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Building consents: Councils shouldn’t be the last man standing between quality & progress

The booming construction industry’s burgeoning pipeline of work has seen the volume of consent applications increase exponentially. In the year ended May 2022, 51,000 new dwellings were consented, up by 17% from May 2021. This rapid rise in consents needing to be processed has placed even more pressure on finite local council resources.

The old adage “time is money” has never been more relevant as prompt turnaround during the consenting process is vital to the sustainability of construction businesses. Add to that increasing interest rates, inflationary pressure, supply chain frustrations and less access to funding, and you have a perfect storm creating serious knock-on effects to these companies’ overall cashflow position.

Time to ditch dated approaches to the consents process

Local authorities are under resourced, but throwing more people hours at the problem is only a band-aid approach for one of New Zealand’s biggest sectors. And of course, Councils can’t simply push through applications; this would ultimately result in increasing the risk of defective work – the last thing we need is another leaky building debacle. The pain of that era is still being felt which, understandably, has made Councils even more conservative.

The joint and several liability approach disproportionately exposes Councils for any subsequent liability, as they ultimately end up being the last man standing. For the last five years, Property Council New Zealand (PCNZ) have been advocating for a reduction or capping of Councils’ liability settings which is common practice in other countries. PCNZ have also been pushing for a new insurance scheme to reduce consent delays and encourage innovation by broadening the scope of approved materials and building practices.

Unfortunately, the Government has ruled out reviewing the risk, insurance and liability settings in the sector; its Policy Position Statement says:

  • the current joint and several rules is deemed appropriate for the sector
  • the capping of local authority liability is not considered necessary
  • a public-provided building defects insurance scheme is not currently justified.

This highlights a lack of maturity in the sector’s regulatory settings here in New Zealand. Councils’ ultimate liability is more often extremely disproportionate to that of those on the tools – after all, they have the bigger balance sheet so become the easiest target. Or it could indicate our system is far too lenient for all involved with project failures, as companies can simply be wound up with limited consequences. Just 22% of construction companies incorporated in 2008 were still active 10 years later highlighting the inability for building defects to be remedied in the 10 years post construction as required by the Building Act.

There will no doubt be valid reasons behind some of these company closures, but this stat clearly demonstrates the need for greater focus on where the liability lands and creating more robust mechanisms which can be enforced on directors when the quality of the project is not up to standard.

Simple solutions to speed up the process

We don’t have to look far for alternative solutions. In Australia, each party involved shares their proportion of the liability.

Surveys show the documentation for building consents in Australia to be a third of the requirement in New Zealand. Is this an indication our design component is substantially higher, or we are simply less efficient as sector? Compulsory benchmarking for existing and new market entrants could include a licensing and accreditation scorecard to reduce the processing time for consents. It could cover the following:

  • Employment, diversity, environmental impact, health and safety
  • Suitable internal systems and processes
  • Government set financial measures in addition to the non-financial measures, for example, balance sheet cover for each project
  • Building trusted partnerships with reputable organisations, and de-risking the sector by removing unethical or poor quality operators

Most (if not all) Councils have variations of this approach to some degree, so what’s stopping the establishment of a consistent national framework – one that would speed up the process and be hugely beneficial to the entire industry?

A great example of this is Selwyn District Council’s Professional Partnership Programme (PPP) for accredited entities. The PPP provides professionals within the sector (eg, builders, developers and designers) to apply to become a partner if they can meet the set criteria. Once approved, their consents will be fast tracked on the basis they meet and continue to meet the standards as agreed in the PPP application process.

Selwyn is currently experiencing significant growth, so there are some transferable learnings from their system. The ultimate goal should be an identical, streamlined processing platform across all 67 consenting authorities where all industry professionals can upload their documentation for real time processing; this would also provide the ability to share administration resources when constraints exist.

It may be that central government will need to force the hand of all local governments to implement change.

Efficiency is within our grasp, but we need all players in the industry to collaborate to allow gains to be made.

For further information, contact:

Dan Lowe

Partner, Business Advisory Services
M: +64 27 475 9556