Stretched housing industry must avoid past mistakes
The government’s challenge is to build another 10,000 houses.
It’s easy to say but is it possible? Especially when you consider the GDP of the property industry has doubled to $30 billion over the past 10 years – and most of that has been in the five years since the global financial crisis.
So, how much more is left in the tank? Are there any easy wins left?
Consider the health of the industry and the symptoms don’t look great.
It cannot be acceptable that councils are declining more than one-third of building consents because they have issues with the quality of both workmanship and the information being provided to them. Yes, these local bodies are risk averse but, given recent history, they are right to be so.
Yet, even with this brake of non-approvals, those projects that do get the green light face significant delays at every stage of the process, including design, consenting, sourcing materials, manufacturing and delivery. It is inarguable that the reliability of skilled tradies on site is now under question as the workload stretches them to breaking point.
In short, our patient is wobbling and in danger of a fall.
The result is increasing inefficiencies and significantly higher construction costs, especially when compared with Australia.
The industry response has been to hire its way out of trouble. If nothing else, that has at least kicked off a boom for recruitment consultants as companies compete for skilled labour within New Zealand and from abroad.
Even without definitive information there is sufficient anecdotal evidence that applicants for key site roles within construction and some specialist services (such as quantity surveying) are receiving offers well above the historical norm or comparable roles elsewhere.
But, with this added cost aside, simply adding people will never be enough.
As businesses scale upward, so does the complexity of their management structures. In turn, this requires greater skill, care and attention to detail if businesses are to be managed and governed effectively.
This is where many have come unstuck. Clarity in management and governance is critical. At all levels.
Where is the capacity in the industry to supply this housing production? There are only so many concrete pre-cast factories, window manufacturers or pre-nailed framing manufacturers and they’re already running at capacity.
The solution has to lie in well-planned, medium- to long-term solutions because the quick and easy wins – like double shifts – have already been taken.
This is a national issue and, unless it is confronted soon and seriously, we could face another version of the leaky building crisis.
The government must be willing to take an outlook that stretches well beyond the three-year election cycle.
Yes, solutions such as long-term supply contracts that give factories the confidence to expand have introduced efficiencies in design and construction methodologies. But more training is needed to raise all skill levels, not just apprenticeships, while there is also plenty of room for innovations such as much-touted prefabrication.
The reality is the entire property industry needs to be pulling on all its levers to deliver better results.
The problem in the past has been the boom-bust market cycle, which inhibits confidence and long-term planning. The housing industry cannot hire its way out and it must work in concert with the government.
It will take everyone to create the stable platform required to enable growth, change and good outcomes for everyone.
Phil Eaton is managing director of Greenstone Group
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