Thursday, 26 April 2018

"'Jumping through hoops' is pushing up building costs" [updated]



I was heartened this morning to hear Radio NZ report that "'jumping through hoops' is pushing up building costs" -- not about the hoops, and certainly not about the costs they're imposing, but because this is finally being reported as a headline item.
Fire engineers are accusing councils of making illegal demands on them that are inflating building costs by thousands of dollars... "I've become totally used to how bad it is, I'm sort of numb to it, it's just a bureaucratic nightmare right now," Wellington fire engineer Kenneth Crawford of Pacific Consultants said. "We've got so many demands coming from council ... it's pushed up costs, it's creating months and months of delays in obtaining a building consent, and none of this is actually really improving safety." A fire design on a small warehouse in 2013 that might have cost $1200 to $1500 was now costing at least $4000, and up to $20,000, he said.
Sadly, as anyone who's recently endured the consent process could tell you, it's not confined to fire engineers.

The Building Act requires council to process Building Consent applications within twenty working days of being lodged. Council have two dodges to get around this. The first is to set up a process to decide when the application has been successfully lodged. This can easily take two weeks, with no work at all done n processing. And the second -- based on he principle that "the clock stops" when questions about the project are asked -- is to ask as many silly questions as council processors can think of, all of them calculated to show down the processing and frustrate client, consultants and designers. [This 2013 table from Christchurch will give you some idea of the time 'saved' in this way.]

In recent months, for example, and like every regular applicant for building consents, I've spent many, many hours replying to council's Requests for Further Information (RFIs). These days it's often less about being a designer than it is about being a lawyer, explaining the building code clauses to the processor at the other end of an email.

The simplest RFI responses are to tell the questioner where precisely in the document set they can find the answer to their question, already addressed. But in recent months it's been getting worse. Among other things, in order to keep things moving I've been required to tell council the make and model of a shower and the finish of a bathroom cabinet; the colour of bedroom carpets (accompanied by a calculation to show they're bright enough); the normal process by which to pour a concrete footing in engineered soil, to abandon approved details because the territorial authority has decided they don't like them, and to replace them with those they've now decided they do; to discuss the acoustics of polystyrene sheets (that are not being used for acoustic purposes); to resupply calculations and statements that the processor has already received, but lost; to explain why handrails are not required on steps with fewer than two treads, and how an opening window into an open lightwell allows light and air into a room; to draw up a list of a project's "construction and demolition hazards"; to provide mechanical ventilation rates for areas we've shown will use natural ventilation; to draw up simple diagrams because processors are unable to read fairly standard plans; to confirm the use of smoke detectors (when they've already been clearly placed and labelled on drawings); and (in the absence of council finding anything else to ask about) to draw a detail of a bathroom splashback -- just some examples of recent Requests from processors, all of which have wasted my time and theirs, unnecessarily dragging out the consenting process, and all at the time and expense of clients who were once very eager to build.

I'm sure you can all add your own list of examples. (And please do!)

This process is often worse when councils sublet the processing to a consultant, whose motivation is then to spin out the questions in order to pad the bill. This can work out very nicely for the very average consultant, but very poorly for clients who have budgets and builders trying to programme in their work.

And all this of course is in addition to the truckload of documentation, in triplicate, that has to be supplied just to 'get in the door' to make that original application, the sheer volume of which in itself delays the processing and all but guarantees inconsistencies will appear in the document set. By way of illustration, I may be renovating a house built in the 1920s, of a style that is still very popular, the original drawings of which are on one A4 page with another smaller page containing what might be called the specification -- which might say little more than 'use nails.' And this 'document set' was probably drawn up by either the builder or owner. Yet to renovate that house now I will need documentation of around 24 A1 pages, and A4 specifications and accompanying documentation of around a thousand. And neither builder nor owner will be allowed to prepare those documents unless they have been previously Licensed by a government department to do so.

Every year it's been getting worse, without making the houses any better. In 2007, for instance -- aware that things were becoming more complicated in this new age of Licensing, Producer Statements and Memoranda/Certificates of Design Work-- the Department of Building and Housing produced a Guide to Applying for a Building Consent. It was a 44 pages long. The second edition appeared just three years later. It was already 62 pages long. None has appeared since: perhaps because no-one would have the time to read a document as long as it would now need to be. Crikey, these days it takes well over a day just to complete the application forms and processes to apply for a consent, and more than a day for every response thereafter.  All of it time wasted.

Every consultant will tell you similar stories, and not just fire engineers.

Yes, 'jumping through hoops' is pushing up building costs, and has been for some time.

Until or unless the Building Act is amended to remove risk from council -- and their ratepayers -- the hoops (and costs) are going to get worse, not better.

UPDATE:

From Radio NZ the morning after:
The impact of everyone trying to pass all the risk on, was it was getting harder to build anything at a time of housing shortages, the Property Council's chief executive Connal Townsend said.

"The overall public policy setting of how the heck we manage risk, is completely out of whack," he said.

"We've just got people passing the ticking timebomb from one hand to another and blaming each other. It's pointless.

"We have to tackle the way risk is allocated and the fact that councils are left carrying the liability is just hopeless, absolutely hopeless."

The previous government tried hard to fix the problem [cough, cough - Ed.] but couldn't, and it was urgent this government confront it, he said.

The risk issue was a perverse result of building laws being overhauled in 2004 to combat the leaky building crisis.

Lawyers, including the Law Commission in a 2014 report, have since then resisted changing the way liability is doled out.

"The net effect of our joint-and-several system is that councils are left carrying the can," Mr Townsend said.

"This story with the fire engineers, all they've done is blown the whistle on a ridiculous problem that has to be solved."


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11 comments:

  1. That’s a very good specific example of how compliance adds to costs. If I had the time and energy, I could document the numerous other ways I see every day with infrastructure associated with land development, before you even have a site ready to build on. It’s not just zoning and land scarcity either. That’s significant, but it’s not the major growing component in what I see. At root it’s a bureaucratic mindset that has no motivation to balance risk with cost and make an appropriate compromise, and every motivation to cover their butt with higher and higher standards of compliance. Every few weeks I see something new introduced which adds to costs.

    This is the main reason I’m sceptical of a crash in property prices to the degree many are predicting - unless the value of the currency itself and wages also crashes. There is some degree of ‘bubble’ wrought by credit creation and restrictive land zoning - but when I take out those factors and look at the base cost to develop land and build a house at a modest profit margin, the difference between that and current prices is not that great.

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    1. Hi Mark
      I think it's significant that as asset price inflation took hold building costs were able to rise appreciably, paid for' by this inflation. (It's our form of malinvestment.) But that offers few guarantees when the bubble stops being inflated -- and because high building costs are now built in, and with no improvement on the horizon, that just makes things *more* fragile rather than less.

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    3. Hi Peter,
      When the bubble does stop being inflated, do you think we're going to see deflation of prices across the whole economy? If so, then I can accept that will lead to a crash in property prices, but it will lead to a crash in the prices of almost everything else too I think, including wages.

      What I'm saying is that I see no evidence of super-large profits being made in the business of delivering new building sites and new houses. The whole economy may be based on inflated prices, but I can't see evidence of the price of *new* houses being dramatically out of whack with the rest of the economy under our compliance regime. If we're talking about people selling *existing* sites and houses in places like Queenstown and Auckland that's different, as they obtained that property under a lower cost structure years ago, and can now sell for a very high profit at current prices. But the same super-high profits don't exist with new product to any great degree.

      Hence I can't see a dramatic crash in property prices *relative to other prices*, unless there's a major overhaul of the compliance regime to be less demanding, or unless there's some other major game-changer such as a proliferation of pre-fab or factory component houses shifted over from China.

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  2. I have another example of how the cost of delay appears. In 2004 we were planning the addition of a large 2md story to a 1920's Villa - don't worry, all lines and weatherboarding were matched and we've been complimented on it many times since.
    We also drew up plans for a ground-floor extension, attached garage etc and it seemed sensible to do it all at the same time. Such were the delays, even in 2004, that I split the project into two stages in order to get something done. The 2nd story was completed by the end of 2005 and the budget was right on the nose, amazingly enough.
    The ground-floor extension continued to be worked on until finally construction could occur in 2008. Of course during that three year period prices rose: in the end it cost me a little over $100,000 more than it would have as a single stage in 2005. Thanks Council - of course it means that there's an extra $100,000 of capex in the valuation, but I would question whether that reflects real wealth, though it certainly allows for higher rates. I'd rather have had the $100,000 to spend on other things.
    No thanks regulators. Thank god I'm not building now though as it has obviously got much worse, which I would have scarcely credited.
    Oh - and no thanks also to the useless National Party: managing socialist stupidities forever, although I'm sure a 4th term would have seen them act.
    That last is sarcasm btw.
    Tom Hunter

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  3. BTW Peter, much as I've always enjoyed your blog and irrespective of whether your views have increased, I really think you should make an effort to publish pieces like this in sites like Kiwiblog. The more people see arguments and stories like this and react to it the better the chances of changing things.

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    1. Hi Tom
      I'm very happy for you to recommend pieces like this to publishers like that.
      Something does need to change.

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    2. Well okay, I will. But I've sent pieces direct to David Farrar before and he's published them. Perhaps you could too. Yes - I know, I know: National Party stalwart, etc.
      But I think he'd publish it.
      You know what's really sad? I'm currently dealing with yet another piece of similar shit, this time involving a farming district water supply that has been working perfectly well for 35 years - but now has the District Health Board is angling to pressure the local District Council legally to dump it as a human drinking water supply. They gave up confronting the farmers two years ago so now are coming from another angle. The DC's not willing to fight and this is some Water Act from 2008 that National never changed. So.... another $20-30,000 for a new Artesian system - not because of Black Letter Law but because the DHB has judged that we morons can't be guaranteed to keep our Point-Of-Service filtration systems running and 100% be sure of filtering out bad things.
      What's that phrase, "Like rust, they never sleep"?

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  4. PS: As an antidote, of sorts, to the pessimism of this post, I'd like to point out that there are still some of us trying to get a flower out of the system instead of a weed.

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    1. Well in that case, this fits perfectly..... https://www.youtube.com/watch?v=k7F2sJjoJP8

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