Introduction

Thank you all for the time and cost you’ve incurred coming here today for this briefing.

Many of you were together last month for the forum in Auckland. At that time I promised early action on licensing and the building act. Today I am delivering. After I’ve briefed you this morning I’ll be hosting a media conference, but I wanted you to hear the Government’s plans from me first.

Before I cut to the chase, can I just say how appropriate we are in this venue today. This is the Government Caucus room where MPs gather once a week. It was beautifully renovated fourteen years ago along with the rest of Parliament. It was a high quality job using New Zealand’s finest craftspeople – appropriate for this important home of our democracy. So it’s probably a good metaphor for today’s announcements as what we are trying to do is to ensure the best tradespeople work on New Zealanders’ greatest asset, the family home.  

So today I want to cover four areas:

• Firstly a quick recap on why we need to lift productivity and quality and what we’re trying to achieve here


• Secondly, to explain how we’re going to review the Building Act, and;


• Thirdly, how we intend to revamp the licensed building practitioners scheme and


• Lastly, what the economic impact might be. 

Challenges facing the building sector

So, first, why is all this important?

In a sentence - because the building sector matters. 

We all have to live in, and most of us work in, a built environment. The sector generates one dollar in every 20 in this economy and employs one in every 12 workers.

The trouble is we aren’t building enough quality buildings. A recent study by the Centre for Advanced Engineering found around two thirds of completed work had one or more defects that impacted on the client.

As one of the Taskforce reports last month showed, the building sector’s productivity performance has also been falling away for many years now.

And given what we know about the likely demand for housing in the future, especially in the greater Auckland area, the need for action is urgent.

Of course productivity is a national challenge, not just one for this sector, and an essential task if we are to sustain rising living standards. This government is tackling that issue across the economy.

The Productivity Taskforce developed some good ideas for the sector with a new skills strategy, and I will be taking suggestions to Cabinet shortly on this.

But right now our focus is on other measures we can take to raise skill levels in the profession, and about providing the right regulatory environment so skilled people can get on with the job. Today’s announcements are on the Building Act Review and the licensed building practitioners’ scheme, and are intertwined.

I want to stress this is about cutting costs, not cutting corners. We are not retreating to the light handed days of the past and the problems that caused.

But at the moment we’ve got a consenting process that’s cumbersome and costly. We’ve lurched to the other extreme in a few short years as a result of an over-reaction to the building issues of the 1990s. Low risk buildings such as a simple home are treated very much the same as more complex projects. Councils are overly cautious because they bear too much of the blame if things go wrong. It’s a risk-averse, one-size-fits-all approach.

We need to strike a better balance. We want competent designers and builders to get on with building without unnecessary red tape.  We want the number of council inspections to be related to the risk and complexity of the building work and the people doing the designing and constructing.  We want to reduce costs but not building quality.   And we want homeowners to be confident that the chippie they hire will do the job well and stand behind the work that’s been done.

‘Build it right first time’ is the mantra.  

So, firstly, let’s look at the review of the Building Act.

The Building Act Review

I will be publicly releasing the terms of reference today.

There are a number of very definite results I want to come out of the Review:

• First; the removal of  building regulation that adds cost and little benefit.


• Second, consents that reflect the risk and complexity of the construction. A simple three bedroom house  needs to be treated differently from a complex building.


• Third, a shift of responsibility back towards builders, away from councils.


• Fourthly, better information for consumers about who they might employ to do the job and better ways to resolve disputes. Fly-by-night development companies have not helped the industry’s image.       


• And lastly a streamlining of building consent functions across the country. I hope councils will look to consolidate their functions. Reducing the number of consenting authorities should also improve consistency. 

We have already made progress with the Building Amendment Bill (No.2) recently passing into law. This fast tracks consents for builders who build similar homes across the country.

We want to take a rolling maul approach for the next stages. By the end of this year I have asked for a report on two things:

• One, immediate opportunities for simplifying and streamlining the current regulatory system; and;


• Two, options for reform of the regulatory system, for example to change the balance of risk and liability.

Subject to Cabinet decisions, it is my intention to implement simplifying and streamlining opportunities that do not require legislative change pretty much immediately after that report. Some other immediate opportunities will require legislation, and it’s my aim to have those dealt with by mid next year.

Cabinet has also approved consultation on the main reform of the Building Act in the first half of 2010. Cabinet decisions on the substantive reform would be agreed by the end of June 2010, aiming for a new Building Act coming into effect in 2011.

A key part of this whole process will be to establish a Sector Reference Group to ensure that the sector’s issues are being addressed, test analysis for sector perspectives, advise on consultation, and provide advice on the recommendations of the review. A broad cross-section of people have been chosen for the work, and their skills and experience will be  vital in making sure we get the changes right.

I’d now like to look at the second leg of the double – the licensed building practitioner scheme.

The Licensed Building Practitioner scheme

The Building Act Review won’t deliver unless we have a functioning Licensed Building Practitioner scheme that is embraced by the 20,000 designers and trades people that we estimate should be licensed.

The benefits are clear to me.

• Firstly, it incentivizes designers and tradespeople to maintain and improve their skills through improved training and professional development. We propose to make the LBP scheme qualifications based by 2015.


• Secondly, it makes the profession accountable.


• Thirdly, that accountability means LBPs can self-certify their work and that of others so reducing council red tape further.


• Fourthly, having a licensed tradesperson doing or supervising the job will give both consumers and building consent authorities greater confidence.

It’s very much a carrot and stick approach. The statutory licensing board will have powers to discipline negligent LBPs – suspension or loss of license will be the ultimate sanction. And unlicensed builders will face fines of up to $20,000.
 
So far the uptake in the scheme has been poor. There’s been little incentive to get licensed.

We intend to change that with today’s announcement on the type of building work that only LBPs can undertake or supervise.

We have decided to limit the restriction to elements that are critical to the design and construction of residential homes and apartments. This is because a house is the biggest single financial commitment most people will ever make. Fixing problems can be difficult, costly and time consuming.

So building work will be restricted to a licensed practitioner where it affects three areas:

• One, the primary structure of a house;


• Two, the external moisture management systems such as roof and wall cladding.


• And three, the design of fire safety systems in small to medium sized apartments.

    
This is all critical work that needs to done right first time round. It represents about half of all building consents.

These rules will only apply to the residential sector. We believe there are sufficient other safeguards in the commercial construction business.

The way I see it, it’s a bit like a rugby lineout. Get it right, the team wins ball and can advance down the field. Get it wrong, the opposition secures possession, your attacking options vanish and it’s a long grind back. The Springboks have proved this is to our considerable pain. We want to get it right, first time round and we can only do that by using the best designers and trades people – our lineout jumpers – to do the critical work.

As you know, this government believes in less red tape – in other words, smarter regulation. So we intend to streamline and simplify the existing scheme to minimise compliance costs. For example:

• If qualified tradespeople want to get licensed, there will be a fast-track application process at lower cost.


• We will also remove duplication with other occupational licensing schemes. For example, recognising registered plumbers as competent to carry out roofing work.


• And not everyone will have to be licensed. We only expect one in ten designers and tradespeople will need to be licensed, since they will be able to supervise the work of others.    

We welcome your feedback and today I am releasing a consultation paper on options to streamline the scheme. 

Crucially, sorting out the rules around licensing will mean we can get on under the Building Act review at looking at home warranty insurance.

There will however be one significant exemption. We are a nation of do-it-yourselfers and it seems unfair to stop Kiwis wielding a hammer on the weekend which could be caught by the definition of restricted building work.

But we still want to protect consumers from past shoddy work on their prime asset.

So do-it-yourselfers will be exempt from the new restrictions. They will not have to employ LBPs to supervise or carry out restricted building work.  However, like professional builders they will still be  accountable for the work they do. 

At the time of applying for a building consent and a code compliance certificate they will need to sign a statutory declaration to show they comply with the requirements of the exemption. This will be kept on council files so future homeowners will know who did the work and can trace them if there is a serious defect.

There will also be a restriction preventing do-it-yourselfers working on more than one home within any three year period. However, we need to prevent unlicensed builders flying under the radar screen by passing themselves off as serial do-it-yourselfers. Australia has the same restriction. 

At the end of the day these seem fair and reasonable steps to prevent bad houses being built by unlicensed builders.

In a sense today also marks the start of a two year education campaign to encourage trades people to get licensed.

I am grateful that the Registered Master Builders Federation and Certified Builders, which between them represent about 4000 trade-qualified builders and companies, are throwing their weight behind the scheme. That’s a great start.

And that brings me to my final point – the time and cost benefits.

The benefits

We believe that by 2011 we will be able to cut weeks and thousands of dollars off the time and cost of building many new homes without compromising quality.

Let me give you an example.

A typical simply-designed and constructed house represents about half of all new residential houses built a year. About eleven and a quarter thousand of them are built each year, a $2 billion per annum market.

Consenting authorities require the builder to provide considerable supporting information because of the one-size fits all approach. It takes four to six weeks to review plans and issue the consent. Between 12 and 15 inspections are required. That needs to be arranged and paid for out of the budget at $100 an hour for the inspector.

The streamlined process the Government envisages will mean less supporting information. A low risk build will need fewer inspections, perhaps as few as four, limited to critical points like foundations and drainage.

We estimate a saving in the build time of up to four weeks. There will be greater certainty over when the house will be ready. It could mean a saving in financing costs of $2500 a week per house, or an all up annual benefit to the economy of around $112 million.

That level of gain has just got to be worth striving for.

Conclusion

So today I have scoped out the actions the Government is taking to develop a more productive and accountable building sector.

To recap:

• The Building Act Review aims to reduce the cost and complexity of the consenting process and ensure responsibility sits with the tradesperson hired to do the job.

• The revamped Licensed Building Practitioner scheme aims to lift skill levels and give consumers and consenting authorities much greater confidence. We want many more of our tradespeople to see a license as important for their business. 

But we can’t do it alone. We do need your help to make these things a reality.

Together we can make a real difference to lifting the performance of a sector which touches the lives of every New Zealander. 
If we get it right, more New Zealanders can raise their families in the quality homes they should be able to get at a price they can afford.
If we get it right, this sector will live up to its promise and make a stronger contribution to building a more productive economy.

Thank you. I’d now like to know what questions you have.