The building sector has raised some questions over the Government's recent changes.
Building and Construction Minister Chris Penk has introduced shared liability for defects - and allowing councils to consolidate their Building Consent Authorities.
Building Industry Federation chief executive Julien Leys joined the Afternoons team to discuss.
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Speaker 1 (00:09):
You're listening to a podcast from News Talks Be follow
this and our wide range of podcasts now on iHeartRadio.
Speaker 2 (00:16):
The Building Can Sense regime is getting an overhaul. It's
been called the most significant change in a generation. To
discuss further, we are joined by Julian Lees. He's the
chief executive of the New Zealand Building Industry Federation and
he's on the line now, Julian, Very good afternoon.
Speaker 3 (00:34):
H I'm Matt Hi Tayler.
Speaker 4 (00:36):
Now, Julian, explain this proposal to me, like I am
an absolute idiot.
Speaker 3 (00:43):
Well, look what it means is every time a builder
becomes insolvent, and we've seen a lot of that, partically
in hard times, and they're leaving the homeowner with an
incomplete building, there's now going to be not just a
council as the last man's standing, but potentially it'll be
(01:03):
a builder who's got some insurance. So ultimately it's going
to lead to faster sort of resolution of these sorts
of things. But also it's going to mean that our councils,
who are so risk averse will be much much more
open and less likely to say no to things, particularly
things like new building products which we're saying to see
as well. So it is a big change, but of
(01:26):
course the devil's always in the detail.
Speaker 4 (01:29):
So as the cautiousness of councils, is that because of
the liability primarily because I just always put that down
to being officious.
Speaker 3 (01:39):
Well yeah, look, possibly you say it's a bit of both,
but no, look it is. They are risk averse because
if they get something wrong or you know, something doesn't
go the way it should, they are the ones that
they get sue. The are the ones that have got
the deep pockets. Now, of course all that gets passed
on to rate players us. So what we want to
(02:00):
do is do something I get similar to what is
in New South Wales and Victoria, where you know you've
got you've got attary warrantees, you've got mandatary insurance if
you're building anything over twenty k of value in the
residential space, and it's just a better system for allowing
you know, homeowners some compensation and to get their buildings complete.
Speaker 4 (02:25):
So people are already screaming leaky homes. Leaky homes. Is
that kind of massive cock up likely under a system.
Speaker 3 (02:33):
Like this, none of it's done properly because I mean, look,
leaky homes and we've still you know, seen the tail
end of it. But that that was also about the
you know, poor design. It's got a whole bunch of issues.
I think I think this means we've got to have
criteria around eligibility. So in other words, you know, we've
(02:55):
got to have builders that have got the qualifications, the experience,
and the financial standing plus the insurance. So we've got
to have those things in place if we If we do,
then then it means that we've got you know, the
homeowner has got a recourse, you know, they've got some
guarantee that that thing things will get done if the
(03:18):
fall falls over. So I don't think we're I don't
think we're there yet, but there are other risks. The
other risks being that if we move from that join
several ability that we currently have to proportion it, it
could be that we simply just don't have enough builders
who you know, meet the alibility criteria or have the
financial backing be ensured.
Speaker 4 (03:39):
Because that's what I was wondering. Kind of smaller business
like a you know, just a small crew running a
couple of people, businessmen or solo builder. Will they be
able to cover the insurance levies.
Speaker 3 (03:53):
Possibly not, because you know, most of our builders are
three to five you know, crew small companies. They operate
on very slim margins, they operate on quickly. Now in
these times amount of times on you know, hand to
mouth basically, so cash flows tight to you know, insurers
(04:15):
will will come to them and say, well, we won't
look at your books, we won't see what your cash
flows like. They don't ensure people if they think the
risk is too great. So that's the issue. And I
guess this is also why Australia has some state backing
of their insurance schemes in all our sales.
Speaker 4 (04:35):
Yeah, because our economy couldn't handle all those little operations
going into business, could they.
Speaker 3 (04:42):
No, and no, no, look and the other thing. No
one's talked about this yet, but New Zealand doesn't have
any functioning building warranty insurance market. You know, we we
we had a I think it was called Stanford Insurance
back in between nineteen that did do that, but they
pulled out because there just wasn't simply the market for it.
So we need to get you know, we need to
(05:03):
realize that if this is going to work, we need
to get that building warranty insurance get up and running again.
And we need to have, you know, something sufficient so
builders can can't get that level of cover if we're
talking about you know, not making counsels the last man's standing.
Speaker 4 (05:20):
So just speaking of warranties, you said before statutory warranties
are used in Australia. What does what's a statutory warranty?
Speaker 3 (05:29):
So what that means is a New Zealand we have
the Building Acts in Australia, the Act. But thinking so well,
it's got the Home Building Act and it's got the
Domestic Building Act something like that, whether what that means
for our Building Act? We would then have an implied
warranty builds into that Act. So that means, so what
that means is any work undertaken by any builder in
(05:50):
New Zealand would have to it would impliedly be saying
this work will be done to a certain standard and
you know, using certain materials, and there's an implied warranty
to back that up, so you know, and again this
is what Australia has done. And again that's the last
sort of insurance backstop if you like, in case we've
(06:13):
got home owners that actually are dealing with the builder
that doesn't have insurance.
Speaker 2 (06:18):
Great, we're chadding to Building Industry Federation Chief executive Julian
Lee's Julian the sixty seven building consent authorities. So you've
talked about the consolidation of those authorities, hopefully into one
unit to get some consistency. But what does that look like.
Does that mean that gets absorbed into central government or
how does that operate if it's just one authority dealing
(06:40):
with those sides of the consents.
Speaker 3 (06:43):
Yeah, well look at the moment, so you're quite right.
We've got sixty seven BCA's councils Auckland Council for all
of New Zealand is about forty six percent of world
building consents. I mean, we know, which's no surprise because
we're the biggest city in the country and this is
where most of the building work happens. So it kind
(07:05):
of makes sense if there's some sort of consolidation where
some of those smaller councils that may only do a
few hundred or you know, a couple of consents, they
probably don't need to be doing that. It'll make it
be much more efficient if there's one organization which could
be a new organization that's formed or simply open council
(07:26):
decignis to take that on, or a private organization that's
set up to do all of that. And they're already
talking now about I think, I think, I think Minster
Penk has said the expectation is that councils should be
doing eighty percent of consents within three days, which is
significantly faster than the currents that have ten to twenty days.
Speaker 4 (07:47):
So how much cheaper will building be under a set
up like this?
Speaker 3 (07:52):
Potentially thousands of dollars will come off the cost of
a new build. And so that's a really good question
because the whole focus has been for these reforms and
by this government to make housing more affordable. You know,
Kiwis do pay a lot for their home and more
than we do our cousins to over the ditch. So
(08:13):
you know, we can we can knock thousands off through
this process and through speedier consenting and in addition to
bringing down the cost of building materials, and then we're
on our way to you know, getting better, more affordable housing.
Speaker 4 (08:28):
Would a government insurance system worker would be for the
insurance to actually come in to the market, would it
need some kind of government back up.
Speaker 3 (08:40):
Yeah. Look, I think because we don't currently have that,
as I said earlier, that functioning building warranty insurance market,
the government probably is going to have to do something
to incentivize or to create a market initially where builders
can be covered and where homeowners have that sort of surety. Yeah.
(09:01):
And because you know, that's just the size of our market,
you know the fact that we're also just in a
tough I'm you know, insurers are looking at New hilland
overall in general and going, h you know, do we
want to really be ensuring anything at the moment.
Speaker 2 (09:17):
Yeah, absolutely, concern certainly is Yeah, Julian, thank you very
much for having a chat with us. Really interesting. So
last one, So out of ten, what do you think
about this policy? How's it going to work?
Speaker 3 (09:30):
Look, I would say in terms of the intent, it's
it's it's an eight, but it's always a case of
waiting and seeing. But I hope it's backed up by
buy some good thought around the insurance side of things.
Speaker 2 (09:44):
Yep, really good to chat with you. Thank you very
much for your time.
Speaker 3 (09:47):
Thanks Madam Tyler.
Speaker 2 (09:48):
That is Julian Lee's chief executive of the New Zealand
Building Industry Federation.
Speaker 1 (09:52):
For more from News Talks b listen live on air
or online, and keep our shows with you wherever you
go with our podcast on iHeartRadio
You're listening to a podcast from News Talks Be follow
this and our wide range of podcasts now on iHeartRadio.
Speaker 2 (00:16):
The Building Can Sense regime is getting an overhaul. It's
been called the most significant change in a generation. To
discuss further, we are joined by Julian Lees. He's the
chief executive of the New Zealand Building Industry Federation and
he's on the line now, Julian, Very good afternoon.
Speaker 3 (00:34):
H I'm Matt Hi Tayler.
Speaker 4 (00:36):
Now, Julian, explain this proposal to me, like I am
an absolute idiot.
Speaker 3 (00:43):
Well, look what it means is every time a builder
becomes insolvent, and we've seen a lot of that, partically
in hard times, and they're leaving the homeowner with an
incomplete building, there's now going to be not just a
council as the last man's standing, but potentially it'll be
(01:03):
a builder who's got some insurance. So ultimately it's going
to lead to faster sort of resolution of these sorts
of things. But also it's going to mean that our councils,
who are so risk averse will be much much more
open and less likely to say no to things, particularly
things like new building products which we're saying to see
as well. So it is a big change, but of
(01:26):
course the devil's always in the detail.
Speaker 4 (01:29):
So as the cautiousness of councils, is that because of
the liability primarily because I just always put that down
to being officious.
Speaker 3 (01:39):
Well yeah, look, possibly you say it's a bit of both,
but no, look it is. They are risk averse because
if they get something wrong or you know, something doesn't
go the way it should, they are the ones that
they get sue. The are the ones that have got
the deep pockets. Now, of course all that gets passed
on to rate players us. So what we want to
(02:00):
do is do something I get similar to what is
in New South Wales and Victoria, where you know you've
got you've got attary warrantees, you've got mandatary insurance if
you're building anything over twenty k of value in the
residential space, and it's just a better system for allowing
you know, homeowners some compensation and to get their buildings complete.
Speaker 4 (02:25):
So people are already screaming leaky homes. Leaky homes. Is
that kind of massive cock up likely under a system.
Speaker 3 (02:33):
Like this, none of it's done properly because I mean, look,
leaky homes and we've still you know, seen the tail
end of it. But that that was also about the
you know, poor design. It's got a whole bunch of issues.
I think I think this means we've got to have
criteria around eligibility. So in other words, you know, we've
(02:55):
got to have builders that have got the qualifications, the experience,
and the financial standing plus the insurance. So we've got
to have those things in place if we If we do,
then then it means that we've got you know, the
homeowner has got a recourse, you know, they've got some
guarantee that that thing things will get done if the
(03:18):
fall falls over. So I don't think we're I don't
think we're there yet, but there are other risks. The
other risks being that if we move from that join
several ability that we currently have to proportion it, it
could be that we simply just don't have enough builders
who you know, meet the alibility criteria or have the
financial backing be ensured.
Speaker 4 (03:39):
Because that's what I was wondering. Kind of smaller business
like a you know, just a small crew running a
couple of people, businessmen or solo builder. Will they be
able to cover the insurance levies.
Speaker 3 (03:53):
Possibly not, because you know, most of our builders are
three to five you know, crew small companies. They operate
on very slim margins, they operate on quickly. Now in
these times amount of times on you know, hand to
mouth basically, so cash flows tight to you know, insurers
(04:15):
will will come to them and say, well, we won't
look at your books, we won't see what your cash
flows like. They don't ensure people if they think the
risk is too great. So that's the issue. And I
guess this is also why Australia has some state backing
of their insurance schemes in all our sales.
Speaker 4 (04:35):
Yeah, because our economy couldn't handle all those little operations
going into business, could they.
Speaker 3 (04:42):
No, and no, no, look and the other thing. No
one's talked about this yet, but New Zealand doesn't have
any functioning building warranty insurance market. You know, we we
we had a I think it was called Stanford Insurance
back in between nineteen that did do that, but they
pulled out because there just wasn't simply the market for it.
So we need to get you know, we need to
(05:03):
realize that if this is going to work, we need
to get that building warranty insurance get up and running again.
And we need to have, you know, something sufficient so
builders can can't get that level of cover if we're
talking about you know, not making counsels the last man's standing.
Speaker 4 (05:20):
So just speaking of warranties, you said before statutory warranties
are used in Australia. What does what's a statutory warranty?
Speaker 3 (05:29):
So what that means is a New Zealand we have
the Building Acts in Australia, the Act. But thinking so well,
it's got the Home Building Act and it's got the
Domestic Building Act something like that, whether what that means
for our Building Act? We would then have an implied
warranty builds into that Act. So that means, so what
that means is any work undertaken by any builder in
(05:50):
New Zealand would have to it would impliedly be saying
this work will be done to a certain standard and
you know, using certain materials, and there's an implied warranty
to back that up, so you know, and again this
is what Australia has done. And again that's the last
sort of insurance backstop if you like, in case we've
(06:13):
got home owners that actually are dealing with the builder
that doesn't have insurance.
Speaker 2 (06:18):
Great, we're chadding to Building Industry Federation Chief executive Julian
Lee's Julian the sixty seven building consent authorities. So you've
talked about the consolidation of those authorities, hopefully into one
unit to get some consistency. But what does that look like.
Does that mean that gets absorbed into central government or
how does that operate if it's just one authority dealing
(06:40):
with those sides of the consents.
Speaker 3 (06:43):
Yeah, well look at the moment, so you're quite right.
We've got sixty seven BCA's councils Auckland Council for all
of New Zealand is about forty six percent of world
building consents. I mean, we know, which's no surprise because
we're the biggest city in the country and this is
where most of the building work happens. So it kind
(07:05):
of makes sense if there's some sort of consolidation where
some of those smaller councils that may only do a
few hundred or you know, a couple of consents, they
probably don't need to be doing that. It'll make it
be much more efficient if there's one organization which could
be a new organization that's formed or simply open council
(07:26):
decignis to take that on, or a private organization that's
set up to do all of that. And they're already
talking now about I think, I think, I think Minster
Penk has said the expectation is that councils should be
doing eighty percent of consents within three days, which is
significantly faster than the currents that have ten to twenty days.
Speaker 4 (07:47):
So how much cheaper will building be under a set
up like this?
Speaker 3 (07:52):
Potentially thousands of dollars will come off the cost of
a new build. And so that's a really good question
because the whole focus has been for these reforms and
by this government to make housing more affordable. You know,
Kiwis do pay a lot for their home and more
than we do our cousins to over the ditch. So
(08:13):
you know, we can we can knock thousands off through
this process and through speedier consenting and in addition to
bringing down the cost of building materials, and then we're
on our way to you know, getting better, more affordable housing.
Speaker 4 (08:28):
Would a government insurance system worker would be for the
insurance to actually come in to the market, would it
need some kind of government back up.
Speaker 3 (08:40):
Yeah. Look, I think because we don't currently have that,
as I said earlier, that functioning building warranty insurance market,
the government probably is going to have to do something
to incentivize or to create a market initially where builders
can be covered and where homeowners have that sort of surety. Yeah.
(09:01):
And because you know, that's just the size of our market,
you know the fact that we're also just in a
tough I'm you know, insurers are looking at New hilland
overall in general and going, h you know, do we
want to really be ensuring anything at the moment.
Speaker 2 (09:17):
Yeah, absolutely, concern certainly is Yeah, Julian, thank you very
much for having a chat with us. Really interesting. So
last one, So out of ten, what do you think
about this policy? How's it going to work?
Speaker 3 (09:30):
Look, I would say in terms of the intent, it's
it's it's an eight, but it's always a case of
waiting and seeing. But I hope it's backed up by
buy some good thought around the insurance side of things.
Speaker 2 (09:44):
Yep, really good to chat with you. Thank you very
much for your time.
Speaker 3 (09:47):
Thanks Madam Tyler.
Speaker 2 (09:48):
That is Julian Lee's chief executive of the New Zealand
Building Industry Federation.
Speaker 1 (09:52):
For more from News Talks b listen live on air
or online, and keep our shows with you wherever you
go with our podcast on iHeartRadio
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