As well as reforming that system, the Government also intends to review liability settings across the entire building system. These proposals form part of broader proposed reforms to the New Zealand building system, which currently include changes to the certification processes for overseas building products to boost competition in the New Zealand building supplies sector.
Challenges with the current system
In his announcement on Sunday, 29 September 2024, Building and Construction Minister Chris Penk noted that New Zealand faces some of the least affordable housing in the world, largely due to high building costs and a cumbersome consenting system.
The current system requires building work to be inspected and consented by a Building Consent Authority (BCA), but has suffered from inconsistencies in the interpretation of the Building Code across different BCAs. According to Minister Penk, this has led to additional costs and delays in projects, which can be challenging – particularly for large-scale home builders, off-site manufacturers, and builders of modular and prefabricated buildings, who work across regional boundaries and deal with multiple BCAs.
Proposed reforms
The Government is exploring several options to replace the current BCA system with a more streamlined model, with such options including:
- Voluntary Consolidation: This approach would allow councils to group together to deliver building control functions. Several councils are already pooling some resources, but certain barriers prevent full integration. This approach focuses on removing these barriers.
- Regional BCAs: Establishing a smaller number of relatively large regional BCAs to replace the current district and city council BCAs. This approach aims to improve consistency and establish entities with the critical mass necessary to drive economies of scale.
- Single Point of Contact: Setting up a single point of contact for builders to submit plans, with building inspection work potentially contracted out to existing BCAs or private consenting providers, to create competition and encourage specialization.
Review of current liability settings in the building system
As part of its review, the Government will also look at liability settings across the entire building system.
Currently, councils and therefore (indirectly) their ratepayers can be liable for defective building work. Courts have traditionally found various parties liable for defective buildings on a “joint and several” basis – meaning that each responsible party is responsible for the full amount of the damages awarded by the courts. This joint and several liability often results in councils (as “the last man standing”) liable to foot the entire bill in these circumstances. Many industry participants have therefore argued that this has created a highly conservative and risk-averse approach from councils, adding cost and extending deadlines to the building consent process.
An options paper released by the Government in 2023 (when it first announced a substantive, end-to-end review of the building consent system) also noted that BCAs hold too much responsibility for providing assurance that building works are compliant with the Building Code.
Next steps
The Ministry of Business, Innovation and Employment’s (MBIE) Building Performance team has advised that it will engage with those who work within the building system about the potential options for improvement first.
It will then use the information from those discussions to prepare further advice for the Building and Construction Minister, with the aim of conducting a public consultation on the options for change in the first half of 2025.
Part of broader reforms to the building system
The Government first announced a substantive review of the building consent system in 2023. Bell Gully previously published an article on this here.
Some of the reforms initially proposed are now underway. For instance, the Building (Overseas Building Products, Standards, and Certification Schemes) Amendment Bill, introduced to Parliament in September 2024, aims to promote competition in the building supplies sector. The bill seeks to do this by removing barriers to the use of quality overseas building products in New Zealand, through methods such as:
- enabling recognition of overseas standards and standards certification schemes, and therefore remove the need for designers, builders or BCAs to verify standards;
- streamlining the citing of international standards, which can be used with Building Code documents to show compliance with the Building Code; and
- requiring BCAs to accept building products certified overseas and recognised by the New Zealand regulator – MBIE.
We will continue to monitor progress with these reforms and report on relevant developments.
If you have any questions on the building system review or how they may affect you, please get in touch with the contacts listed or your usual Bell Gully adviser.