperate need for more houses.

There are big differences between National and Labour and their plans to meet the desperate need for more houses.

This election, both parties are promising more apprentices in the medium-term, with overseas workers likely plugging the gap short-term.

READ MORE: Construction industry struggling to grow further, despite demand: ANZ

That might fix the worker situation but deeper issues around the industry's capacity are also at stake.  

National plans to build about 34,000 social and affordable homes on Crown land over the next decade, 26,000 of which would be completely new builds.

Labour's key policy to build 100,000 affordable houses over 10 years is almost as much about upgrading the industry as it is about putting roofs over heads.

If the government stepped in with a project of real scale, it would accelerate the take-up of efficient building processes like prefabrication.

As David Kelly of Registered Master Builders Federation points out, such changes won't happen without certainty and scale.

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That wouldn't necessarily require a Labour-style Kiwibuild project, either. Kelly says Housing NZ's big order book is one example of a big job that could provide the assurance that building companies need.

Fixing the financing constraints facing the industry is a little more complicated.

Labour's solution will only provide some of the houses needed. But its infrastructure policy would certainly be a big help. Instead of waiting for local councils to cough up, the government would be an intermediary, attracting international finance through infrastructure bonds.

After all, Twyford says, the world is awash with cash that would love to invest in our infrastructure. 

The money would be repackaged for private players to take on, and paid for with targeted rates.

Twyford says this is the key difference between Labour and National's infrastructure policy, which he describes as a $1 billion line of credit to councils facing borrowing limits.

National's housing policy is less about providing more money and structure to build – it leaves that to the market – but more about providing the mechanics to allow things to happen.

Nevertheless, its housing policies do include urban development authorities, which would fast-track development in areas which are currently too hard for the market to solve alone.

The problem with any big building rollouts is there are few really big building companies in New Zealand. That can only be solved by some of our smaller players clubbing together, or big foreign players entering the fray.

Pamela Bell, of Prefab NZ, believes New Zealand does have the capacity to make all this happen. After all, she notes, prefabricated housing companies are not at peak capacity yet.

"The ones I've seen could easily double [production]. They're not doing night shift, there's still a lot of potential. But that's of no use unless you're talking about unblocking infrastructure, consenting and finance delays."

Some outliers like Daiman Otto, of construction consultancy Tall Wood, don't necessarily believe a mass building plan is required to fix the industry's problems.

To him, scale just masks less productive ways of doing things. Big companies "can attract investment" but "the innovation is not happening with the big players. it's happening on the fringes."

What people are unaware of, Otto says, is the "coming disruption in the form of digital construction" to the industry.

"The kind of scale that both parties are talking about it possible, but it's not possible using the same old business model."

He cites a Sydney building site he visited recently where eight people were assembling a seven-storey office block. Much of the work was being done off site.

Otto also believes incentives would help make that transition quicker and easier. 

If, for example, no building consent fees were charged to get houses to "passive house standard" - houses that are airtight, insulated, and use minimal energy - wouldn't every company want a piece of that, he asks?

"There's some levers to pull to encourage productivity but not prescribe the solution," he says.

 - Stuff


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