Swift action on Building Act reforms

By and - , Build 176

MBIE and government have taken swift action to progress changes to the regulatory framework, one of the key obstacles to affordable housing. We look at the first phase of changes.

IN BUILD 174, Reforms tackle prefab consenting, we noted that government was due to make decisions at the end of 2019 on the proposed Building Act reforms. Arising out of MBIE’s April 2019 discussion paper, these legislative changes were expected over the next 2–5 years.

Since then, government has moved quickly. It has confirmed that it will take a phased approach to the reforms, in line with industry submissions, to minimise business disruption while providing the sector with time to adjust to new rules and regulations.

Phase one changes

The first phase of changes has been announced. These concern reducing building consents, strengthening the CodeMark product certification framework, decreasing the Building Levy, increasing financial penalties and changing how Building Act changes are notified.

Certain provisions relating to the Building Levy, offences and penalties will immediately come into effect. The remainder of the Bill will be implemented through regulations to be effected in 2021.

Opportunities to engage with the Select Committee on the draft Bill will be available in the first half of 2020, with government intending to pass the Bill by mid 2020.

Fewer consents for modern manufacturing methods

Where prefabrication and off-site manufacturing methods are used for a building project, two consents are currently required – one for design and manufacture and one for installation of the products.

It is proposed that, where products are sourced from a manufacturer certified under a new scheme, only a consent for installation will be required. MBIE suggests that this could halve the number of inspections required and significantly reduce time and cost impacts in the relevant projects.

However, cost savings may be offset to some degree by manufacturers passing on the costs of audits under the certification scheme.

This proposition will be welcomed in the growing prefabrication industry, but easing of the consenting rules alone will not be sufficient to drive significant progress in tackling affordable housing.

Cost savings through prefabrication cannot be achieved without significant investment to achieve scale. For this to occur, the industry requires confidence that there will be a consistent and adequate pipeline of work.

In addition, certain industry participants may be more likely to forgo installation inspections entirely and attempt to rely on the manufacturer’s certification. This could result in a reduction in building quality and an increase in enforcement costs.

Bolstering CodeMark certification

To speed up the consenting process and assist designers and builders with product selection, manufacturers and suppliers will be required to make a minimum level of product information publicly available. This will include evidence for any performance claims made.

Where adequate information has not been provided, MBIE will be able to require the manufacturer or supplier to provide this. It will have the power to impose fines of up to $30,000 for a failure to comply and to ban on-sale of the product or method.

MBIE estimates that these changes should save $1.5 million a year by reducing inspection failures.

Decreasing the Building Levy

The Building Levy will be reduced by approximately 13% from $2.01 to $1.75 (including GST) per $1,000 of consented building work over the $20,444 (including GST) threshold.

MBIE estimates that building consent costs will fall by $80 for an average new build and by $5,200 for a $20 million commercial project. These cost reductions will be welcomed, but in the context of the cost of a project, they are fairly insignificant.

In addition, MBIE will have a broader discretion to spend funds accrued from the levy on stewardship of the sector, which includes the Construction Sector Accord.

It is unclear at this stage, however, how those funds could be used to support the Accord and other initiatives.

Stronger financial penalties

Financial penalties are to increase substantially to bring the Act in line with other legislation such as the Health and Safety at Work Act 2015, Food Act 2004 and Fair Trading Act 1986. The existing penalties have not been adjusted since 2004 (see Table 1).

In addition, the timeframe for filing charges is to be extended from 6 to 12 months to give enforcement agencies sufficient time to conduct complex investigations.

These changes could result in tougher policing on the sector, but MBIE will need to increase its resources for this to occur.

Online notification of Building Act changes

Changes to the Building Act will no longer be published in newspapers. Instead, they will be notified online and in the New Zealand Gazette. This is to reflect increasing use of the internet to access important information.

Further changes in the pipeline

Future reforms may include regulating professionals and tradespeople to ensure they have the correct skills and are held to account for poor conduct or substandard work.

They may also address feedback received during the consultation process that the building insurance market is not prepared to meet the large increase in demand that would arise from a compulsory guarantee or insurance product.

MBIE is due to report back on these matters by the end of 2020, and a second Bill of reforms could be in Parliament by the end of the year.

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