Wednesday 19 January 2022

Building materials

There's a bike path running through a forest. Thirty years ago, it had been well maintained. Now, it's an overgrown mess. A big branch across the path stops anyone getting past the first hundred metres. Clearing things that are past that branch won't do any good unless that first branch is cleared. Heck, if you start with stuff five hundred meters down the track, without addressing that first branch, people might even claim that there were never barriers in that next bit at all - because those parts just hadn't been hit yet.

The housing supply mess is a bit like that. Councils use zoning and consenting to protect their balance sheets against the costs of urban growth, so there isn't enough zoned land to build on. That's the first branch. But there are other branches past that one.

The Commerce Commission is looking into building materials supply; it's running a market study. 

That work should begin with a simple question. 

If I disassembled a perfectly good house or apartment tower in Vancouver, Seattle, or Toyko, and brought all the parts here on a ship, would anybody let me put them back together here? 

Whatever else is going on in the building supply sector here is almost irrelevant if you can just route around it through parallel imports. If parallel imports are de facto often impossible because councils won't sign off on plans that include them, because they buy all the downside risk of any building failures, isn't that going to be a really big problem?

This week's column in Newsroom, now ungated. A snippet:

Building materials supply seems like it should be far easier, at least in principle. If a construction company thinks that gib, or insulation, or nails, or any other building material is terrible value for money in New Zealand, there seems to be a simple solution.

During the import licensing era, Alan Gibbs urged JVC to disassemble perfectly functional televisions at the end of their assembly line so they could ship him the parts for reassembly in New Zealand. He undercut local suppliers while providing a better product. Could something similar be done with houses abroad, ideally before all the pieces were put together? Houses could be parallel imported, one piece at a time.

The developer able to do that would have a substantial advantage over others, if local building material costs really are out of line. And nobody has ever accused developers of not wanting profits.

If building material costs really are far higher here than they should be, why aren’t developers bringing in shiploads of building materials and ignoring local suppliers? Covid cannot be the answer; complaints about building material costs long predate the pandemic.

Framing the question properly would help the Commission decide where to focus its efforts. Imagine for the moment that there were some nightmare cartel arrangement among local building materials suppliers. Could it possibly matter if anyone could easily parallel import a few container ships of insulation and gib from Vancouver, or full kitset houses?

I probably should have said that Covid can't be the only answer. Covid is clearly wrecking supply lines. But that should be a transitory thing that should be looked through. The longer term issue is clearing the regulatory hurdles for the decade of serious building that's needed.  

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