By Bernard Hickey
Housing Spokesman Phil Twyford has argued Labour's 'Kiwibuild' policy of building 100,000 houses in 10 years could prove the catalyst for a structural shift lower in building costs as it would generate the economies of scale in pre-fabricated building and bulk buying of materials that could reduce costs by NZ$47,000 or more than 20% per home.
"I think Kiwibuild offers the chance, not just to build the affordable new homes that we need, but to lead structural change within the building industry that will help to permanently lower costs and increase quality," Twyford said in a speech to the Prefab NZ National Conference in Auckland.
He referred to a report titled "Value case for Prefab: How offsite construction can deliver better cost-effective housing to more New Zealanders," and released at the conference by Prefab NZ and BRANZ, which estimated the use of pre-fabrication and bulk purchasing could reduce costs by NZ$47,000 per house. This included NZ$32,000 of savings on the building of a 157 square metre house, and NZ$15,000 of savings due to bulk-buying of materials to build a house that would currently cost NZ$246,000 to build.
"By taking a leadership role, and working alongside the experts in the building industry, Kiwibuild will let us implement these techniques on a large scale, and deliver the cost reductions and quality improvements that New Zealanders need," Twyford said.
New Zealand's house building industry was fragmented and unable to generate the economies of scale to produce affordable new homes, he said. He pointed to a Productivity Commission study that showed in the 2009/10 year, 4,604 firms built just one house during the year, while only 30 firms built more than 30 homes and just 5 firms built more than 100 houses that year. The Commission study also pointed to research showing building materials cost 30% more in New Zealand than Australia.
"How do you incentivise change in an industry in which hundreds of mostly small to medium enterprises make a myriad of disconnected decisions on investment, plant and productivity? It is here that Kiwibuild offers a once in a generation opportunity," Twyford said.
A government-backed building programme opened the door to bulk buying that required or incentivised the the use of pre-fabrication and offsite manufacturing.
"What’s more Kiwibuild delivers the scale needed for offsite manufacturing and prefabrication to work. It will be difficult for a builder producing 200 homes a year to justify the investment in plant and technology. Build 1000 or 1500 a year and it becomes viable," he said.
Twyford said he expected savings from bulk buying of building materials to be greater than the NZ$15,000 per house cited by the Prefab NZ/Branz study.
'More hands-on Government'
Labour would bring regular amounts of greenfields land onto the market and the Government would take a more hands-on role in the development process, he said.
"By utilising available Crown land, master planning new developments and by foregoing the developer’s margin, we can exercise more control over land price," he said.
"But I believe that one of the most important tasks, is that together we must use the scale of Kiwibuild to usher in a new era of sophisticated offsite manufacturing and prefabrication that will build better and more affordable homes. And create a more innovative and productive construction industry into the bargain," he said.
"I will go as far as saying that only through a Government backed building programme of the scale of Kiwibuild can we make the step change that is needed. Our Kiwibuild programme is a once in a generation opportunity to lead our housing industry in a new direction. To take advantage of economies of scale and bulk buying that our thousands of individual smaller firms can’t do by themselves."
'Faster, warmer and drier'
Twyford pointed to the Prefab NZ/BRANZ study showing lower amount of defects in pre-fabricated housing, and the homes could be built 50-75% faster in a factory than on-site, partly because weather delays forced delays of more than 13% of construction time.
The use of pre-fabrication could improve industry productivity by 2.5%, the report said.
Here is an article from David Hargreaves on Fletcher Building's plans for pre-fabricated houses.
(Headline corrected to make clear savings of NZ$47,000. Amounts already correct through article.)
36 Comments
I believe in OZ, there is now big business in gated housing estates, made up from prefabricated houses built in factories. Not too sure if they are a license to occupy, rather than freehold. I think this model may move to NZ. It is a bit like the rest home model, but for younger people.
Labour seem to be inching towards the compulsory acquisition of rural land at rural prices for much of their Kiwibuild. Note the use of the word ‘greenfields’ and the absence of brownfield targets. This doesn’t seem like the usual left-wing speech of chasing density and ever rising land prices. This seems more like the expanding polycentric city with multi modal transport and housing types development process. Early days, hard to tell what it all means and what the voters will go for. But I think the next election will be interesting….
“Labour would bring regular amounts of greenfields land onto the market and the Government would take a more hands-on role in the development process, he said....
“By utilising available Crown land, master planning new developments and by foregoing the developer’s margin, we can exercise more control over land price,” he said. (Phil Twyford)”
I think there is several issues with it. Do it too small and you end up doing a Hobsonville with its $1.4 land costs per hectare. Do it too big and you do not allow the private developers access to rural land at rural land prices. This is what killed this process off last time the Labour government tried it in the 1930s and 40s.
See the cartoon in the following link (fig 6) http://www.thesustainabilitysociety.org.nz/conference/2007/papers/HARRIS-Lost%20City.pdf there was a big political backlash, even though the economics of it seem to be working.
I am not sure how committed Labour is in going this direction. But interesting times if Labour is going back to its roots…
If Labour gets into power -big if for next election, but will happen at some point
and if this policy finds the happy middle ground of not being too big or too small
then sanity could be restored to New Zealand's housing market.
Noted above I meant $1.4 million per hectare for Hobsonville land and rural land goes for about $50,000 per hectare for top quality dairy land. A lot of rural land is cheaper and less useful for farming purposes but would be suitable for urban developments....
Agreed ZZ that is why my New Year prediction was this election would be about infrastructure not tax cuts or welfare spending. So far that hasn't happened but we are just at the skirmishing feel the enemy out stage of the election battle. So lets see....
Of course greenfield development in the non-Auckland growth centres like Christchurch, Tauranga, Hamilton and the Southern Lakes would be much cheaper as greeenfields are closer and more accessible. This should result in plentiful amounts of affordable housing in desirable locations. Auckland might have to accept more competition from other centres if NZ resolves its housing woes.
I think in an ideal world the infrastructure would come from regionally generated income and political structures. These regional infrastructure bodies then would co-operate with CG Kiwibuild for public transport orientated development and with private developers for personal transportation (cars and bikes) development. This would give the most competition.
The regional infrastructure providers should have a target of achieving mobility and affordability in housing as define by Alain Bertaud.
Again ZZ I quite agree with you. Being in Canterbury I am constantly exposed to a myriad of plans, meetings, discussions and organisations with the end result of bugger all is achieved.
If you look at that above Chris Harris article the housing and public transport schemes of the 30s and 40s were self funding when the government acquired land at rural prices because when they eventually sold off the housing the capital uplift they had created was able to pay for capital expenditure in infrastructure. Of course things have changed, so it might not be so easy now but it is worth investigating.
On the cost issue I would love the economists to get off there lazy backsides and do the calculations of what it costs the country in interest rate and housing price rises of the current do nothing policy versus a saving and investing infrastructure scheme that allows lower interest rates and housing prices.
Praise be, another contributor on interest.co.nz has "GOT IT" at LAST......!!!
The "savings" on infrastructure from "compact cities" are lower than the increase in housing costs.......!!!!
The "Costs of Sprawl 2000" paper estimated the cost of infrastructure for unrestrained sprawl in the USA to be some massive total amount per year, but this came to $50 per household per year.
Why wouldn't we pay $50 per household per year to keep housing costs at a median multiple of 3? The savings are thousands of dollars per year. Of course it is only first home buyers right now and renters, who get hit with these costs, but give it a couple of generations and everyone's housing costs will be so high. Like in the UK.
Then it is too late to do reform because the "equity" that stands to be wiped out is so high. We need to nip this dastardly rent-seeking plot in the bud in its early stages.
You wish, he's smarter than that.
"The "savings" on infrastructure from "compact cities" are lower than the increase in housing costs.......!!!!" is a ridiculous claim. You are saying that if you limit the amount of higher density housing and then compare it to an unlimited amount of sprawl housing the extra infrastructure costs of the sprawl housing are compensated for by the constraint on the amount of higher density housing.
That doesn't mean that sprawl typology is cheaper, more desirable or should remain the default zoning. Quite the opposite - you admit it's more expensive to sprawl. What should be removed is the constraint on higher densities if you really wanted cheaper.
Phil re: $50 per household per year for infrastructure I think you are out by an order of 10.
If we take ZZ statement that NZ needs $15 billion of infrastructure investment and we have 1.5 million households that is $10,000 per household. If that was debt funded that would be something like $500 per household per year.
Definitely achievable and I think borrowing $10,000 per household on infrastructure which would have all sorts of productivity benefits is much more preferable to borrowing $100,000's on inflated house prices for no net gain.
Continue on our current path and the rich get richer and the poor get poorer. Make changes like outlined above and we all are better off.
Lazy?
they get paid to sit there and make opinions.
It's not about being lazy, it's about the immediacy of other peoples' problems.
If someone goes wrong, they might be held accountable - that's bad.
Other people are living in busted houses and bunches of resources are being wasted and their lives are suffering - that's just statistics and facts - facts are good.
... so the best that Labour can offer us is " cheap " pre-fab houses , which will cost $ 350 000 plus ... That is their vision for Kiwis ... to live in government built junk ... subsidised to infinity and beyond by the tax-payer ....
Luckily , these bozos have absolutely no chance of winning the next election .... possibly not even the one after that ....
Prefab, factory built houses.
Tuffbuild is doing just that - with no government support.
Our 3 design is a 3 bed, 72 sqm home. R 3.9, double glazed, heat-pump, carpets - finished. Inc building consent - for $85,000.
It is small, but suited to rentals, or small families.
Tuffbuild.co.nz
... and there's ecotech homes , keith hay , buildlink , portabuild , fusionhomes , versatile , quickliving homes , genius homes .... no shortage of private companies already in this space , about to be bulldozed aside by a Labour government " think big " strategy ...
Oh yes, but under a Labour government the rules of "supply and demand" will be suspended and the "efficiency of centralisation" that creates extra layers of bureaucracy and oversight will reverse themselves..... making it cheaper than tight efficient private business already achieves in order to stay price competitive in their market.
It's not like they're break any laws, as they'll write themselves legislation to fasttrack or public-interest any such inconveniences away.
Worked for one or two of those Gummy, but did a better job when I designed and built my own place. If they want cheap housing then the trick is to enable the owner/builder, not some merchant of dressed up building materials. The owner will take pride in the job and actually have home as a result, not just some cheap refab shack.
PDK has of course shown the way with an insulation panel home. I have not yet made it down to PDK to see the result and to be fair I have my doubts about a chillibin home as it is missing the better form of insulation that should be a key part of any NZ home and that is capacitive. That right, passive solar and thermal mass should be mandatory for any new building, anything less is irresponsible, including the cheap clap trap that Hugh advocates, and of course Mr Tuffbuild.
Hey Mr Tuffbuild, what is your cut on each house? What is your actual contribution to the community? Or are you just on the take?
Hi Scarfie
Google us & you'll see we do a kit-set of the house for $70,000 inc GST, consent etc. This includes everything, pre-painted, pre-cut. So it is an assembly process. No gib. Easy to follow assembly manual.
Designed for anyone with a "can-do" attitude & a mate to help. Probable build time 6 weeks.
The owner / builder can already do this. No need for licensed Building Practitioner - if it's for yourself. Still need licensed plumber & electrician for a day, though.
Our cut is very little. The idea was "a little & often" - not $40,000/house.
But we are in it for profit. Without profit we wouldn't do it. Who would. But we also want to lift the standard of housing for poor, young families. Hence a basic 3 bed house, warm & strong. Our rental stock for the poor is not good. Anything we can do to improve that should help.
At the end of the day, is anyone else able to do a new house as cheap as we are?
Sure - they;re basic. But stronger & warmer than most other new houses.
So if you want one for yourself, and own the land. Budget $70,000 for the kit. $1,000 for the plumber & electrician. A bit for services, and whatever the council wants for consenting the section (the building is already pre-consented).
I don't think we're going to get rich quick. But it provides an income.
The trouble is ncolly is you haven't been altruistic in your approach. I pointed out a flaw in your design and your totally ignored that and used the opportunity to plug your product again. I have done a better house for cheaper, I have posted the link here before but won't again (for now).
Look good on you for having a bash at it, you are at least successful in marketing if less so in design. Making a house for the poor is more than simply building them cheap. You have think about the lifecycle of the home, also the full sustainability picture. When I design I also take a psychological approach to design, as people have quite definite reactions to the quality of a space and there is a lot in the make of that quality. There is also the physiological reaction, temperature is only one of those. Think of heat in terms of radiation vs convection, think also humidity (your houses won't breathe), air flow, light, ceiling height, and lots more.
Anyone practitioning the design of buildings should read "A Timeless Way of Building" by Christopher Alexander. Or for someone for practical applications of his principle read Sarah Suzanka.
Btw your website is slow to load and needs attention. I am out of bandwidth for the month so didn't bother waiting for it.
Hi Scarfie
Sorry, but I missed the design flaw - unless it was the lack of thermal mass. Please humor me & remind me.
We'd love to do a conc slab, but it complcates and adds cost (as well as value)
Likewise, we can do the house with PV, solar HW, uPVC etc. But at what point do you stop.
Our aim is to provide an affordable home - not a top quality, astheically great, zero energy cost home.
As to sustainablility, the SIPs can be 100% recycled - unlike lightweight timber frame with gib, treated timber & batts. We do recycle just about 100% of our manufacturing. Cheaper than dumping it!
Aploogies about the website - can't afford to hire a decent website designer. maybe if we put the cost of the house up a bit......
The difference is that a comparable Keith Hay type home is $125,000, compared to our $85,000. And it's colder
Portabuild don't do a 3 bed, and their 2 bed is more expensive. (and colder)
Fusion homes use Metra panel, so colder & more expensive.
Versatile is traditional lightweight timber frame (same a KH) and more expensive than KH (and colder)
Couldn't find Qicklink homes - maybe they are better value than ours.......
There is simply no way that a factory build home by a large organisation can be cheaper than us. We have very low overheads, no set-up costs etc.
As a result we are doing 3 bed house at under $1,200/sqm. inc GST & building consent.
Brendon - saying that we need to spend $15 b on infrastructure is like saying the CHCH rebuild cost is 40 b, when we all know it could have been a lot less. We have talked about this before, we already have good rural roading in NZ, its the cities that are lagging behind, a MUD style development could be developed a la Woodlands easy enough, all council need to do if they don't know what to do is at least have the curteous to get out of the way.
zz - you are missing the point I am trying to make re developing polycentric cities. For example Hobsonville point should be a polycentric hub in its own right,, with good transport links that connect to other links to get around Auckland. Yet all it is, is a dormentary suburb of Auckland, with its main selling point being its 'easy' car, bus and ferry links to Aukland, which only makes Auckland more monocentric. Now this might be OK for those that wanted to live on the Hobsonville fringe and comute if they receieved more affordable housing. Yet here they are promoting 40m2 houses on 111m2 sections for $340,000. This is not anything like what I was talking about with a MUD style development.
Dale if there is anything I have learnt from Hugh's structural approach it is to have simple targets and follow the numbers.
I like Alain Bertaud because he expresses this so simply, planning should focus on affordability and mobility. Affordability being housing should be medium house cost no more than three times medium income or rental of no more than 30% of income. Mobility being in an urban area you should be able to go between any two areas in under an hour (particular between home and work) at the maximum and ideally under 30 minutes.
If you look at the numbers, Hughs Demographia surveys, TomTom results etc. You will see many places achieve this in one or both respects. In NZ we do not achieve either.
I have no doubt that you could recreate a Woodlands style development in New Zealand, given the appropriate co-operation from the politicians, on a feeder rural road that has the capacity to take that development so affordability would be achieved. The problem comes where that feeder joins the main trunk route. These are inadequate and congested. Not only will you not achieve mobility for your NZ Woodlands but you will make everyone else mobility worse.
Christchurch is a prime example of this, following the earthquakes due to affordability there has been a leap frog sprawl to satellite towns and lifestyle blocks but the trunk road infrastructure cannot cope. State highway 1 north and south are crawl ways during rush hour. The two growth areas of South west Christchurch -Rolleston/Prebbleton and Lincoln and the North Christchurch - Rangiora/Pegasus/Kaiapoi are disconnected. You cannot go one to the other in under an hour.
New Zealand has not invested in trunk transport infrastructure. We have not had the equivalent spending of the US Highways Act or the well fund European local authorities. Look at the numbers in the graphs here of US, Finland versus New Zealand motorways and passenger train movements http://www.interest.co.nz/opinion/65197/brendon-harre-thinks-we-have-problem-poor-quality-and-inadequate-quantity-local-infras.
I don't know how much infrastructure is needed. $15 billion was just an example. I don't know if you go exclusively for motorways or a Finnish style mixed modal transport system. I do know that to achieve the sort of cities we want we will need more infrastructure and it will cost some money.
I have just started reading "Mobility First" by Sam Staley and Adrian Moore. Jumping to the conclusion they were highly critical of how the Federal funding of highways had devolved to corruption and pork. They recommend that a more local or regional approach is needed.
Hi Brendon – all what you say is true – to a point. The only reason that the growth was north of the Waimak Bridge was that was the only place that it was allowed, or more easily allowed. If growth had been allowed with no urban constrained growth boundary then you would have had the choice for development to happen in a different area, or more dispersed areas, and hence the pressure would not have had come on the north corridor as it has done. You and I know there are at least ½ dozen areas that growth would more naturally have happened, if allowed.
When the developers chose to build Woodlands, it was no accident they chose the spot they did, remembering they could have chosen almost anywhere to put it, not like our developers in being able to choose very limited areas. As part of that consideration, the Woodlands developers would have taken into account possible effects of congestion and would have tried to mitigate it, as too much congestion would have been a negative. One way of doing this is choosing a location close to or on transport corridors that have extra capacity and to also develop as a polycentric centre where they might create employment around Woodlands to lessen any commute time, and of course this is exactly what they did. It is always a little of what comes first, the residents or the work.
So yes we do have an infrastructure problem in many areas in NZ but there are enough ‘free’ areas where you could build a successful Woodlands style development.
Dale I see where you are coming from and don't disagree that there isn't housing development opportunities closer to Christchurch if the planner nazis allowed it but ultimately more/ better transport infrastructure means there is a larger area within easy travel distance.
Geography and infrastructure as ZZ says is a limiting factor. Not all urban growth limits are lines on maps created by planners.
Transport infrastructure gives multiple benefits. As discussed above with PhilB it can aid by creating potentially larger areas of elastic housing supply. Thus preventing housing bubbles and the consequent excessive private debt and unnecessarily high interest rates.
It increases productivity -cities even polycentric ones have a higher density for a reason. So that businesses and workers are close enough together to participate in commercial dealings with each other. Imagine if the two growth areas of Canterbury I described above travel time was halved, from in excess of 1 hour to 30 minutes, how would that improve commerce?
Transport is a classic and basic public good that has been underfunded for too long in NZ. We are all worse off because of it.
zz - polycentric cities by definition have their own employment around their hub, there is no central CBD as such and therefore no need to go there for employment.
Woodlands is seperate from Houston, just as a NZ equivalent would be seperate from Auckland.
You state that all the jobs are in central Auckland' - when in reality only approx. 20% of all Auckland jobs are in the CBD. But everything is funnelled into it regardless, some of it yes is caused by the topography, the rest poor planning.
ZZ I agree with your general points about infrastructure being required but you have to stop with this 26,000 sqkm nonsense. Houston city area is 1625 sqkm and 2.1 million people. Woodlands is 113sqkm and 105,000 people. Links here and here.
We will only get somewhere in this issue if we face the facts honestly....
26000sqkm Metro Houston works out as roughly a circle with a radius of 90 km. Yet Woodlands was created past the fringe of Houston on cheap farm land only 57km out. I think metro Houston is the arbitary size of whatever local authority represents Houston. A goodly part of it being non-urban.
I did not get the bit about "Woodlands is seperate from Houston, just as a NZ equivalent would be seperate from Auckland." That is not consistent with Alain Bertaud, the purpose of a city is to be basically one big giant labour market. If it is so far away it is seperate labour market then it is not growth of an existing city but a creation of a new city.
I think it would be possible to put a 'Woodlands' a lot closer to Auckland if we did the infrastructure right. Karaka peninsula looks good to me. Especially if you could get motorway and rail links through to the airport. I am not from Auckland so not sure if that is possible?
I always figured that water supply would be one of the key determinants in suburban development. N.Z. being long and skinny, doesn't have many long meandering rivers. Rather many small rivers that feed rainfall from the mountain ranges straight out to sea. Much more so in the North Island too. So, go open up as much cheap rural land as you want, build as many roads as you want, but where's the water coming from? Can't let the cows and the grass go thirsty....
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