A cunning political stunt?

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In August of 2015 a very telling report titled The Rules Reduction Taskforce Report was delivered to the Minister of Local Government.

It received much fanfare, along with promises of action, rules reduction, cutting of red tape and the elimination of nonsense rules from the system.

One year on from recommendations being made, it’s time to recap the reasons and findings of this report, and to see what actions have taken place as a result of it.

The Loopy Rules Report confirmed what the construction industry has known for years — laws around land development and construction are a mess.

The Government was congratulated on commissioning the report on Loopy Rules and the impacts they are having. It was the first step in realising that something is seriously wrong with the laws we are currently operating under.

The Loopy Rules Report was managed by a taskforce that travelled around the country to hear from people in local communities, as well as councils, sector interest groups, tradespeople and government agencies.

It came as no surprise to anyone who carries out land development or construction projects, or who has had a project completed, that the laws and implementation of such are creating unnecessary complexity, expense, confusion, delays, loss in productivity, and risk-averse outcomes that could never have been the original intention.

Of the 2000 topics submitted on the Loopy Rules Report, a huge 78% of them impact on construction. The breakdown of topics submitted is as follows:

Resource Management Act: 32%

Building Act: 27%

Local Government Act: 12%

Health and Safety Act: 7%

A common denominator in all of the above, with the exception of the Health and Safety Act, is that the laws in question are all administered by local authorities who, given the amount of disquiet around the implementation of such, are struggling with the complexity and consistency of delivery of what they have been charged to do.

Submitters were consistent in saying that they seldom felt valued in their dealings with local authorities, let alone being considered or treated as actual paying customers.

Readers might remember discussion in my previous columns about how petty rule enforcement is driving good builders from the industry, and that a full regulatory rethink is necessary if we want affordable housing and a sustainable industry.

The response I had to those articles was immense, and the Loopy Rules Report only reinforces the stark reality of operating within our industry.

Quite honestly, the industry will not survive in a productive format unless there are some major structural and cultural changes as to how the rules operate.

If these changes are not seen, no one will want to continue working within it, or will be able to deliver the huge number of dwellings that are now backlogged.

Low financial returns, dealing with a mountain of inefficient bureaucracy and boom-bust cycles, along with 10 years of liability is not a sustainable formula and, of course, provides no incentive to stay in or enter the industry.

The construction industry contributes to the health and strength of the overall economy, and if it operates well, the spin-offs through employment and investments are huge.

It is imperative that we have sensible and workable rules that enable this massive driver for the economy to work efficiently. A nation of 4.7 million people should not be drowning in excessive and inefficient regulation.

 

Implications of the Health and Safety Act 

The one Act that local authorities don’t directly administer is the Health and Safety Act, which is reserved for WorkSafe NZ.

And, once again, submitters were consistent with their condemnation — especially around falling from heights — which is in line with previous articles I have written on the subject.

The taskforce heard from people who have serious concerns about the negative impacts of the current health and safety regime.

They were told of high compliance costs, overzealous enforcement, disproportionate fines, excessive paperwork, a lack of personal responsibility for safety, lost productivity, and general confusion about how to comply.

The taskforce is sure Parliament never intended any of this. However, this is the real world.

The language used by WorkSafe NZ, namely “all practicable steps”, a requirement of the Health and Safety in Employment Act 1992, is so broad that neither employers nor employees know what to do to comply.

In addition, WorkSafe NZ’s extensive list of more than 400 guidance documents can make it difficult to identify what is actually required in any given circumstance.

For example, the 64-page Working from Heights Guide refers to 32 New Zealand and Australian standards, 10 European standards, six codes of practice and 10 best practice guidelines — but it does not state exactly what is required in any given circumstance.

Again and again, submitters describe their difficulty in finding understandable information to guide them through what they need to do. They feel swamped with inaccessible information and, at the same time, over-regulated. Clearly, WorkSafe NZ has work to do here.

I have stated many times over the past 24 months that the falling from heights campaign has been foisted upon us with little or no thought as to its cost, benefits or on-site practicalities.

It has resulted in a $10,000 increase in cost to the consumer for a 200 sq m single-level build, with no real substantiated benefit.

The Australian Code of Practice for falling from heights is proven, covers the majority of what the submitters have raised, and also saves the consumer 75% of the costs we are currently lumbered with.

Time and again I will say it — WorkSafe NZ would be doing everyone a favour by adopting the practical aspects of the Australian Code of Practice.

 

Implications of the Building Act

At the time, the Building Act 2004 introduced a whole new approach to building controls.

As part of the new approach, most councils have become building consenting authorities, requiring them to interpret the Building Code when assessing consent applications and to inspect and approve the work done.

Councils are liable for any errors they make under the “joint and several liability” regime, which has cost them millions in legal action to do with leaky building claims.

As a result, councils have become more risk-averse since incurring these losses, and this approach leads to arguments with designers and builders over, for example, acceptable solutions, as well as detailed and repetitive inspection processes.

The situation creates undue cost, frustration and delay to those applying and working under the consents.

Risk-averse behaviour and poor service is likely to continue as an underlying driver of decisions as long as councils remain in charge of consenting, and have no competition.

The continual changes to the rules, like the one implemented on January 1, 2015, to do with warranties and disclosure, was implemented with little thought, unnecessary haste and against industry advice.

For example, why develop new regulation for builders in late November, the busiest time for the industry, and then force them to have systems and rewritten contracts in place for a launch on January 1?

It demonstrated a complete disconnect from the way the industry operates.

As a result, facets of this regulation go largely ignored by the industry as unworkable and unenforceable. This is a prime example of a well-intentioned but, in reality, Loopy Rule, and one would hope that, going forward, this type of thing will be avoided.

It appears little has been learnt as the upcoming changes to the retentions regime coming into effect in March 2017, without any modification between now and then, are destined to become the next big Loopy Rule.

This change will have potentially catastrophic financial impacts if the faults that have been identified are not rectified.

Furthermore, politicians have been quoted as saying one of the panaceas for the current malaise of the Building Act is for builders to sign off their own work.

There may be some merit in this statement and, in time, we may get there. However, the industry is not ready for this.

The Licensed Building Practitioner system has not yet matured to a point where this can happen, and a knee-jerk, politically-expedient response might just create more unintended consequences.

It could end in tears, with substandard work and out-of-pocket consumers being the result.

A more sensible response would be to address the risk-averse behaviour clogging up the system, and to get some reality, sanity and service back into the consent approval and inspection system.

Auckland, in particular, will never build the homes it needs under the current gridlocked system.

The Ministry of Business, Innovation and Employment (MBIE) could take a much stronger leadership position around best practice and cutting out the nonsense, rather than leaving it to local authorities to interpret and administer the rules in the most risk-averse way they possibly can.

The joint and several rules that plague our industry and drive perverse outcomes not only affect local authorities — they have decimated the lives of many tradespeople who have unfairly carried the can for errant manufacturers, and others who have folded their tents and left the industry.

The joint and several regime where it relates to the construction industry needs a serious overhaul by pragmatic people looking for a pragmatic solution.

With all due respect, asking a posse of lawyers if it should be changed is no different to asking a flock of turkeys if they want an early Christmas. Of course the answer will be no, as the gravy train of law suits with wide nets would be cut back.

 

Implications of the Resource Management Act

The biggest area of concern with submitters was the Resource Management Act (RMA), and not solely with the legislation itself — implementation was a big complaint too.

It is an overly complex area that disguises a raft of issues to do with district plans and other documents developed by councils and the Ministry for the Environment.

Resource consents have become more and more complex, with consents needed for such minor things that the only thing impacted is the time line of the project and the applicant’s wallet.

The RMA has morphed into something that was probably never envisaged by the original legislators.

The inflexibility of the Act and the number of minor matters now covered have reached a paralytic state.

A recent example of how ridiculous the RMA can be in operation includes a builder making a set-out error when excavating for a foundation, and inadvertently taking out an extra meter behind the foundation wall.

It had no effect on anyone except himself having to pay to fill it back in. He did the backfill work under an engineer’s supervision so everything was reinstated exactly as it was.

You’d think this would be the end of it, but no. The local authority concerned requested the project stop, a fee of $1500 be paid for a resource consent, and an assessment of effects be produced retrospectively.

The final eventual outcome was that nothing changed, the resource consent was approved and the builder had to pay three times — once for the mistake, second, for a needless resource consent and, third, for the delays while the project stopped and an assessment was made of something that had already been returned to its pre-existing form.

I severely doubt this is what was ever intended by the RMA but it’s what it has descended into. There is no space for common sense.

There are many who naively defend any changes to the RMA. However, my challenge to them is to try applying for a resource consent with the raft of expert opinions and peer reviews that will be required by ideologically-driven planners, and then see if your position remains as steadfast.

It is an Act that seems to be completely devoid of any commercial considerations or common sense where it relates to a current landowner or applicant — and this needs to change.

 

Taskforce recommendations from the Loopy Rules Report

The taskforce wisely recommended 10 fixes, as follows:

1 Make it easier to get building consents.

2 Get serious about lifting skills of the building sector.

3 Make it easier to get resource consents.

4 Reduce the cost of consenting fees.

5 Sort out what “work safety” means and how to comply with it.

6 Make it clear what the rules are and actually mean.

7 Establish a new customer focus for the public service.

8 Departments should introduce a stakeholder engagement approach to developing local government policies and regulations.

9 Reform the Local Government Acts.

And, most important, and the one that the Government can have the most immediate impact on:

10 Stop making loopy rules by:

Developing a coordinated pipeline approach to regulation.

Including a cost-benefit analysis prior to development.

Creating a mechanism to actively review central and local government regulations.

Extending Treasury’s annual review of departmental regulations, and incorporate an assessment of local government regulations.

 

Recommendations v Reality — where to from here?

Given this report was commissioned and received willingly by the Government, and that it rightly exposed the shortcomings of the current systems and rules, what has happened in the ensuing 12 months since the recommendation were made?

This is where it gets interesting, or should I say, disappointing. I am aware of two unanswered letters to Ministers requesting an update on progress to date — and I would say this is not a ringing endorsement of action or interest.

Apart from those unanswered letters, I am not aware of any action on behalf of the Government to take action on the taskforce’s recommendations from the Loopy Rules Report.

Ignoring the findings of this taskforce, or just giving them lip service, is indefensible. Inaction will continue to drive people out of what is rapidly becoming a very unhappy, poorly-regulated, risk-averse and, increasingly, non-productive industry.

Will this valuable piece of work be acted upon or will it be seen as just an expedient political stunt?

I sincerely hope I am proved wrong, and that it is discovered that much is, in fact, happening, but not yet announced. Time will tell.

 

• This article contains the author’s opinion only, and is not necessarily the opinion of the Registered Master Builders Association, its chief executive or staff.