Privatise inspection of new housing developments: Fletcher

The time it takes to consents and the uncertainty of the consenting process are two major obstacles to housing development, he says.

Speaking after joining a panel presentation at a conference in Auckland on residential development, Evans says the process needs to incentivise developers to build, but “at the moment they almost penalise it.”

For example, he said high-density housing developments within Auckland, such as at Fletcher’s Three Kings quarry development, create less demand for new infrastructure than a free-standing house on the city outskirts such as Drury. Yet high-density developers face exactly the same infrastructure growth charges and development contributions on a per unit basis, he says.

The 45 apartments Fletchers has just completed at Three Kings required 45 development contributions.

Evans says a current problem is that councils are “the last man standing” when residential building projects go wrong, as happened with the leaky building crisis.

“The general consensus is that the liability issue that’s a noose around the councils’ necks should be addressed sooner rather than later,” he says.

Evans believes New Zealand should adopt similar reforms to those in Britain, with the inspection process privatised and an insurance process in place to protect the end-housing purchaser.

That would help make the process cheaper. “It’s not going to be for everyone – in the UK, the costs vary, depending on the scale and quality of developments,” he says.

But if a development is of high quality, then the cost of insurance should go down.

“If you get reputable companies delivering and having a good quality control system, then you shouldn’t need as many inspections, so you should be able to deliver cheaper and faster.”

Insurance companies would very quickly sort out which kinds of developments would need more inspections, he says.

Fletcher Residential has never had a leaky building claim against it, but if there are any problems, buyers are protected by Fletcher Building’s balance sheet so they never reach the council.

However, Fletcher Residential gets no benefit from having such a strong parent, Evans says.

“There is a view that things need to change. We as residential builders need to speak consistently together to get some of these messages back to local and national government.”

Fletcher’s residential and development arm had revenue of $251 million in the six months through December, 6 percent more than a year earlier. Earnings before interest and tax fell 9 percent to $43 million, due to lower earnings and land development and a higher proportion of sales in the lower-margin Christchurch market.