By David Hargreaves
So, the future is, in part, pre-fabricated.
Housing and Urban Development Minister Phil Twyford won't be tied to absolute figures, but he's talking about a "significant" number of the 100,000 Kiwibuild houses being prefab.
On the one hand that makes sense. On the other, it's a risk.
Done correctly, the building of large numbers of prefab houses could be done more quickly than 'bespoke' houses. They could be more cost-efficient both in terms of building costs and therefore cost to the buyer. The mass production of them could ensure uniformity of weather-tightness and warmth.
The flipside though is that the world is littered with state-sponsored social housing concepts that have gone wrong.
Today's bright shining future housing development can easily become tomorrow's slum complete with attendant social problems.
The Government is under pressure to quickly get its Kiwibuild programme rolling. Pressure could mean decisions being made too quickly. And the wrong ones being made.
I think it's important the the perceived urgency to move on accelerating house building - particularly in Auckland - doesn't cloud the decision making process.
I wouldn't like to think that Kiwibuild becomes some kind of 'guinea pig', a kind of social experiment. Because social experiments and housing can mix pretty badly.
My concerns on this are not just about how the prefab houses turn out - but what the actual reaction will be to them.
Do we absolutely know at this stage that if thousands of prefab houses are produced then thousands of families will want to buy and move into them?
The trouble is the market for such housing has not been tested - on this scale.
Ideally it would be good to 'test the market' first to see what the reaction might be.
Attitudes to housing in this country are changing slowly, but there's no doubt that for a lot of people, owning their own home means something they have had built to their own specifications, on a decent-sized piece of land.
Now, you can say that for many people that's probably an unrealistic expectation these days - but that's something a lot of those people probably don't want to hear. Expectations of what being a Kiwi and having your own home means are in-bred.
The first thing therefore about any large-scale prefab housing development in this country is that it will not want to look like its prefab. Now apparently this can be done. It would need to be.
The other thing of course is we've got to make sure we put the right sort of houses in. That means houses that meet earthquake requirements as well as fitting the requirements of the New Zealand weather.
In that sense it would seem to be sensible to look more at places like Japan, if we are going to get imported homes, or at least parts of homes, rather than Europe.
Clearly it would be an absolute disaster if the first wave of Kiwibuild houses turn out to have deficiencies - particularly in weather tightness. There's enough of that going on in New Zealand already.
If that happened the confidence in the Kiwibuild programme would be shattered.
Really, to be honest I would prefer to see Kiwibuild establlished initially on the back of a more conventional house building and let the prefab business in this country develop at its own pace.
The massive ramping up of prefab activity that could be required puts us into very new territory with our housing developments in this country and heightens the risk. If we had a recent history of large-scale prefab housing here, okay. But we don't.
There's so many questions about the massive introduction of prefab housing, that really we would as a country be better advised to take several years making sure we 'get it right'.
And the other related issue here is one of financing - with the banks apparently not comfortable lending on prefab structures prior to them being actually attached to land. Ideally, that's an issue that would need sorting out before there is large-scale ramping up of prefab housing in this country.
Questions.
However, there is urgency. It's not easy. No easy decisions.
The Government is trying to make fast decisions. But they must be good decisions.
It doesn't take all that long to put up a slum. But then you've got a long time to regret it.
While the coalition Government has put a lot of pressure on itself to tackle a housing crisis that Labour, in opposition, was happy to play up, it should not allow that pressure to force its hand with hasty decisions - which I fear it will.
It is better to have people getting a little restless about the amount of time its taking to make decisions - than make the wrong ones.
In the court of public opinion this Government will only really get one shot of achieving credibility in the housing area.
Unlike its National predecessor it does at least look sincere in its efforts to address housing shortages - but good intentions are never enough on their own.
People want results, yes. But ultimately they want good results. We'll still have to be looking at the houses built tomorrow in many years' time.
72 Comments
Good opinion piece David.
The disaster is that the current Gov doesn't seem to have ( or had) a PLAN?
they are going by several new ideas after 140 days in office and seem to be floundering around --
No one is certain who will buy these pigeon holes when finished - certainly not kiwi families with kids - these buyers need some outdoor space to play and move.
What will happen to the first lots of unsold units ( out of the 16000 PT intends to build in his first term) ?.. HNZ rentals comes to mind in a flash, so mixing demographics will also be an issue and could be future turn off for potential buyers.
The $2B allocated for the build will evaporate after the first 4000 units --- what if they were not all sold out? --- they will need to find another $2B ... or pull the plug ?
"HNZ rentals comes to mind in a flash, so mixing demographics will also be an issue and could be future turn off for potential buyers."
Dead right, they become a hard sell in areas where there is an abundance of state housing. I would guess 25 to 30 percent state rentals at best or the mixed ownership models are doomed.
All the problems you are worried about are the same whether built conventionally or prefab.
Get those underlying problems sorted then any alternative methodology that can add parallel volume, whether it be public or private, conventional or prefab, will work fine.
Granny Herald's giving it's piece on prefabricated houses. Good video interview followed by the text with the banks throwing up barriers and the KOL being a mortgage broker.
http://www.nzherald.co.nz/personal-finance/news/article.cfm?c_id=12&obj…
Cheap, yes, thats the idea. Nasty, not if done properly. Its called utilising the advantages of the modern factory. On site three guys hoisting/holding something in place while one guy climbs a ladder with a nail gun.. in a factory lay it flat on the floor and nail it together then pick it up with the nice convenient gantry crane. One is simply far more efficient.
If I was in Labours shoes I'd be talking to the Lockwood's of this world who already have factories with a few standard lower cost plans - not cheap but smaller and guarantee their off take for say 10 years forward at x houses pa so they could gear up with confidence.
There are actually quite a few competent factory type operators out there now - just providing them off take agreements with Crown guarantees would allow for dramatic increases in outputs.
Starting new operation from scratch makes no sense.
The old hands that have proved their competence over many years is the place to start !
Modern prefabrication techniques lead to better quality houses. Here is an NZ example of one:
https://www.facebook.com/ChchPassiveHouse/
It is a Passive House - airtight, highly insulated, ventilated and stays 20-25 degrees year round without heating and cooling. It is actually easier to build these using pre-fabricated panels as they can be built straighter, millimetre accurate and to a higher quality finish in a factory.If you look back on the page, you can see the photos of the panels being craned into place.
The houses are the easy part !
I drive thru Glen Innes regularly and watch the years - yes years it has taken - even for areas that Housing NZ own to clear the area, then build the infrastructure before even starting the houses.
It's the land issue that will be the major constraint on Labour's 100,000 affordable houses in 10 years and a factory just won't help in this area. Every site is different and we forget just how much goes underground today.
Power, Fibre, Stormwater, Sewerage, Water, Gas plus roading. All have to be installed in a logical sequence and it just can't be rushed. Some require downhill constraints - some extra pumping - all very expensive.
Th probability that Labour can build an incremental, let alone affordable 100,000 houses in 10 years is Zero !
The same problems as have constrained construction for the last 30 odd years are unchanged. We simply don't have the flat land required for these set of volume build programs.
You’ll be amazed at how quickly services can be installed particularly in green fields. If they use Polyethylene pipe for the full set of services they can buttweld 100m strings for each and just push into the trench. Chuck in a few lateral feeds and boundary kits and you’re sorted.
Why is this labour govt, with limited skills (no offence to anyone), thinking they can do a better job than the vastly experienced private (building) sector. Housing shortage is not a problem just in Auckland and NZ. Its a problem faced by any city with plenty of jobs -all the time. So if you come out of opposition and into govt. you are not expected to solve this overnight. Beating up the problem in opposition is one thing and trying to fullfil an unrealistic promise overnight and that too with a heap of urgency can lead to a disaster. as mentioned above--have we got the buyers or even people wanting to live in them?
Why is this labour govt, with limited skills (no offence to anyone), thinking they can do a better job than the vastly experienced private (building) sector. Housing shortage is not a problem just in Auckland and NZ. Its a problem faced by any city with plenty of jobs -all the time
Fair question. During the height of Japan's bubble, the housing construction industry was corrupt (run by the yakuza), relatively inefficient, and expensive. Since the bursting to the bubble, the housing construction industry has transformed into a world-beating industry. Just goes to show.
The land price seems to be the major stumbling block in Auckland!
These prefab shockers I am sure won’t be allowed to be put in any new subdivision as I would say they would all have building covenants!
I know there would be no chance what so ever of getting them in any subdivision in Christchurch.
If the Coalition bought some land a long way out from Auckland then it might be a goer but then there will be little infrastructure and take a helluva long time to get into the CBD.
The people that could afford the deposit and the repayments I would doubt would want to live in them where it would just look like a ghetto with them all being the same pokey box’s and no landscaping as per the standard State house.
How much would the Government want for these army barrack look box’s????
Forget about capital gain on them and all it will do will be to lift other house prices!
Let’s face it not everyone will ever own a home and that is the way it has always been and always will be!
I've kept really silent these last few years as A) the previous Government's policy was so entrenched that it was (and remains) a super tanker and to change course will take years and years and B) the emotiveness of the issue, and the difficulty for for most to separate what ought to happen with what will happen. Arguing from the emotional corner is counterproductive and words wasted.
My two cents:
Prefabs will not change a cent. Not one cent. The biggest issue is the price of land, by a country mile. Labour have done nothing to meaningfully address this. The second issue which (could one day) be helped by prefabs is that we actually need massive scale, corporate investment into housing development. More consistent specs, better buyer power; all that.
Until we get the price of land down nothing really matters. Honorable efforts, but with solid evidence to date they will all end in receivership (there must have been 5 prefab companies which were meant to be the saving grace of house prices that have all ended being liquidated).
So how do we get the price of land down?
1) Dramatically slow down immigration. Less heads need less beds, and will help increase labour prices and thus interest rates. We have such a cumulative gap in housing that even if we stopped immigration tomorrow the pillars underpinning housing would remain. But immigration lowers wages which lowers inflation which lowers interest rates and increases house prices. If we let wage immigration take a breather for (say) 3 years and revert to long term average levels interest rates would then rise and house prices likely fall. Let immigration even fall for a few years. In the end it should be about GDP per capita, not GDP in aggregate; the latter just makes for nice political press releases.
2) Do everything we can to help the supply response. Re-orientate immigration to those with engineering and building skills. Reform the rma DRAMATICALLY and better provide for densification. Help BIG BUSINESS (yikes) build massive scale developments and take advantage of scale. Big business here, sadly, are our friend. Housing in America is cheap 1) do to laisse faire land legislation but also from large building companies building huge developments with consistent and cheap specs.Just look at the price of Metro Glass double glazzing; there are no consistent specs, which is why this company has somehow continued to milk it.
3) Keep high LVRs in place, and eliminate any notion of negative gearing. Reform the RBNZ capital adequatecy rules so that they place less emphasis on residential mortgage securities. The fact is our local banks are ordered to lend a certain percentage to residential borrowers is stunningly short sighted and wrong.
4) Introduce a capital gains tax (increasing the bright line won't help as only 50% comply)
5) free up development land - helps at the fringes and discourages inner city landbanking as it is an unknown. Gov needs to discourage this and act sponanteously to upset the status quo.
6) subsidise contractors recruiting offshore
7) Implement strict ethics controls restricting investment property for MPs. I'm aware of too many labour MP's who may be personally enriching themselves through the status quo, even if they are less obvious that National MPs.
8) Kill NIMBY'sm everywhere it stands. Combat it, fight it, revert it. It's a cancer and needs to be rolled back.
The reality is that house prices are woefully overpriced, and the longer it goes on the greater risk to financial stability and social morality. But NZ house prices are not going to crash in the short term so get that out of your head. But labour has done feck all to help the problem and the short term pressures until continue to compound and get worse. But mark my words in the short term prices are only going to get worse. So all you doomsday sayers - your heart is in the right place - but all else equal prices are only going to increase in the short/medium term. We can all react in the same way to every piece of news regarding auction clearance rates and volumes which reinforce our biases - but in doing that aren't helping the situation while sitting there dumbly on our hands and just calling it a bubble. In fact - what is happening is quiet rational - we just need to remove those rational pillars. It's super simple, but we so far Labour seem content to rule by committee and do nothing. Moreover, labour need to adopt conservative ideas to reform the RMA dramatically and cosy up to big business, while impementing much needed immigration controls to actually do something effective. We need a bit of shock and awe to put off speculative demand, drop immigration, allow interest rates to rise in a natural fashion, and foster a supply response to a tight market.
Rental prices are the free'st, most pure form of what is happening in the underlying market. They can't be specualuated on or land banked. They respond to the supply and demand imballance immediately and in some respects are the best indicator; immigrants tend to rent first and buy later. We shouldn't try to restrict rents. But we should try to lower house prices.
I'll still take Labour on this even if they are sitting on their hands. They are like deer in the headlights; hopefully they can budge.
I am a useless old fart but the answer is actually so fucking simple. Editors; can you please send my post to the ministers, I'd love to see how they respond, and at least you have the relevant contact details. MPs need to be held to account and it should start now.
[ PS they would have heard it before but they should do it it in a public forum]
Just email it to him phil.twyford@parliament.govt.nz
OF COURSE LAND PRICE IS THE PROBLEM ! Made much much worse by Auckland council fees when creating subdivisions ............. $20,000 for a water meter alone
other connection costs and driveways costing hundreds of thousands
DC Levies at eye-watering levels .
Housing will never be affordable when it costs the price of a small farm in upfront fees to subdivide a section
The answer is not more planning. It is experimentation. Build lots of different pre fabs and you will soon find out what people like.
Planning leads to this sort of thing:
https://www.shutterstock.com/video/clip-6973564-stock-footage--k-concre…
Did you have asbestos pre-fabs here in NZ in the post war years? Now they were really bad.
i agree about building up, why is Auckland waterfront not high rise apartments ?
but the bigger question is size of population and growth of population.
one of NZ's draw cards was the small everybody knows someone population.
which led to our friendly helpful nature
we are losing that in Auckland soon the same will happen in other cities
Prefabs using SIP-type systems are commonplace - that's how cool rooms, caravans, and entire houses are commonly engineered world-wide. A UK example: Kingspan.
And notice that word 'engineered. That's way different to occasionally drug-tested hammer hands clonking together frames out in the weather, then leaving them to mature for weeks at a time before the next set of tradies show up and start more clonking. Whatever term one can apply to That sequence, 'Engineering' it ain't.
So common taters blathering on aboot weathertightness are out of their depth. Panelised construction takes things way beyond the nail-frames-on-the-factory-floor notion espoused above, and then there's extruded/printed houses and other techniques not even hinted at.
It does require an international effort, as at least initially, even tests will be close to 100% import content. But that's the little hurdle.
As many of us, Keyser Soze being the latest, have gently pointed out for years now, land price is the Big hurdle to 'affordability', however that's defined.
As the sadly missed Hugh P used to say - if the land price is wrong, so is everything on top.
Pity poor Phil T: he's on the tiger. And as the Chinese proverb has it ' "He who rides a tiger is afraid to dismount".
The government would not have promised the electorate 10,000pa new houses had it not already received firm undertakings for the supply of the approx 7000 of these it will source from prefabricators. It also must have worked out a way to address the supply of affordable sections. Otherwise they wouldn't have committed themselves to the extra 100K affordable houses. Have faith, Phil will come through with the goods.
Prefab is better quality than onsite stick build. Those who think otherwise are simply uneducated opinions which we can do without. However, as already commented on land price and services are the issue so prefab or not is irrelevant.
This entire affordability issue has nothing to do with the cost or method of construction and everything to do with how modern monetary systems work. We have inflated asset values for a reason, its engineered that way.
Exactly, the bubble is primarily caused by excessive credit creation via mortgage lending, and the principal effect of the credit bubble has been to swell land costs. We are a subset of the Aussie credit bubble via our common lenders. Demand for accomodation is a part of it but not the major part, rents are completely disconnected from prices. It really bothers me that the govt has come to the wrong conclusion about what the primary driver of prices is. The govt may well spend vast sums of money on building crap houses that will not have a corresponding effect on prices, it will be like pushing in a piece of string. This bubble will deflate eventually, quite possibly in a spectacular fashion, and we will be left with types of houses that people don't want on land bought at the top of the bubble (and which is now worth a fraction than what was paid for it)
Prefabs can be great houses! . Look at a few of the modern prefab websites such as Easybuild or Matrix These offer a range of homes including smaller affordable homes that are well suited to a first home buyer or someone downsizing. And the houses look good too.
David, I really dont understand why you think the government should leave it to the conventional home building market, given its low productivity, high build costs, and total inability to address demand for housing. What is needed is leadership and innovative thinking across a number of fronts including conventional, quasi and full prefab. In the past, government has managed to work with the private sector to achieve a programme of large scale State house building. These were great houses, and are sought after today. We can and must do something on an equivalent scale today to address the appalling housing crisis we have allowed to develop here. The NZ house build industry must also change radically if we are to get out of this mess.
"Prefabs can be great houses!"
And they can be eyesores as well.
As we all know, the government-built prefabs that exist in this country are plain awful. In fact, they're disgraceful blots on the landscape.
Interesting that the government didn't tell us pre-election that it had prefabs on its agenda.
This sort of prefab rubbish ought to be prohibited.
And, by the way, I see in today's Herald that Auckland is the 3rd to most liveable city in the world (according to one ratings agency)....... so there's little chance of land prices falling in Auckland.
TTP
"and they can be eyesores as well". Take a look around the newer suburbs of Auckland and you will see one 'architectural' abomination after another.
Prefabs can be made to be as beautiful and well designed as you want them to be. There are some fine examples all over the world.
Ngrrk, not to mention all those monolithic time bombs. Here in Auckland they're everywhere! I am yet to sight a comment from a National Party supporter hoping the affordable housing crisis is fixed. Its like they don't want it to be fixed so to support house prices and rents. Stuff what the tenant/FHB deserves.
Such greed.
I think we will look back on this part of our social history with incredulity and shame. An extended outbreak of national hysteria which led to a real estate bubble, political cowardice by a national party who should have (and did) know better, and a large part of the population who are quite happy to throw the young and less fortunate under the bus if that what it takes to “make a bit of money in the property market”. A really ugly period.
TTP, because of the overenthusiastic investment by unsophisticated people, values could drop 10 per cent between the time a project was sold and when it was finished. There could be a 20 per cent drop in land values;
https://www.stuff.co.nz/business/100602214/Auckland-developers-owners-c…
Now that we are in late March, this is starting to play out. This very insightful article was published in January.
I see Mercers survey still has Auckland as the third best city in the world. Not surprised as I always enjoy visiting it. No wonder it has such a huge and growing population. Vienna is still number one. I was there last year. I totally agree. So much to see and enjoy and the hotels are much cheaper than New Zealand’s and better.
Prefabrication essentially allows greater production control, precision and efficiencies due to the systematisation of the manufacturing process and elimination/reduction of negative input variables such as inclement weather, indifferent tradies, supply train interruptions etc. It's the method by which most modern high quality goods can be mass produced at a price which the average person can reasonably afford. -I doubt there would be very few that would argue that cars should be still be hand made by coach builders and only affordable to a small percentage of the wealthy, and it's no different to a house. It's a process not an outcome.
To argue against this process is like arguing that because the now outdated Ford Model-T was mass produced that it's risky to adopt this manufacturing method and therefore we should not step out of the secure realm of bespoke coach building least our 'standards' succumb to the market whims of the hoi polloi (clutching of pearls!).
Like in any modern products, the key is in the design/engineering and it's suitability to the environment and the physical and emotional needs of the user/s. Different models, styles and configurations can be designed to suit the users general needs and they can be further customised at a more personal level as required as long as basic structural integrity isn't compromised. Let competition and the market decide what it wants. There are already plenty of modern well built prefabs available globally and we also have a plethora of talented people in design, engineering, architecture, landscaping etc that can be deployed in this industry once the handbrakes are taken off.
As has been mentioned before on many occasions, the current critical bottlenecks and largest cost inputs are not the buildings per se, it's land pricing, gratuitous planning regulations, supply monopolies, gravy train addicted bureaucracy, outdated construction methodologies and labour inefficiencies combined with virtually open boarders.....all culminating in political paralysis and ongoing housing trainwreck for your average NZer.
Lets not forget .............. National NEVER promised to house everyone in their election manifesto .
Labour did .............. they said they would house the poor and indigent , and make houses 'affordable " for everyone in their election manifesto
Now Labour needs to stop referring to what National did not do, and NEVER said they would do , and Labour needs do what they did say they will do .
Boatman, why would National have promised to house everyone when there was NO housing crisis for nine years? Labour took the lead on this issue and the public voted.
Six months on, do you think now's the time for a snap election? Patience is key. Expecting the Coalition to repair nine years of damage in less than six months is a tall order. More people voted through conscience instead of their wallets. The ground has now shifted.
... my point for several years has been that the NZ Reverse Bank ought to have been putting the OCR up ... not down ... over the period of the escalation of house and land prices ... cheap munny has allowed excessive leveraging of our property market ... and the bigger its got ... the biggerer the mess will be if the property Ponzi hits a prick and pops ... biggerest risk to our economy ...
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