Building: Less Government? More Maurice. [Update 3]

Few details have been released so far, but Maurice Wimpianson’s proposal to “shift the responsibility for building work” away from councils and onto “licensed” builders looks like the worst of both worlds.  “The liability for building now lands on local councils and that needs to change,” says Williamson, and so it does.  Trouble is, I’m not so sure that what I’ve heard of his changes – what will be the third major change to the industry in little over a decade – are the silver bullet the industry needs.

It’s true that councils should never have been landed with a responsibility they can properly administer nor a risk their ratepayers can afford.  (The cost of making councils responsible for building risk has been made worse both by leaking houses, and the green-plated building regulations supposed to “fix” that  problem, which heavily inflates the cost of repairs.)  Assessing building quality  is not something councils do well, and with the increasing sophistication of buildings these days the attempt to  have them shoulder the responsibility for it has been a disaster all around.

Long discussions about sophisticated building systems with people who have only just learnt to read and write, but who nonetheless are required to take responsibility for issuing your consent, is not a process calculated to make a person fall in love with the present system.

Long delays in processing consents and issuing Code Compliance Certificates only add to already exorbitant costs for home-builders and home-buyers – costs that reflect the attempts by council to do something they can’t do well, and to stump up for a responsibility they should never have had.

But you’re not going to fix this mare’s nest of unclear responsibility and the extra cost that reflects that loose chain by allowing “licensed” builders to “self-certify.” That just sounds absurd. And it cuts out completely D.I.Y.ers and honest builders who don’t wish to pay fat sums to ignorant fat cats to assess them.

Don’t be confused by the rhetoric of the Building Minister.  It’s not a free market or a deregulation that Wimpianson is proposing.  It’s a hampered market with costs inflated by state meddling, the supply of builders restricted by state controls, and the cost of risk (which is inflated by green-plated building regulations inflating the cost of repairs) landed squarely on builders’ shoulders – those few builders who will choose to remain.

Government-licensing of builders is no more a guarantee of building quality than it was to have government-licensing of building systems.  We’re still paying for the false sense of security that gave everyone.  Using qualifications as a proxy for quality is the only way a bureaucrat in a state-controlled system can “measure” quality, but it certainly doesn’t guarantee it -- as a perusal of the “quality” of registered teachers would tell you.

The idea that registering architects and licensing builders is some silver bullet that guarantees quality can be exploded simply by looking at the number of leaky houses designed by registered architects and built by master builders, i.e., a significant number.  I’m repairing one now that was built by master builders, and designed and signed off by the president of the Institute of Architects – didn’t stop the building leaking, or needing expensive repairs

It’s essential that councils be taken out of the building chain.  They should never have been there in the first place.  But licensing builders is not the answer to fall back on: and the enthusiastic reception by Master Builders to the idea is not evidence that it is the answer, but evidence instead that Master Builders see the opportunity here for rent-seeking.  And they will be.

To see what the answer to all this might be, let’s look at what might happen if  the government got the hell out of the way altogether (aside, that is,  from its proper job of registering titles and contracts).   Now, when you buy a second-hand car you’ll usually get it inspected.  When you buy a house, which is the most expensive thing most of you are ever going to buy, you’d expect that you’d have that inspected too.  And just as sellers of second-hand cars are increasingly touting the quality of the inspections and inspectors to help sell their cars – Come With Full AA Inspection! Signature Class Car! – so too would recognised building inspectors acquire increased importance among buyers.

Wouldn’t be very long before they’d be looking only for houses backed by reputable inspectors – inspectors who, unlike councils, would have their own reputation on the line with every house they assess.

And acquiring importance  too would be insurance companies.  I see Maurice floating the idea of a warranty bought by the builder, but without details it’s hard to know precisely what’s intends for Maurice’s Market.  But what’s likely to happen in a free market is that standards are increasingly set by insurance companies themselves – standards that in many cases will be higher than they are now, but are based on what’s economically workable for their customers.  If you want to sell a house, then you’ll want to convince house-buyers it was well-built – and the best way to convince them of that would be first to convince the best insurance company you can afford. 

The company that insures your house has the biggest incentive to assess its build-quality without taking your wallet off at the arm. And in a free building market, each insurance company would be free to set its own building standards – with premiums and reputations to suit. Build the housing equivalent of a Toyota Corolla, and most insurers would charge very little for the very little risk involved.  Build the housing equivalent of a hot rod however, something more radical, and you’d find fewer insurers willing to back you, and those who did would want to charge you more for the privilege.  But you’d still be able to build it, which you can’t do today.

The outcome of an actual free market would be that you could choose your risk based on the level of building risk and building excitement you wanted – just as you do with a car – and building standards would eventually be set by market mechanisms that left the risk where it should be: on buyers and sellers and insurers. Not on ratepayers.

Standards would likely be higher, as insurers (like the AA do with their car inspections) fight to increase their reputations. And over time you’d have building standards that encouraged innovation, rather than strangled it, protected home-owners rather than leaving them in limbo, and didn’t cost an arm and a leg and numerous long delays to assess. 

Frank Lloyd Wright used to say that the building regulations of today reflect what the building inspectors of yesterday knew, or thought  they knew.

He’s still right.  And it’s getting so that’s all we’re allowed to erect.

UPDATE:  A question from a commenter made me wonder if I hadn’t been too clear.

Basically, I am suggesting is inspections not just when you buy an existing house (which is what most people do now), but also during the construction of your new house – and not from your local council, but by your chosen insurer.

What I'm essentially suggesting is that if govt and local govt withdrew, then what would be likely to replace them is an insurance-driven model, with the insurance companies themselves acting as your "consenting agency."  Unlike now, that would make the chain of responsibility for failure very clear, and the motivation for doing good very stark.

Your motivation as a home-builder for using one would be to ensure both its resale value and its insurability.  Both would be easier if you can choose and afford a reputable insurer who sets objective standards by which your new building can be measured.  (And these could even refer to existing standards like NZS, AS and so on.)

And the motivation of the insurer would be the same as it is now in every other field: to offer a competitive rate and service while maintaining its reputation for square dealing.

So as a home-builder you'd be dealing with a rational organisation who wanted to help you -- and also wanted to ensure things were done right.

And as a home-owner you'd have both the choice of insurer, and the choice of the level of risk you wanted to take.

Basically, if you wanted to build something conventional, you could get a good inexpensive service that protected you and future home-buyers.  And if you wanted something more like the Bavinger House (below and right), you'd have to pay a little more . . . but unlike the situation now, you'd actually be allowed to build it!

UPDATE 2: Opening my latest copy of ‘Scope’ magazine, I read with interest the story of this new house (right and below) on Fiji’s Denarau Island for a newly retired couple, designed by Auckland-based Glasgow Architects.  The house, one of many in this still popular resort area, has been specced for abundant rainfall, Fiji’s heat and high tropical wind forces. Says principal Garry Glasgow of the insurance-based model used in resort-town Fiji,

“Building in Fiji presents some interesting issues as there is no ‘building code’ as we are accustomed to in New Zealand.  ‘In fact,” Garry says, ‘the control on quality is dependent on the insurance companies who insist on engineering reports and architectural qualifications to comply with their building criteria.  For this reason more detailed construction supervision was required than is the case in New Zealand.”

UPDATE 3: Meanwhile back in New Zealand, the South Pacific’s home of extensive, expensive building bureaucracy, we hear more stories like this one:

    “We're getting a simple shed built, to use as a workshop. The contractor tells us that the council charges for a building permit have gone up by around 40% in less than two years. And even though the number of applications has dropped drastically over the past twelve months the waiting time for approval hasn't varied.....Oddly enough, the four councils in this area have all put up their charges by exactly the same amount.
    “In addition, any windows in a habitable building must be double-glazed--never mind the cost, never mind that it's none of the council's damn business.
    “These bastards are nothing more than parasites, leeching off other people's work and getting in the way of the productive sector of society. A pox on them all.”