Residential building product supply

time for new thinking?

For a whole range of reasons, it’s easier and quicker to rely on ‘tried and tested’ products when building residential homes in New Zealand—but this is holding back necessary innovation, according to the Commerce Commission’s recently released draft report on competition in the residential building supplies market. NZ Plumber takes a look.

The complexity of New Zealand’s building regulatory system makes builders, designers and councils favour ‘tried and tested’ building products— and this is hampering innovation.

This is one of the key findings in the Commerce Commission’s draft report on its study into residential building supplies, released in August. The study focused on competition for building supplies for the major components of a home: foundations, flooring, roof, walls and insulation.

It was commissioned in November 2021 by the Minister of Commerce and Consumer Affairs, Hon Dr David Clark, who said it was critical that Kiwis have access to fairly priced building materials.

At the time of the report’s release, the average cost to build a residential home in New Zealand was $2,696 per square metre. Building materials are estimated to comprise 16%-24% of the total cost of residential housing development—or 23%33% if you exclude land and infrastructure costs. Labour, GST and professional services make up the bulk of the rest.

Consents for new residential homes have reached record highs in 2022, and residential building activity has also increased on the previous year. The value of alterations and additions to residential buildings was $2.4 billion in the year ended Dec 2021, up from $1.2 billion in the year ended Dec 2012.

DRAFT REPORT FINDINGS

Preliminary findings in the draft report include:

The regulatory system is complex to navigate and makes it difficult for competing suppliers to enter the market

Designers and builders generally use ‘tried and tested’ products because they’re proven to perform and there is a clear compliance pathway

Certain key building supplies are often specified by brand in building plans and consent applications—and builders generally don’t use other options because of the administrative effort, uncertainty and potential delays when seeking a variation to the consent

Suppliers of new products must establish compliance with multiple Building

Consent Authorities (BCAs) and not all decisions are consistent

It’s difficult to find useful information about new or innovative products to help product suppliers and designers assess if they would comply with the Building Code

New Zealand’s small size and demand uncertainties (eg, boom-bust construction cycle) make it challenging for domestic manufacturers to achieve efficient scale, and less attractive for entrepreneurs to import products

Some major building supply merchants are using exclusive leases and restrictive covenants on land to limit other merchants from being able to access suitable sites to open stores

Rebate arrangements between suppliers and merchants can make it harder for alternative suppliers to compete effectively.

The resulting increase in demand for key building supplies, as well as supply chain pressures, has led to well-publicised shortages of some supplies, like structural timber, plasterboard, and insulation. Covid has also placed pressures on the building supply industry, with lockdown restrictions and major disruption to global supply chains.

The report provides a set of preliminary findings and draft recommendations for improvement to factors affecting competition in the residential building supply market. These, in turn, says the Commerce Commision would produce better long-term outcomes for consumers in terms of price, quality, range and service.

Why innovation matters

New prefabricated building products are being seen as a key solution to Aotearoa’s growing population and associated housing demand. There has been significant recent growth in offsite manufacturing, but the sector remains small. For domestic offsite manufacturers, lack of certainty around the pipeline of work and an absence of large long-term contracts remains the key challenge, according to the report.

Climate change is also driving the need for ‘green’ building supplies, and initiatives such as MBIE’s Building for Climate Change programme will call for a significant response from the building industry. If barriers to competition persist, they could inhibit the entry or expansion of innovation in green building supplies. The report notes that new homes being built in NZ today appear to be behind international standards in terms of energy efficiency, and the quality of our existing stock is poor. If the building industry gets on board with innovative green alternatives to traditional supplies, this has the potential to increase choice and competition, it says.

What next?

Final feedback on the Commerce Commission’s draft report into residential building supplies is due by 13 October. The final report will be publicly available by 6 December.

You can read the Residential Building Supplies Market Study Draft Report in full at www.comcom.govt.nz

BUILDING PRODUCT INFORMATION REQUIREMENTS

The Commerce Commission’s draft report acknowledges that work is being done to reform the building regulatory system. Regulations relating to new minimum product information requirements form part of a major legislative reform programme underway at MBIE. The regulations, which will come into play in December 2023, will require building product suppliers to publicly provide minimum levels of information about their products, and to ensure the information is accurate.

MBIE is currently developing educational materials and guidance to make sure everyone involved understands how to comply.

STEP BY STEP GUIDE Building Product Information Requirements

Introducing building product information requirements will ensure there is a minimum and consistent level of product information available for building products to support designers, building consent authorities, tradespeople and consumers to make better choices about building products that contribute to Building Code compliance. THE GENERAL MANAGER (GM)

BUILDING WORK WHEN CONSENT IS REQUIRED

THE MANUFACTURER 1

Fibreboard Peak Ltd is a New Zealand based manufacturer of weatherboards made from fibre cement sourced from overseas. To be sold in New Zealand they must provide certain product information about the weatherboards. They collate information from the manufacturer, internal quality control testing and the results of external testing.

Fibreboard Peak

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The GM works with those staff members expand their role to track that building products they are selling comply with building product information requirements. The GM needs to ensure there is a process in place to check that the required information is included with the relevant products before they are made available for sale. This may include having in-store signage to ensure the information is available to the customer before purchase.

2

Fibreboard Peak Ltd are uncertain of some of the claims from the overseas manufacturer so they check what testing was done, by who and to what international standard. They can also undertake 3rd party testing to be sure of the physical properties before including those claims in the product information.

THE DESIGNER

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The GM of a large building product retailer is preparing their staff for the requirement for all products in stock to meet the minimum information requirements. There are already a number of other regulatory requirements that have to be considered such as specific product testing.

THE BUILDING CONSENT OFFICER

The designer is also able to see how this product The building consent officer is reviewing the works with the wider building design to meet building consent application for the customer’s new 6 Building Code performance requirements by reading through the building product information provided with the weatherboards. It is clear from the product information that the product is not subject to a warning or a ban. 7 home. She hasn’t come across Fibreboard Peak Ltd’s weatherboards before. Previously the agent would have had to seek further information from the architect to understand the weatherboards scope and limitations. Now they are able to look up the product information on the manufacturer’s website. 8 The builder who is working on the customer’s house has not installed Fibreboard Peak Ltd’s weatherboards before but, as building products now must include installation information, they are able to install the weatherboards correctly first time. They must ensure that the building products are installed so that the building work complies with the building code and the relevant plans and specifications. This saves them from having to redo them later because they weren’t installed properly. THE BUILDER

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The designer thinks the weatherboards from Fibreboard Peak Ltd would work well in their design but hasn’t used them before and needs to check how the weatherboards secure to the building structure. The designer is able to look up the technical drawings for installation within the product information and adjust the cladding design to ensure it meets these installation requirements.

9

The customers are happy with how their new house is progressing. They find an alternative weatherboard they think would look better in their house. After checking the product information and discussing the relevant differences and similarities to the weatherboards being used in the rest of the house, they are confident the new weatherboards will also be fit for purpose. With the designer’s help they complete a variation to the building consent to update the building consent. THE CUSTOMERS

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Complaints regarding non-compliance by manufacturers, importers, wholesalers/retailers and distributors with the requirements for building product information is lodged with MBIE. This covers failure to provide the required building product information and making false or misleading representations about the product.

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The corrective action may include creating a compliant building product information to cease making false representations. MBIE may also proceed with an investigation that may lead to prosecution and imposition of applicable fines.

This September, MBIE asked for feedback on its draft educational resources to help people understand the new building product information requirement regulations, which will commence in December 2023. An example of a draft resource is shown here. Source: Commerce Commission.

BP 5816