KiwiBuild is in need of a reset. Shamubeel Eaqub the author of Generation Rent discusses in a podcast what he thinks has gone wrong with KiwiBuild and his wish-list for fixing it. Future Proofing the Housing Market would be my suggestion direction for the reset of KiwiBuild.
In my previous paper -The Housing Productivity Story -that was about the need for New Zealand to respond to the twin challenges of the housing crisis and climate change, a Interest.co.nz reader contributed with a video describing an innovative project in Heidelberg, Germany that performed brilliantly in both aspects, by building a 100% renewable district.
One of the key features of the German initiative is house builders can access low cost 1% interest loans up to the value of 75,000 euros if they are constructing energy efficient buildings. In the Heidelberg example the whole development of 5000 homes plus addition commercial and industrial buildings are all being built to the passive house standard.
This is a good idea because although these energy efficiency features can add 15% to build costs, in the long-term energy efficiency savings outweigh the cost.
If New Zealand implemented a ‘future proofing’ housing construction policy not only would it help the housing and urban development sector meet the countries carbon zero by 2050 target, over time there would be a gradual improvement in the quality of our housing stock, which is notorious for being cold, damp and unhealthy.
A difficulty for implementing this policy is it would be highly regressive because of the nature of New Zealand’s housing market.
Since the 1980s the building industry has shifted from building for the lower and medium income quartiles to focusing on the upper quartile. The lower two income quartiles now only receive about 5% and 10% of the new builds.
Source: Revitalising the production of lower value homes: Researching dynamics and outcomes by Kay Saville-Smith Fig 3. Which had updated data from the original Productivity Commission graph from 2012 -Fig 0.6
The intent of Kiwibuild is to encourage the building industry to change its business model to be more responsive to housing demand from lower income groups. So far the industry has been reluctant to make this change.
KiwiBuild’s ‘buying off the plans’ initiative has a well publicised slow uptake. Hopefully KiwiBuild will be more successful once the new Ministry of Housing and Urban Development is better established and the legislation creating a Housing and Urban Development Authority is passed this year and the enabling powers are passed next year.
A Construction Future Proof Fund could help KiwiBuild and the building industry improve its business model to be more responsive to lower quartile income groups housing demands.
The construction fund could have a legislative remit to issue low interest construction loans to developments where there is a mix of housing sizes, types and ownership models, that target the different segments of housing demand. For instance, developments that include subsidised state housing for the lower quartile, affordable build-to-rent housing (ideally with security of tenure) for the lower-median quartile and affordable KiwiBuild owner-occupied housing for median income households.
This approach would fix the regression problem of construction subsidies being taken up by developers and builders whose business model only caters for high income households.
The Construction Future Proof Fund could be an alliance between a bank -say KiwiBank and the Energy Efficiency Conservation Authority.
The government could contribute government expenditure to this fund for the purpose of lending for the construction of energy efficient homes -say up to $50,000 at a fixed 1% interest rate p.a over 20 years. A rough calculation of the maths of the difference between market interest rates of around 4% and a fixed 1% interest rate, extrapolated over the lifetime of the loan, indicates $200 million of funding per year could assist in the future proofing of something like 10,000 to 20,000 newly constructed energy efficient homes a year.
Some market purists will say this is a subsidy for house construction, but it is a much smaller subsidy compared to the accommodation supplement payments to tenants and landlords which totals $1.5 billion. The accommodation supplement was last increased in the 2017 Budget by the previous government.
The accommodation supplement is criticised because it benefits landlords more than tenants, as it increases demand but not supply for housing. The more inelastic a cities housing supply is, the more the supplement is capitalised into higher house prices and higher rents.
There is evidence that New Zealand cities have very inelastic housing supply so improving rental conditions by increasing the accommodation supplement will be of little benefit for reducing inequality. Providing a subsidy on good quality construction for lower income housing would help assist in improving housing supply elasticity. This would also have wider benefits, including for productivity, workers and city-based productive firms as I detailed in my previous paper - The Housing Productivity Story.
Construction subsidies should be tied to defined and measurable quality targets. If there is insufficient quality standards then the government risks repeating The Great British Housing Disaster of the 1960s where many government initiated housing complexes had to demolished due to defective building standards, as the UK construction industry responded only to the ‘numbers game’ of quantity targets.
New Zealand currently has very lax energy efficiency building requirements, being able to leapfrog past generations of overseas building standard improvements to the most efficient standard could have the same effect as developing countries bypassing landlines and going straight to widespread mobile phone use.
The proposed Construction Future Proof Fund should also be seen as an investment in decreasing housing related health costs and an investment in a just climate change transition for the housing sector.
A similar approach could be taken to future proof seismic risk. The New Zealand building code constructs buildings to a standard that protects life but not the building itself, which post-quake often means the building has to be demolished. Buildings though could be constructed to survive earthquakes with only a little extra expenditure.
Subsidising the construction of ‘quake proof’ buildings would be helpful for transitioning to a greater variety of multi-unit housing typologies. Especially as multi-unit buildings are often considered high risk by the insurance industry. Insurers in New Zealand have moved to risk-based pricing which means $thousands more in higher premiums for high-risk properties. This has had led to community discussions about managing risk, construction standards, climate change altering risk profiles and so on. In the long-run subsidising the construction of ‘quake proof’ buildings could be a net saving for New Zealand, as the cost of recovering from earthquakes is reduced.
If the government had an established mechanism to subsidise the construction sector, then when New Zealand experiences an economic downturn it would be in a better position to support the construction industry. This mechanism would make it easier for the government during times of economic uncertainty and slowdown, when the private sector is under-investing in construction, to temporarily increase its contribution to the Construction Future Proof Fund to counteract the under-investment from the private sector.
Underbuilding can be seen from 2008 to 2015 , when New Zealand’s building rate halved -from a long-term average of about 6, down to 3 dwellings per 1000 residents
If the previous government had supported the construction industry in the five years of slowed building after the 2008 Global Financial Crisis, New Zealand’s subsequent housing crisis would not have been as severe as it was.
If the construction sector is less subject to economic uncertainty, it is more likely to adopt a business model that makes long-term investments in its workers, supply chains and plant to improve productivity.
Overall, there are clear benefits for New Zealand from future proofing the housing market. A Wellbeing Budget approach which takes a holistic view of societal costs and benefits should be supportive of this proposal.
See Ben Pitkan-Douglas comment in the original post where he confirmed that $50,000 was the additional cost to construct a passive house in Christchurch in 2017.
This is a repost of an article here. It is here with permission.
55 Comments
I built my Passive House more than 2 years ago using all local trades. The standards are higher but far from impossible. There would be a short period of upskilling then improvements across all new builds.
Also note that the Passive House certification process is a quality assurance system to ensure the house meets the rigorous standard.
They have been building airtight houses in North America for a long time now. To get CCC they seal a fan around the front door and turn it on, the internal pressure must be maintained at a certain level (minimal leakage) before you can get the house signed off. The colder the area, the higher the pressure required.
Never seen an airtight house in NZ, the windows we use have rubbish seals, the kitchen and bathroom vent direct to outside and fireplaces don't even have balanced flues.
The blower door test is performed at 50 Pascals (equivalent of a constant 30km/h wind) in both directions (pressurisation and de-pressurisation) and the result averaged. The resulting metric is referred to as ACH50 - air changes per hour at 50 Pascals - which is the proportion of the total internal air volume that would change in an hour. There are already many companies in NZ offering this service.
For my Passive House my ACH50 of 0.39. Most new code build houses (even with plastic wraps) are around 3-5 so 10 times worse.
But remember that with improved airtightness that ventilation becomes much more important to ensure a supply of fresh air and removal of damp, stale air. The healthy, low energy house needs all its parts (continuous insulation with minimised thermal breaks, heat gain/loss, airtightness, heat recovery ventilation, surface temperatures) to work together to give good outcomes. Passive House is the only current standard that takes this holistic approach to give a defined outcome.
Yes, all local materials other than the heat exchange ventilation unit which comes from Germany - there are no NZ ones that are efficient enough.
The windows are made by Thermadura in Mosgiel. It’s run by a German guy but all fabricated here. There are a couple of other manufacturers popping up now that make Passive House quality windows in NZ - SEDA is one
the building industry is still a big mess in NZ, the leaky house problem is still there, still bad planing from council and other agencies, in the old days, at every stage when building a house, a building inspector had to approve each stage, before the next stage could be built, this would help stop bad building practices.
No it wouldn't. Unfortunately the building inspectors do not have the range of skills or knowledge necessary for that to work.
Also the good old days were responsible for some extremely poor and non-compliant work. Building inspectors of the day approved variations from the requirements of the standards. They had no legal authority to do this and they were probably well intentioned and trying to address the failings of the rigid standards.
However a lot of the poor practices carried on into 1992 when the building act and building code came into effect. There are many problematic and leaky buildings due to the approach of the "good old days".
Lot of assumptions in what is a 'counsel of perfection' article, well-intentioned though of course as we expect from you, Brendon. Some of the assumptions:
- Euro-style apartment living, which rather contradicts the recent reported wish of most Kiwis to have a backyard, a shed, and off-street parking. Sure, this may change, but that's a generational - 2-4 decades - turnover.
- Industry capacity and regulatory brakes. I mean, can you seriously imagine BRANZ and the local TLA ticking all the boxes needed to build this stuff, inside a decade or two? Absent a red-tape cutter like a UDA, of course - but once the bureaucrats and vested interests are finished with a putative UDA, it is more likely to resemble - sheer guess - an unholy mixture of BRANZ, MBIE, the local TLA and the local duopoly
- Affordability: ECON101 rules everywhere, even if strung out and hampered by non-market influences. If these passive marvels of Stacked Tiny Houses aren't within the affordability-index-du-jour, no-one will be able to - er - Afford 'em
- The spatial separation of Home and Work is also assumed: the pretty pictures are not evidently degraded by such mundane attachments as shops, malls, workplaces, mines, quarries, refineries and everything that is actually needed to turn minerals into metals, shape and distribute them, and maintain the end products. It's all very well Assuming that Metal and Energy are just there, somewhere to the left of the picture, but out of the frame of view. But consider that Germany, that paragon of Green Virtue, gets 30% of its electrons from burning Lignite......
None of the above should dissuade you that this is a Lovely, Good Intention, let alone stop thinking and writing along these lines. But then, in the immortal words of Saul Bellow, the result of the Good Intentions Paving Company is, to purloin a Chris Rea lyric, a Road to Hell.....
Thanks Waymad. I quite accept the devil is in the detail in such proposals.
Re what the public want. There is evidence that younger people are more interested in walkable neighbourhoods closer to city amenities and city jobs than previous generations. Also people want choice. Just because the majority (and the stats you quote was only just over 50%) want a house with a yard etc doesn't mean that's the only type of housing the market should provide is stand alone housing with yards.
Yes NZ needs the cookie cutter UDA.
Yes the developments need to be affordable -any proposal needs a rigorous business case that is cognisant of market forces.
Commercial/industrial areas can be integrated into such developments -it is for the Heidelberg example.
Good question Scarfie. It could take generations.to fully upgrade every NZ house wrt energy and seismic risk. Auckland for instance has over 500,000 houses and it is building over 10,000 new houses a year -some of which is intensification i.e. replacing existing stock. A construction subsidy will increase house building at the margins -but it doesn't fundamentally change supply and demand. So it will not be fast. But what is the saying - Q. when is the best time to plant a tree. A. 20 years ago. Q. When is the next best time A. Today
Worth noting here that Passive House also has a retrofitting standard called EnerPHit which gives Passive House like results within the limitations of the existing building (e.g. if it is wrongly oriented for sun).
Retrofitting existing stock is a bigger problem that new builds. But there is no reason the scheme couldn’t be extended to include existing stock. The key to this would be ensuring a robust, proven holistic standard like EnerPHit is used as upgrading components in isolation gives more results.
I have no time for Shamubeel eaqub aka The Sham. He has a big mouth and ego and doesnt have a clue what really works. He hilariously gazumped Twytfords kiwibuild announcement declaring the 100 thousand house target was too small and NZ should build 500 thousand over the same timeframe. Nice.
"improving the quality of NZ houses" and Kiwibuild do not go together at all. Kiwibuild's core point is to supply "affordable homes". Very clearly hight tech "future proof houses" are NOT affordable to build. Yes they are better houses but they are certainly more expensive to build.
By all means build "high tech future proof houses" but accept they will cost more and are directed at the wealthier buyer.
Do Kiwibuild as well and accept it is for FHB who do not need 2 bathrooms, a garage and fancy appliances for their 1st home, that can be the aim for their 2nd home
I think the main point to be made about NZ housing right across the board is that it is far more expensive than it needs to be, and is poor quality because of the minimum standard as legislated. This applies to houses of any size.
BUT the cost of upgrading to a better standard is minor compared to the savings immediately achieved.
As with the best run companies, leadership starts at the top, so if the Govt. was to take the leadership role in building to what we would call a higher standard (but other countries call their minimum), then you would find that the rest of the market would follow suit.
After all, can you imagine a more up market new home owner allowing that house to be built at a lower standard than a state/kiwibuild house?
The volume increase alone would help bring down the cost of the improvements.
Other immediate savings would be lower energy costs, lower health costs, far better mental well being. All these can be measured in real dollars, which would more than pay for the cost of the improvements.
The biggest problem is that everyone seems to be under the impression that low income people should be buying brand new houses. This should not be the case. Low income people should be buying older, cheaper homes that they can afford. New houses built for those on higher incomes gradually become housing for lower income people as the properties age, and those shiny new subdivisions become dated, in need of maintenance, and less desirable. The newly built suburb I was raised in (which was considered reasonably affluent) is now quite dated and daggy and many houses have been turned into student flats. There are currently 15 houses for sale under $450k in that suburb now, mostly 3 bed/1 bath on large sections.
Kiwibuild is an example of what not to do - in Christchurch they are trying to sell tiny brand new 2 bedroom homes on 200 sqm sections for $460k when there are 1087 properties currently listed for sale that are selling for less. The only people who should be building brand new houses for low income people is the Government, as part of their social housing mandate. The rest of them should be buying as cheap as possible, and then improve the house over time.
The view I have come to is that the government needs to lose its obsession with home ownership.
Like many other countries, the government could become an affordable rental housing landlord as well as a social housing landlord. As an affordable housing landkord, unlike a social housing landlord, the government could pay off its investments within 20-25 years.
Through this role the government could lead by example in terms of construction quality, and build industry capacity.
Yes I think we need different types of Kiwibuild. Including KiwiBuild-rent. That's kinda what I meant by the quote below, although if a private developer built a housing development for the different quartile income segments of the market then they could qualify for the construction subsidy too.
"The construction fund could have a legislative remit to issue low interest construction loans to developments where there is a mix of housing sizes, types and ownership models, that target the different segments of housing demand. For instance, developments that include subsidised state housing for the lower quartile, affordable build-to-rent housing (ideally with security of tenure) for the lower-median quartile and affordable KiwiBuild owner-occupied housing for median income households."
Yep good. Although I am a little skeptical about market-provided 'build to rent'.
We've heard for years about community housing providers plugging gaps, but it just hasn't worked for several reasons.
I just think the govt needs to take the bull by the horns and BUILD themselves.
Yes sure the market might not provide any instititional players willing to engage in build-to-rent in which case we definitely need KiwiBuild-rent. Although with low interest rates you would think some investment funds would find stable positive rental returns attractive. My proposed construction subsidy would hopefully induce some investors into the market.
Yep good, but the market is volatile and uneven. Govt has ability to build through the peaks and troughs.
We need some good old fashioned Labour house building Brendon!
It's dangerously neo-liberal to rely heavily on 'enabling the market'.
Also, I know from experience that there are a lot of market players out there who talk a load of BS. Need to be wary of that. There will be good niche players like New Ground Capital but my view is they will always be niche.
Fritz I agree with you re Kiwibuild. The government need to be a lot more actively involved. I actually think the masterplanning that Heidelberg used to ensure their 'vision' was implemented is the way to go for Kiwibuild.
For the wider housing market there is an argument for removing restrictions to help the private sector. But the market is so broken that it needs a more 'hands-on' approach to set the positive example.
See this for the issue on getting private investment into ‘build to rent’:
https://www.afr.com/real-estate/residential/super-funds-won-t-invest-in…
I was born in a drafty house in Wellington 64 years ago. Not much has changed unfortunately. In fact they got worse before they got better(?) but even today, single glazing is passed as okay when double glazing should be mandatory. Insulation everywhere else & we're close. I agree with the layout to the sun comments especially the winter sun, which is the most important sun of all. This doesn't sound like rocket science to me!
I'm sorry LGM, I'm an Architect and I had my own practice for 18 years. When I first came to NZ in 92, the building code was the size of an average magazine and yes, coming from Europe, it was a joke to me. But nowadays the building code is much, much more complete and stringent including R value calculations for each new dwelling
You can’t cut performance corners with a certified Passive House as there is a rigourous and independent QA process to ensure the standard is met.
On that note, be wary of houses claiming to be near-Passive or using the “Passive House principles” - this just means it does not comply and it will likely underperform is some area such as energy usage, summer overheating or condensation.
I know a lot of small time investors (buying a second house to save for a retirement fund) who just got out of it as soon as they heard some anti investor whispers from the incoming govt in 2017. They obviously made the right business decision as they did not and could not possibly compete with the proposed 100,000 new homes coming on market from developers with deep pockets.
There is also a health dividend from using Passive House. There is no condensation or mould, filtered fresh air year round (ours removes all the pollen and wood smoke particles), constant temperatures in every room.
Research overseas has shown a Passive House occupant works an extra 6 days per due to less time off sick. Mould and damp activated asthma and rheumatic fever (note many million allocated in the recent budget for this) become non-existent.
They are also much quieter which reduces stress and improves mental health.
The cost of the loan subsidies would pay back several fold in health savings alone.
Aplogies if I have come across a little preachy regarding Passive House above. For the record, I have no commercial interests in Passive House. I am a passionate owner and advocate for the standard. I just want everyone to have access to the same benefits that I receive from better building.
There are several good owner sites out there which provide more details if you are interested (one of these is mine but I won't say which one!)
https://www.facebook.com/ChchPassiveHouse/
https://www.facebook.com/ChristchurchPassiveHouse/
http://ourpassivehouse.co.nz/
https://www.facebook.com/haweaflatpassivhaus/
https://idealhousenz.wordpress.com/
http://passivehouse1nz.blogspot.com/
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