Red tape and levies cut in Building Act Overhaul

Red tape and levies cut in first phase of major Building Act overhaul

The government plans to cut red tape for prefabricated building processes, introduce minimal building product standards and reduce building levies by 13 percent as part of a major overhaul of building law.

Building and Construction Minister Jenny Salesa announced the changes in Auckland today but has held off making announcements around occupational regulation and building insurance that were also consulted on at the same time.

The government has been reviewing the Building Act since last year after identifying several longstanding problems in the industry, which is New Zealand’s fourth-largest employer. The reforms will be the biggest in 15 years.

Changes to the prefabrication rules and standards for building products are expected to save New Zealanders up to $150 million over a decade, or $15 million a year, because the new criteria will lead to less work being delayed or redone.

The changes to prefabrication rules will enable the mass factory production of high-quality buildings, halve the number of inspections needed for prefabricated buildings, and reduce consenting requirements.

Salesa says prefabrication should be the future of construction because it is faster. In New Zealand, just 10 percent of new homes are built offsite.

The government also says it will introduce minimum requirements for information about building products. According to the Ministry of Business Innovation and Employment, there are around 600,000 different building products used in New Zealand at present.

“Councils have told us this will help them better assess compliance with the Building Code. Delays in consenting cost a building owner around $1,000 for each week of delays,” Salesa says.

The consultation document recognised it is quite common for builders to substitute products without applying for variations to consents.

Under the proposed rules, manufacturers and suppliers will be required to give a plain English description of products and information about how they should be installed and maintained. The existing product certification scheme, CodeMark, will also be improved.

MBIE estimates $1.5 million a year can be saved by builders installing products correctly, as inspection failures will be reduced.

The government also decided the building levy, which developers pay to help fund MBIE's administration of the law, should be reduced from $2.01 to $1.75 including GST per $1,000 of consented building work above a threshold of $20,444 including GST. This means about $80 will be saved on the average newly-built house, and $5,200 saved on a $20 million commercial project.

The levy change is expected to come into effect from mid-2020. The other changes will require new legislation, with a bill slated to be tabled in the first half of next year.

The consultation process also considered whether people building new houses should get insurance or a guarantee to protect themselves from faulty work. It also looked at liability caps for local councils which often find themselves the “last man standing” in the event of disputes. These issues won’t be addressed until 2020.

Salesa indicated that they are part of a wider package of reform that includes changes to the Resource Management Act. She also says the building insurance market is currently not in a position to meet any increase in demand brought on by compulsory guarantees or insurance.

Earlier this week, Salesa said she was waiting for officials to advise her on reform of the Construction Contracts Act, which covers building retentions.

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