Building on Solid Foundations

Venue: Dunedin Town Hall
Time: 3.30pm, Friday, 27 April 2007

Certified Builders Association President Richard Merrifield, Chief Executive Derek Baxter, Board Members, Regional Presidents, delegates, Department for Building and Housing Chief Executive Katrina Bach, and distinguished guests.

Good afternoon. It is a pleasure to be here today and to have this opportunity to talk, to listen, and to continue our conversation about being the best.

As you all know, we are in the midst of a series of major reforms designed to transform the building and construction sector to re-establish our world-class reputation. Open and frank communication between the government and the industry, particularly major players such as yourselves, is as crucial now, as it was years ago, if we are to clean up the problems created during the 1990's – leaky buildings, poor design, substandard construction work that got signed off by "drive by" building inspectors, and cowboy operators who disappeared when their shoddy workmanship caught up with them.

The changes that we are making in this sector are the most profound in our history and are about lifting standards, confidence and skills. That is what we have all signed up to and the people of New Zealand – your customers – deserve no less. Your organisation values quality. Your members have a reputation for doing work of the highest order. Excellence is what you offer the market. And that is what the government, through all these reforms, is aiming for across the building and construction sector.

I must have spoken to literally thousands of builders at my builders' breakfasts around the country over the past 12 months, and there is a very simple term that sums up the government's aims and has become my personal mantra for this sector - ‘design and build it right the first time’.

From the day I became Minister some 18 months ago, I have also had another simple message – the Government cannot reform the sector alone.

Regaining our world-class reputation in the building and construction sector requires all of us to work together. And I am grateful for the Certified Builders Association's continuing work to raise standards across the board by getting involved and providing your time and expert input into the reform process.

2007 – a watershed year

This year (2007/08) will see significant milestones achieved in your sector.

The Building Code is being reviewed from top to bottom; building consent authorities are being required to improve their performance; measures to improve the energy efficiency of our homes and workplaces will be implemented; and the new system to speed up the resolution of leaky homes disputes will be fully underway. Work will continue on developing a home warranty scheme and a product certification scheme, and the rebuilding of the apprenticeship system.

For you – as Certified Builders – perhaps the biggest change is only seven months away. Licensing of building practitioners will be phased in, initially on a voluntary basis from November this year, and will lift skills and professionalism, increase accountability, raise consumer protection, and give recognition where it's due. Licensing will separate the professionals from the cowboys. It will also protect our deeply engrained Kiwi Do-It-Yourself (DIY) tradition.

Licensing will be a whole new way of doing business to get some very important outcomes. As a first step, it is intended to help ensure that people doing core work in the building sector are competent. That is our bottom line.

In the medium term, it will raise skill levels across the sector. It will promote, recognise and support professional skills. Over time, we will see an increased emphasis on education and training, along with better career pathways. I envisage that eventually new entrants to licensing may be required to have completed apprenticeships or trade training.

And no, that is not saying we will be sending good, experienced builders back to school. That is not what licensing is about. I have said, and I will keep saying: experienced builders and tradespeople who can demonstrate that they have the skills, have a good track record, and take pride in their work should have no trouble getting a licence.

And it is in this context that Certified Builders are tailor-made for licensing because of the disciplines you put on yourselves. There are a number of ways to become a Certified Builder, but they all involve training and certification – be it through a Trade Certificate or an Advanced Trade Certificate in Carpentry, or Carpentry and Joinery, or today’s equivalent, the National Certificate or National Certificate Advanced in Carpentry, or a Certificate in Building, or other recognised qualifications.

A huge part of the standing and credibility that you have as individuals and as an organisation comes from your commitment to ensuring quality standards through formal training.

I am aware that there is a school of thought that says that qualifications ought to be mandatory for licensing. I can assure you that all such options were considered when the scheme was first mooted, but the fact is, a large section of the current building sector workforce is not formally qualified, but at the same time is experienced, competent and professional. We cannot exclude those people from the sector and deny good people their livelihood. We need their skills.

According to recent Department of Labour figures, more than 1200 carpentry vacancies existed across the country in February 2007. And the so-called "fill rate" which calculates the number of vacancies filled after eight weeks was only 34 percent. People working in other industry trades, such as roofers and bricklayers, are also in short supply.

Improving capability

Both the industry and the government recognise the need for further investment to future-proof the industry and lift our game even higher. And it is pleasing to see that investment already paying off. After the appalling legacy of the previous government in the 1990s, with their deliberate destruction of apprenticeships, the apprenticeship system is being rebuilt. As an organisation that stipulates its members must be trade qualified, I know you will appreciate our record of achievement in this area:

As at the end of last year there were 8,450 Industry Trainees in the Building and Construction industry, an increase of 7.5 percent on the previous year and a 175 percent increase over the numbers in training in 2000.

And there were 1,435 Modern Apprentices in the Building and Construction industry as at the end of last year, up 13 percent over the previous year and a huge 300 percent increase over the number in 2000, when we introduced the Modern Apprenticeship programme.

This investment in education will help ensure that the next generation of licensed building practitioners will come to the industry with trade qualifications. And for those who work in the sector now, the scheme will recognize that those competent professionals fully capable of carrying out (or supervising) restricted building work.

The 13 licenses will be rolled out progressively from November, starting with the voluntary phasing for the design, site lead and carpentry classes. I predict that licence holders will quickly gain a marketing advantage in terms of enhanced credibility with customers, clients or employers. Among a public that remembers the leaky homes issue, it would be a brave person who would undervalue the credibility and professional standing that will come with being a licensed builder.

In a few years time, it will become mandatory for an LBP to supervise or undertake work relating to design and site leads and carpentry, together with other licence classes.

We have deliberately arranged appropriate lead times so we can listen, learn and give people time to adjust as we go along. Just as we want buildings to be built right the first time, so we intend that this licensing regime will be designed and implemented right the first time.

As I said before, I want the feedback between the policy makers and industry to continue. The Licensed Building Practitioner scheme was developed through regular consultation with your industry, and its successful implementation requires the communication channels to remain open.

Accountability, not liability

I know occupational licensing has raised some concerns around the issue of liability. The government has no intention of having licensing change the liability framework that you work under. Where there is any unintended confusion around liability, then the government and the department are working to sort it out.

Much of the confusion comes from misunderstandings around the difference between accountability and liability – both specific and technical terms.

Licensing will mean increased accountability, through the Building Practitioners Board, which will have the power – as it should – to fine, or suspend or rescind a licence when work is deficient.

But that is not about liability, which is where you are open to another party suing for damages. There has always been legal liability in your sector. That is your working reality. We are working to make sure that the licensing scheme does not in any way increase that risk.

My one last point on liability is this. In the long term, licensing should mean liability would become less of an issue for you. It will raise the skill level and the professionalism of all involved. That will mean better buildings.

No one ever got sued for building a building right.

DIY

The other issue where there has been some misunderstanding is around what to do about the do-it-yourself builder. Let me make the government's position crystal clear; we will not undermine the Kiwi DIY tradition of having a go. I have given the public a commitment that DIY will be protected, and I will honour that commitment.

I acknowledge that there will be some in this room today who want DIY building banned. As I said publicly a year ago when I announced licensing, that is not going to happen.

Having said that, the question of DIY construction work does raise some issues. For example, some say that allowing a DIY builder to build their own house undermines the licensing regime because it allows unlicensed builders – those who might not be able to reach the height bar for skill and experience to get a licence – to remain in the industry. Moreover, there is no accountability through the Licensing Board for the quality of the work, and therefore little protection for the consumer who may subsequently buy the house.

On the first point, there is no way the government or your industry can stop an unlicensed builder from building a house, or adding a room to an existing house. The current belt-and-braces licensing regime does not do that.

So, how do we lift skills and professionalism, and enhance accountability in the industry, and raise consumer protection, while at the same time, protecting every Kiwi's right to have a go?

One of the options is to require DIY builders to place a notice on the Land Information Memorandum report (LIM) showing that a non-licensed person did the construction work and not a professional licensed building practitioner. This means that anyone who may be interested in buying that particular house in future knows the score up-front. They can make an informed choice. They either take a chance on the quality of the build, and get all the necessary pre-purchase inspections and due diligence, or they walk away and buy the other house down the street built by an LBP, with all the protections and accountability that comes with that.

It is called freedom of choice. Something I think everyone in this room values and understands.

The other issue with DIY is defining exactly how far a DIY builder can go. Should a DIY builder be allowed to build the Sky Tower? Obviously not. The reality is that most DIY builders only tackle straight-forward houses and additions – those with simple roofs and wide eaves and conventional cladding. Anyone should be able to build a traditional house, the bach, or the sleep-out. Farmers should still be able to build the hay shed or tractor shed.

Beyond these simple buildings are the more complex constructions that have caused us problems in the past, with weathertightness in particular, where an LBP would be required. In fact, most of the builders I talk with say that new building work done by DIYers is not the issue, but the real problem is the renovation work that is outside the consent process. And short of following everyone home from Carters or Placemakers and checking out what they are up to, there is nothing we can do about that.

Your Association has been open and honest regarding your position on DIY work, and I thank you for making your expertise and time available. Make no mistake, the government is committed to the licensing regime, and I believe these options improve the scheme and strike the right balance. I am interested to hear what you think. The joint work with your Association and other stakeholders on the DIY issue will continue.

Building Code Review

No doubt you are also taking considerable interest in the full review of the Building Code, which is due to be reported back to me in November – another crucial development, and why 2007 will go down as a pivotal year in the history of building and construction in this country.

Our Building Code is performance-based, and stresses objectives rather than requirements. The reason for this is to ensure that buildings meet certain performance standards without sacrificing innovation. I am sure your industry in particular appreciates the flexibility this allows.

The review will change what we build and the way we build, because we expect a lot more from our buildings than we did even 16 years ago, when the Code was introduced. There have been significant advances in construction technologies and in our knowledge of building products and performance. A modern Code must reflect that. And it must work for you, the people who are 'at the coalface' on building sites around the country.

The feedback has been invaluable in ensuring that the review is on the right track. The government has already held one public discussion round which has yielded valuable feedback, and another round is pending. This is an ongoing consultation process, which you must remain part of.

Energy efficiency

However, the government is not waiting for the completion of the Building Code review to improve the energy efficiency of buildings. Residential and commercial buildings consume nearly a quarter of all energy used in New Zealand, and more than half of the electricity used in New Zealand is used in buildings in some way. We can be more efficient than that, and we will be.

Late last year, I announced a group of proposals around energy efficiency as part of the government's programme to reduce the amount of energy required to heat new homes, to heat water in new and existing homes, and to light, heat, ventilate and air condition commercial buildings.

The work programme consists of four main initiatives, which are:
·Higher thermal insulation performance requirements for new homes;
·Making it easier to install solar water heating systems;
·Improving lighting in commercial buildings; and
·Improving heating, ventilation and air systems in commercial buildings.

The proposed measures would involve changes to the Building Code and/or new Department of Building and Housing compliance documents.

The Department has publicly consulted on the first three measures, and an announcement is due shortly. Consultation on heating, ventilation and air conditioning systems, and domestic hot water systems is about to begin.

Sustainability must be at the centre of what we do. Factors such as climate change and rising energy costs must influence how we design our buildings and the materials we use on our building sites. We are living in a world where environmental sustainability and energy efficiency will increasingly be at the forefront of our decision-making.

Building Consent Authority accreditation

Another key change that will have an impact on you is the auditing and accrediting of councils as Building Consent Authorities.

You need the consents process working efficiently and well. It has got to be timely and uphold the required professional standards. Equally, the process will demand the same standards from you as builders.

The accreditation scheme is designed to improve the quality of building controls and ultimately the quality of the building stock in this country. Local authorities will have to lift their game, and make the investment necessary to get consents processed sooner and to a higher quality.

New Zealanders deserve to be assured of the quality of the building consents that they pay good money for, and the quality of the houses that are built for them.

Shoddy building work will no longer get signed off. Drive by inspections will be a thing of the past.

While your focus will rightly be more on licensing, building officials and the councils that employ them face their own challenges. And that is exactly how I have presented it to them – as a challenge they need to meet.

I have told them they need to be very clear that territorial authorities across this nation are responsible for being accredited and registered by 30 November this year, or if they are not, then they will lose the right to issue building consents, and an adjacent local authority who has the accreditation standard will likely take over that function.

Once again, these reforms are about responding to the market. Homeowners, coming off the back of the leaky homes problem, are, as I have said, more aware than ever of issues surrounding the quality of their homes. They rightly expect good, solidly built and weathertight homes, and the entire suite of sector reforms is targeted at delivering precisely that – from the design stage to the final inspection.

I am very aware of the challenges they face. And likewise, I am very aware of the challenges ahead of all of us in the journey to a world class building and construction sector in New Zealand.

Other changes

On top of all of these reforms, by November there will also be:

·Voluntary product certification. While this will by no means be a silver bullet for ensuring homes are built to the required standards, it will give better information on the performance of the products certified.

·Along with the core Building Act reforms, there will likely be new legislation on the housing front, including renting, multi-unit complexes, and changes to dispute resolution models.

·Speaking of dispute resolution, by November owners of leaky homes will be seeing the benefits from the Weathertight Homes Resolution Services Act that came into force on the first of this month. The reforms will result in faster resolution of claims, so affected homeowners can get compensation from the liable parties, get their homes repaired and get on with their lives.

·A pilot financial assistance scheme involving market rate loans and loan guarantees also came online earlier this month to help claimants in difficult circumstances get their homes fixed first and argue about liability second.

·The Government is also investigating home warranty insurance options as another step in protecting homeowners and future-proofing the industry.

The Big Picture

The theme for this conference is Building on Solid Foundations, so I want to acknowledge your sector's contribution to our nation's growth:

·A record 191,700 people were employed in the construction industry, and wage and salary rates increased at an annual rate of 3.2 percent, as at the December 2006 quarter (Household Labour Force Survey);
·Job vacancies are up 5.4 percent in the year to February 2007 (Department of Labour's monthly Building Trade Vacancy Index);
·There were 25,770 new dwelling consents issued for the year ended February 2007, and
·The value of building work put-in-place in the calendar year 2006 was worth $12.772 billion, which is 3.1 percent up on 2005.

This is a positive picture of an industry doing very well. And the demand for your work and expertise is ongoing.

Conclusion

The changes we are making in the sector, together, are profound and they are bold. The results will be substantial and lasting. We are reshaping the sector; we are transforming it. I am determined that the sector will regain its world-class reputation.

I thank you all for the positive and practical way with which you have engaged with us throughout the process of reform – and for providing the benefit of your experience and advice. Your commitment to professionalism and to excellence is truly valued.

Have a successful conference. I am delighted to declare the Certified Builders Association of New Zealand's 9th Annual Conference officially open.

ENDS