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‘No capacity’ for KiwiBuild

The viability over the Government's KiwiBuild scheme has been called into question by the building industry, which says there is just no capacity to do it. 

The Chief Executive of New Zealand Certified Builders, Grant Florence, won't go as far as saying KiwiBuild is doomed to fail, but says it faces some massive challenges. They include the price of land for affordable housing, and the sheer lack of tradespeople to do the work. 

Speaking from the organisation's 20th anniversary annual conference in Rotorua, Florence told Newsroom that builders throughout the country are booked up through to mid-2019, and there is further demand down the pipeline. Efforts to increase the number of trades apprentices have fallen flat - there has been no lift in numbers this year.

"The industry is definitely seeking more details (on KiwiBuild) right now - what resources are being put into this, how will it be priced, where will it be done, and at what pace?" Florence is sceptical about some of the short-cuts the Government has mentioned as aiding the scheme, such as pre-fabrication off-site, and doubts the attractiveness of large contracts will be enough to lure builders in, especially if it means lower margins. 

"The key lever is addressing the price of land, which is 50 percent of the cost of housing - more in some places," he says. "Unless the Government is prepared to address that in some way or form then I can't see it working." 

"I personally think we will struggle to do those things the Government is thinking. I think the industry right now is just asking for details on how and what KiwiBuild is and how it is going to be executed. There is a growing level of scepticism within the industry about its viability and whether it's actually likely.

"We are probably at peak capacity now. There is a lot of over-trading ... builders are trying to do too much.

"If and when KiwiBuild gets up and running, I think it will put huge pressure on the industry. If it were to come on tap tomorrow I doubt the industry could cope." 

Florence says homeowners - both those planning renovations and new builds - are the ones who would be hit worst by sudden extra demand on the industry. "It comes back to the point Treasury made recently in the Budget. KiwiBuild work won't be in addition to local work being done now because of this constraint on resources." 

Treasury has halved its forecast on the rate of progress on the housing policy, saying it now sees just $2.5 billion of KiwiBuild-induced additional residential investment over the next five years. In spite of that, Finance Minister Grant Robertson said the Government still plans to build 100,000 affordable homes within a 10-year period. Housing Minister Phil Twyford lashed out at the "kids in Treasury" for the downgraded forecast - he's since had to apologise. 

Florence says Twyford has quite rightly pointed to high-density housing as the answer, especially in Queenstown and Auckland. But he also has worries over Auckland's Unitec plans and the lack of detail being revealed. He says before the first hammer is swung there needs to be massive infrastructure improvements, including transport and water issues. "Building the houses is the easy bit," he says.

In terms of new apprentices coming into the workforce, the trend now is for older people who have already been to university taking up the tools. About 40 percent of those in the NZCB apprentice competition in Rotorua already had a degree.

Slightly more women are also turning to the trades, but Florence says there is plenty more room for that number to expand. It's thought anecdotally that the Government's fees-free policy may have backfired on apprentices, with school leavers who might have taken them up now heading to university. Tertiary institutes haven't yet been able to provide numbers on that. Florence says there's a need to work closer with schools to encourage people - especially women - to enter the industry. He'd also like to see some effort put into finding the 40 percent of apprentices who drop out after one year, to try and get them back into the fold. 

In the meantime, any extra workers are going to have to come from overseas, and Florence is not just talking about hammer hands. He says quantity surveyors and engineers will likely come from Europe, and unskilled workers from Asia. He says we need workers from across all the trades. "We did it for Christchurch and we will have to do it again for KiwiBuild to go ahead," he says. 

He can understand some of the outrage over the importing of nearly 200 Chinese workers to finish an Auckland hotel, especially when the labour is cheaper than can be sourced locally, but says we need to look at the problem on a macro basis. "If they want to build it, they are going to have to bring people in."

In the meantime the building industry wants more details on KiwiBuild plans.

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