Ambitious Targets Driving Dramatic Reduction In House Building Costs

Kiwi consumers can expect to see house construction costs tumble as innovation and cooperation align to transform off-site manufacture of houses, drive down construction costs for first-time homeowners.

COLAB23, the conference on offsite house building organised by Offsite NZ CEO, Scott Fisher, showed evidence a-plenty that targets set for OSM (Off Site Manufacture of houses) by the government’s own house-building agency, Kainga Ora, will lead to substantially lower construction costs for first time homeowners.

While traditional practices, bespoke building methods, supply chain constraints, margin-on-margin pricing and restrictive trade practices are dominating the house construction market, making New Zealand building costs among the most expensive in the OECD, COLAB23 represented a once-in-a-generation transformational approach to new home construction.

Sir Mark Farmer, who galvanised UK construction with his “Modernise or Die” review and was a critical participant in the Commerce Commission’s Building Materials Study, impressed Kiwis with his evangelistic enthusiasm about European best practice construction methods. However, nothing summed up the zeitgeist of the conference better than Simplicity’s Sam Stubbs mantra: “challenging the status quo.” Technologies and practices on display were all geared to delivering higher quality, more affordable homes to consumers. These included robotic house assembly, new building materials (SIP panels, thermo-insulated windows and advanced cladding systems) and BIM (Building Information Modelling), all point the way towards delivering high-quality, precision engineered, factory-built homes. Taken together these innovations augur well for home buyers looking for more affordable, sustainably built and energy-efficient entry-level homes.

Tex Edwards from Monopoly Watch NZ provided evidence of 32% reduction in building costs achievable from adopting OSM at scale. He showed potential for further cost reductions, up to 50% over the decade, in both entry level social housing and first home buyer segments as modern methods of building are deployed at scale. Edwards and associated parties, Kiwi Infrastructure and ABC (Affordable Building Coalition), visited 32 international house building factories and prepared detailed submissions to the Commerce Commission on reforming the entry-level house construction industry to meet international best practice.

Factors propelling this transformation and the rapid adoption of new building methodologies at scale are the ambitious targets the government has set for Kaianga Ora. These have forced the agency to look for improvements in its supply chain and its approach to house assembly systems. The result: an order-of-magnitude increase in homes built. In 2015 Kainga Ora was building fewer than .01% of the nation’s new houses; now it is on the path to delivering over 10% of all houses, and 32.8% of all economy segment houses. “This will so galvanise competition that a 50% reduction in gross costs should be achievable this decade,” said Edwards.

The last few years has seen increased activity in entry-level house construction, with over 24,000 new people in trade training and an estimated 35,000 sections becoming available through Kaianga Ora, climate change targets set for new home construction, and healthy home standards introduced.

“Central government pressure has created a pathway to reduce costs and align NZ house building with international best practice,” said Edwards. “Scale, OSM ,standardisation and long-dated pipeline contracts will deliver a reduction in costs not just for Kainga Ora but these will also flow through to kiwi first home buyers.”

Notably absent was BRANZ, the industry’s well-funded research arm, despite benefitting from a levy that effectively taxes all kiwi house builders, including the OSM industry. “It’s time for the government to redirect the BRANZ levy to Offsite NZ in order to deliver real innovation,” said Edwards. “A successful OSM industry, one that applies lessons from the successes and failures of international projects, will improve building quality and reduce cost, but it requires continued Government participation, cross-industry co-operation and proper pipeline contracts.”

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