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Building Amendment Bill (No 4) — First Reading

[Volume:678;Page:1454]

Building Amendment Bill (No 4)

First Reading

Hon MAURICE WILLIAMSON (Minister for Building and Construction) : I move, That the Building Amendment Bill (No 4) be now read a first time. I intend to move at the appropriate time that this bill, the Building Amendment Bill (No 4), be considered by the Local Government and Environment Committee, and that that committee report back to the House on or before 31 July 2012. The Building Act 2004 is the primary legislation that governs the building and construction sector in New Zealand. I want to make sure that members are fully aware of just how vitally important to our economy the building and construction sector is. I bet you that if we did a survey of this House and asked how big the building and construction sector is as a contributor to our GDP relative to, say, agriculture, everybody would say they were quite different. In fact, they are almost identical in their contribution. They are almost exactly the same in their contribution.

To get some efficiency gains into the sector is vitally important. The National Government conducted a major review of the Building Act. We went out and sought submissions and we got over 380 submissions on the current legislation. I think—to be fair to Labour, because it was Labour’s legislation—in general, submissions were that the current system was not broken, but we did need to reduce some of the costs and some of the red tape that was in there and try to improve some of the efficiency in the system. It is more to do with some amendments to the legislation, rather than holus-bolus throw it out, because productivity in the building sector is very low, there is a lot of risk-averse behaviour, and there are a lot of things that are needed. I welcome and thank the huge number of people from organisations like the Registered Master Builders Federation, the Certified Builders Association, the Building Industry Federation, and a whole range of people who made submissions to this bill and who, I believe, will make submissions to the select committee.

Amendments to the primary Act have been done by two things. Just the other day in the House we passed the Building Amendment Act 2012, which actually started as the Building Amendment Bill (No 3), and now this bill, the No. 4 bill, brings them together. I think members will remember that when I was talking about the No. 3 bill in the last few weeks I said they should not judge it on its own merit but understand that it was part of a comprehensive package of changes. If I took the changes in both that No. 3 bill and now this No. 4 bill together, I think I could really lay out what the Government’s goals are. The Government’s goals are a sector with the necessary skills and capability to build it right first time, because so much of the building and construction sector up until now has been about redoing the work or coming back to fix up what was wrong. So it is about getting it right first time. The Government wants a sector that delivers good quality, affordable homes and buildings and contributes to a prosperous economy; a well-informed sector, a sector that shares its information and quickly identifies problems and corrects them; a sector where everyone involved in building work knows what they are responsible for and what they can rely on others to do; and, finally, consumers in the sector making informed decisions and understanding the risks and consequences of their decision. So that is what we are after.

Let me take members through some of the substance of this bill, which is having its first reading tonight. This bill completes the Government’s changes to the Building Act 2004. The review of it arose from, as I said, the big submissions we had received, and it supports the Government’s goal of achieving a more efficient and productive building sector. I want to outline some of the key changes in this, the No. 4 bill. The bill introduces new consumer protection measures to help New Zealanders who are building or renovating their homes. New Zealand’s housing stock—and this is a good number for members—is worth about $613 billion. That is about 10 times the value of the New Zealand stock exchange. So consumers and builders in the housing market deserve, I believe, to have clear rules about how they are expected to behave in such a ginormous industry with such a phenomenal asset base. The new measures in the bill will help homeowners to hold to account those responsible for building work and get any faults fixed quickly and more efficiently.

The new measures include the requirement that all residential building work above a prescribed price must be documented in a written contract between the homeowner and the building contractor. This will ensure that both parties clearly understand from the outset what their rights and their responsibilities are. Before a contract is signed a building contractor will be required to provide information to their client about their company, the people who will be carrying out the work, their track record, and any surety or financial backing they have to cover the costs of fixing any faults. This, I believe, will help consumers make informed decisions about which contractors to chose, based on knowing those who have got a good track record with very few faults along the way, and that will be where I think the market will gravitate very quickly towards.

All building contractors will be required to fix any defects in their work reported by their clients within 12 months of completion. This obligation is additional to the existing 10-year limit for people to be able to sue for defects in building work. The 12-month period is intended to be a “no questions asked” requirement for the building contractor to stand behind the quality of their work, similar to how faulty goods can be returned and repaired if they are not fit for purpose. We can do it for our colour TVs, we can do it for our new motor cars, so we should be able to for new buildings. The builder must put right any defects so that somebody’s new house—and the service they receive—is fit for purpose and the quality and the standard that they paid for. I think that consumers can expect no less. These measures will put in law what is already best practice in the industry—and I need to stress that. There are a number of good practices out there that do a lot of this. Builders will be more likely to build it right the first time, because they clearly will be accountable for fixing their own mistakes. The Government anticipates these new consumer protection measures will support responsible, professional building contractors, and we expect to see contractors competing on quality as well as on price. The measures will also help owners to distinguish the professionals out there from the cowboys.

The bill also contains some other important amendments to the Building Act 2004 to improve efficiency and accountability in the sector. These include increasing from $100,000 to $200,000 the maximum penalty for doing building work without a building consent, which will better signal that the offence is one of the most serious offences that can be conducted in the Building Act; rewriting and reformatting schedule 1, which provides for exemptions for building consent requirements—schedule 1 has been amended several times since 2004 and has become difficult to access and to understand—and adding new powers for territorial authorities to deal with non-dangerous buildings that are near to dangerous buildings. Again, I think members from Canterbury will know that is an issue that has cropped up time and time again—a building that is not dangerous but is right next to one that is—and this is giving the local authorities some power to act on that building, which may be in danger. The Canterbury earthquake showed that there can be significant risks to undamaged buildings if they are next to those that are dangerous. Councils should be able to warn people about the danger, or, in the worst-case scenario, prevent people from entering those buildings that may be adversely affected by what is next door. There is better targeting of the requirements of the Dam Safety Scheme to include dams that are large dams by virtue of their size, and based on risk factors. Again, I am a Minister who is, and I think this Government is, very fixated on trying to actually deal with things on a risk-rated basis, and not on a one-size-fits-all basis. So this will, I think, improve the efficiency and effectiveness of the Dam Safety Scheme and reduce a lot of compliance costs for a lot of rural farmers, in particular, who have quite small dams on their land, but have actually had to comply.

This bill will empower consumers. It will increase confidence in the sector. It will reinforce incentives for the sector to upskill, and it will reduce compliance costs by clarifying regulatory requirements. I am delighted to say that I think that every one of the major organisations and industry groups that I have talked to about the substance of this bill are supportive of it. In fact, it was many of them that contributed to the writing of this as we got it to this point. I expect at the select committee it will get some modifications, but the actual general intent of it, I think, will weather the select committee and come back to this House in July. I commend the bill to the House.

RAYMOND HUO (Labour) : Labour will support the Building Amendment Bill (No 4) to go to the Local Government and Environment Committee. We are in broad agreement with the direction of the Building Act review, which was initiated under the last Labour Government. I acknowledge that there has been a high degree of cross-party commitment to the Building Act review. Much has been said about the Building Act 1991 and the Building Act 2004. The 2004 Act was introduced in response to widespread weathertightness failure in the residential housing sector, which resulted from systemic problems, which we need to look at closely during the review process. It is important for us to fully understand what went wrong in all instances, not to apportion blame, but to learn valuable lessons that will minimise the risk of a failure in the future. This means we will need to be ready to adjust our regulatory frameworks in light of what we have learnt, and it is important for us to take a comprehensive approach. Let us say, for example, if I may use an analogy, that it is like launching a satellite. We simply cannot say: “Hey, let’s get the satellite launched first and then sort out the navigation system later.” We cannot do that. If we do, we will have dire consequences.

On reflection of the way in which the Building Amendment Bill (No 3) was progressed, I think it is a fair for me to suggest that we should not give too much of a hard time to the Minister. The No. 3 bill was introduced in November 2010, received its first reading in December 2010, was referred to the Local Government and Environment Committee, and we received the select committee report 3 months later, which was 28 June 2011. The bill did not, however, receive its second reading until 28 February 2012, and that was less than 2 days before the licensed building practitioner scheme kicked in. The reason that this bill was rushed through was probably that unless it was passed into law, a number of good initiatives, including New Zealand’s long DIY tradition, would not be able to continue in its current form. Overall, that bill was passed into law in a “wait, wait” and “hurry, hurry” fashion. That was not a good way to demonstrate competency of how the House should be run, but that should be the responsibility of the Leader of the House, not of the Minister for Building and Construction.

The creation of a superministry looks interesting. From 1 July it will absorb the Ministry of Economic Development, Department of Labour, Ministry of Science and Innovation, and the Department of Building and Housing. To make it sound more like a military operation, shall I add that at 2400 hours on 1 July 2012 the superministry will absorb four ministries/agencies.

It was only 2 years ago that the Ministry of Science and Innovation was even formed. Worse still, it was only last year that the Department of Building and Housing took over social housing policy. Transferring social housing policy from the Housing New Zealand Corporation to the Department of Building and Housing, and now removing it from the Department of Building and Housing to transfer it to somewhere else is just one example of National’s expensive shuffling. Although its impact has yet to be felt, some say it is a good idea and that it may improve business efficacy; some say it is not a big deal and that it is just rearranging the deckchairs; some say it is a bad idea.

I am sure the Minister will have received an email from one of the top structural engineers in this country, Mr John Scarry, and I quote: “This is far worse than rearranging the deckchairs. It is like burning what few lifeboats there were on the deck of the Titanic after it hit the iceberg in order to keep the officers warm. Honestly, this is a continuation of all of the disasters that have afflicted the construction industry, and especially the structure profession for decades. Long periods of neglect, then the worst of changes at the worst possible time. One also has to question how a Government can do this sort of thing with regard to the Department of Building and Housing when its own royal commission into the Canterbury earthquake will not report back fully until near the end of this year.”

I will quote from the briefing for the Minister for Building and Construction released under the Official Information Act: “It is estimated that social housing accounts for around one in five dwellings in New Zealand … The current delivery model for social housing is failing to meet the needs of a growing number of households …”. In addition to that, the Department of Building and Housing has taken on other work concerning the financial assistance package for owners of leaky homes and provided information, advice, and dispute resolution services for unit title holders. I quote: “With additional functions has come increased complexity in our work.” That was what the officials said. What future impact it will have on the Department of Building and Housing we do not know. What is certain is uncertainty.

Let us have a look at the Building Amendment Bill (No 4). Firstly, with regard to building consent authorities, there is an unbalanced allocation of risk and responsibility in practice. The bill will introduce a stepped, risk-based system that would see consenting and inspection effort by building consent authorities more tightly focused on that building work where the greatest risk exists. Secondly, with regard to building practitioners, under the Building Act 2004 the Department of Building and Housing established in November 2007 the licensed building practitioner scheme, which became effective from 1 March this year. Qualification and competency, in combination with other measures such as warranty and insurance, will help protect the interests of consumers. Thirdly, for better consumer protection there are some discussions about the joint and several liability model and the proportionate liability model. There are pros and cons, as evidenced from the Australian experience. I will be interested in listening to our stakeholders in that regard.

Also, I am interested in the ideas of a surety. The 2010 data shows that approximately 50 percent of new buildings are covered by the surety products available in the market. That brings me to the fourth issue in respect of the New Zealand standards. From the briefing we note that an independent review found that the way standards are used in the system has not changed, despite changes in legislation in 1991 and 2004. Of the over 650 building-related international and New Zealand standards—

The ASSISTANT SPEAKER (Lindsay Tisch): I am sorry to interrupt the honourable member, the time has come for me to leave the Chair.

Hon Members: Oh!

The ASSISTANT SPEAKER (Lindsay Tisch): Order! This debate is interrupted and set down for resumption next sitting day. I will resume the Chair at 9 a.m. tomorrow for the extended sitting.

  • Debate interrupted.