Latest / Best of Business / Julien Leys: Building Industry Federation chief executive on the Government's new changes for the building sector

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Julien Leys: Building Industry Federation chief executive on the Government's new changes for the building sector · Best of Business

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  Speaker 1: You're listening to a podcast from News Talks Be follow
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  Speaker 2: The Building Can Sense regime is getting an overhaul. It's
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  Speaker 2: been called the most significant change in a generation. To
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  Speaker 2: discuss further, we are joined by Julian Lees. He's the
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  Speaker 2: chief executive of the New Zealand Building Industry Federation and
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  Speaker 2: he's on the line now, Julian, Very good afternoon.
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  Speaker 3: H I'm Matt Hi Tayler.
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  Speaker 4: Now, Julian, explain this proposal to me, like I am
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  Speaker 4: an absolute idiot.
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  Speaker 3: Well, look what it means is every time a builder
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  Speaker 3: becomes insolvent, and we've seen a lot of that, partically
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  Speaker 3: in hard times, and they're leaving the homeowner with an
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  Speaker 3: incomplete building, there's now going to be not just a
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  Speaker 3: council as the last man's standing, but potentially it'll be
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  Speaker 3: a builder who's got some insurance. So ultimately it's going
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  Speaker 3: to lead to faster sort of resolution of these sorts
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  Speaker 3: of things. But also it's going to mean that our councils,
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  Speaker 3: who are so risk averse will be much much more
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  Speaker 3: open and less likely to say no to things, particularly
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  Speaker 3: things like new building products which we're saying to see
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  Speaker 3: as well. So it is a big change, but of
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  Speaker 3: course the devil's always in the detail.
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  Speaker 4: So as the cautiousness of councils, is that because of
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  Speaker 4: the liability primarily because I just always put that down
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  Speaker 4: to being officious.
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  Speaker 3: Well yeah, look, possibly you say it's a bit of both,
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  Speaker 3: but no, look it is. They are risk averse because
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  Speaker 3: if they get something wrong or you know, something doesn't
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  Speaker 3: go the way it should, they are the ones that
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  Speaker 3: they get sue. The are the ones that have got
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  Speaker 3: the deep pockets. Now, of course all that gets passed
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  Speaker 3: on to rate players us. So what we want to
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  Speaker 3: do is do something I get similar to what is
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  Speaker 3: in New South Wales and Victoria, where you know you've
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  Speaker 3: got you've got attary warrantees, you've got mandatary insurance if
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  Speaker 3: you're building anything over twenty k of value in the
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  Speaker 3: residential space, and it's just a better system for allowing
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  Speaker 3: you know, homeowners some compensation and to get their buildings complete.
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  Speaker 4: So people are already screaming leaky homes. Leaky homes. Is
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  Speaker 4: that kind of massive cock up likely under a system.
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  Speaker 3: Like this, none of it's done properly because I mean, look,
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  Speaker 3: leaky homes and we've still you know, seen the tail
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  Speaker 3: end of it. But that that was also about the
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  Speaker 3: you know, poor design. It's got a whole bunch of issues.
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  Speaker 3: I think I think this means we've got to have
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  Speaker 3: criteria around eligibility. So in other words, you know, we've
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  Speaker 3: got to have builders that have got the qualifications, the experience,
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  Speaker 3: and the financial standing plus the insurance. So we've got
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  Speaker 3: to have those things in place if we If we do,
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  Speaker 3: then then it means that we've got you know, the
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  Speaker 3: homeowner has got a recourse, you know, they've got some
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  Speaker 3: guarantee that that thing things will get done if the
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  Speaker 3: fall falls over. So I don't think we're I don't
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  Speaker 3: think we're there yet, but there are other risks. The
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  Speaker 3: other risks being that if we move from that join
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  Speaker 3: several ability that we currently have to proportion it, it
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  Speaker 3: could be that we simply just don't have enough builders
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  Speaker 3: who you know, meet the alibility criteria or have the
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  Speaker 3: financial backing be ensured.
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  Speaker 4: Because that's what I was wondering. Kind of smaller business
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  Speaker 4: like a you know, just a small crew running a
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  Speaker 4: couple of people, businessmen or solo builder. Will they be
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  Speaker 4: able to cover the insurance levies.
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  Speaker 3: Possibly not, because you know, most of our builders are
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  Speaker 3: three to five you know, crew small companies. They operate
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  Speaker 3: on very slim margins, they operate on quickly. Now in
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  Speaker 3: these times amount of times on you know, hand to
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  Speaker 3: mouth basically, so cash flows tight to you know, insurers
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  Speaker 3: will will come to them and say, well, we won't
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  Speaker 3: look at your books, we won't see what your cash
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  Speaker 3: flows like. They don't ensure people if they think the
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  Speaker 3: risk is too great. So that's the issue. And I
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  Speaker 3: guess this is also why Australia has some state backing
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  Speaker 3: of their insurance schemes in all our sales.
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  Speaker 4: Yeah, because our economy couldn't handle all those little operations
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  Speaker 4: going into business, could they.
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  Speaker 3: No, and no, no, look and the other thing. No
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  Speaker 3: one's talked about this yet, but New Zealand doesn't have
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  Speaker 3: any functioning building warranty insurance market. You know, we we
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  Speaker 3: we had a I think it was called Stanford Insurance
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  Speaker 3: back in between nineteen that did do that, but they
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  Speaker 3: pulled out because there just wasn't simply the market for it.
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  Speaker 3: So we need to get you know, we need to
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  Speaker 3: realize that if this is going to work, we need
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  Speaker 3: to get that building warranty insurance get up and running again.
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  Speaker 3: And we need to have, you know, something sufficient so
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  Speaker 3: builders can can't get that level of cover if we're
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  Speaker 3: talking about you know, not making counsels the last man's standing.
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  Speaker 4: So just speaking of warranties, you said before statutory warranties
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  Speaker 4: are used in Australia. What does what's a statutory warranty?
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  Speaker 3: So what that means is a New Zealand we have
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  Speaker 3: the Building Acts in Australia, the Act. But thinking so well,
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  Speaker 3: it's got the Home Building Act and it's got the
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  Speaker 3: Domestic Building Act something like that, whether what that means
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  Speaker 3: for our Building Act? We would then have an implied
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  Speaker 3: warranty builds into that Act. So that means, so what
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  Speaker 3: that means is any work undertaken by any builder in
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  Speaker 3: New Zealand would have to it would impliedly be saying
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  Speaker 3: this work will be done to a certain standard and
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  Speaker 3: you know, using certain materials, and there's an implied warranty
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  Speaker 3: to back that up, so you know, and again this
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  Speaker 3: is what Australia has done. And again that's the last
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  Speaker 3: sort of insurance backstop if you like, in case we've
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  Speaker 3: got home owners that actually are dealing with the builder
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  Speaker 3: that doesn't have insurance.
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  Speaker 2: Great, we're chadding to Building Industry Federation Chief executive Julian
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  Speaker 2: Lee's Julian the sixty seven building consent authorities. So you've
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  Speaker 2: talked about the consolidation of those authorities, hopefully into one
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  Speaker 2: unit to get some consistency. But what does that look like.
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  Speaker 2: Does that mean that gets absorbed into central government or
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  Speaker 2: how does that operate if it's just one authority dealing
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  Speaker 2: with those sides of the consents.
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  Speaker 3: Yeah, well look at the moment, so you're quite right.
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  Speaker 3: We've got sixty seven BCA's councils Auckland Council for all
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  Speaker 3: of New Zealand is about forty six percent of world
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  Speaker 3: building consents. I mean, we know, which's no surprise because
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  Speaker 3: we're the biggest city in the country and this is
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  Speaker 3: where most of the building work happens. So it kind
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  Speaker 3: of makes sense if there's some sort of consolidation where
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  Speaker 3: some of those smaller councils that may only do a
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  Speaker 3: few hundred or you know, a couple of consents, they
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  Speaker 3: probably don't need to be doing that. It'll make it
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  Speaker 3: be much more efficient if there's one organization which could
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  Speaker 3: be a new organization that's formed or simply open council
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  Speaker 3: decignis to take that on, or a private organization that's
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  Speaker 3: set up to do all of that. And they're already
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  Speaker 3: talking now about I think, I think, I think Minster
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  Speaker 3: Penk has said the expectation is that councils should be
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  Speaker 3: doing eighty percent of consents within three days, which is
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  Speaker 3: significantly faster than the currents that have ten to twenty days.
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  Speaker 4: So how much cheaper will building be under a set
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  Speaker 4: up like this?
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  Speaker 3: Potentially thousands of dollars will come off the cost of
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  Speaker 3: a new build. And so that's a really good question
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  Speaker 3: because the whole focus has been for these reforms and
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  Speaker 3: by this government to make housing more affordable. You know,
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  Speaker 3: Kiwis do pay a lot for their home and more
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  Speaker 3: than we do our cousins to over the ditch. So
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  Speaker 3: you know, we can we can knock thousands off through
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  Speaker 3: this process and through speedier consenting and in addition to
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  Speaker 3: bringing down the cost of building materials, and then we're
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  Speaker 3: on our way to you know, getting better, more affordable housing.
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  Speaker 4: Would a government insurance system worker would be for the
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  Speaker 4: insurance to actually come in to the market, would it
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  Speaker 4: need some kind of government back up.
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  Speaker 3: Yeah. Look, I think because we don't currently have that,
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  Speaker 3: as I said earlier, that functioning building warranty insurance market,
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  Speaker 3: the government probably is going to have to do something
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  Speaker 3: to incentivize or to create a market initially where builders
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  Speaker 3: can be covered and where homeowners have that sort of surety. Yeah.
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  Speaker 3: And because you know, that's just the size of our market,
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  Speaker 3: you know the fact that we're also just in a
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  Speaker 3: tough I'm you know, insurers are looking at New hilland
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  Speaker 3: overall in general and going, h you know, do we
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  Speaker 3: want to really be ensuring anything at the moment.
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  Speaker 2: Yeah, absolutely, concern certainly is Yeah, Julian, thank you very
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  Speaker 2: much for having a chat with us. Really interesting. So
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  Speaker 2: last one, So out of ten, what do you think
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  Speaker 2: about this policy? How's it going to work?
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  Speaker 3: Look, I would say in terms of the intent, it's
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  Speaker 3: it's it's an eight, but it's always a case of
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  Speaker 3: waiting and seeing. But I hope it's backed up by
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  Speaker 3: buy some good thought around the insurance side of things.
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  Speaker 2: Yep, really good to chat with you. Thank you very
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  Speaker 2: much for your time.
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  Speaker 3: Thanks Madam Tyler.
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  Speaker 2: That is Julian Lee's chief executive of the New Zealand
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  Speaker 2: Building Industry Federation.
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