Government Announces Major Changes to Building Consent System for Economic Growth

The Government is announcing the biggest change to the building consent system since the Building Act came into force in 2004, Building and Construction Minister Chris Penk says.    The building sector has the potential to be an economic powerhouse, yet productivity has stalled since 1985 despite major advances in building methods and technology, Mr Penk says. New Zealand’s sluggish consenting system is delaying projects and driving up costs, making the average standalone house here 50 percent more expensive to build than in Australia.   We must eliminate system blockages to speed up the delivery of new homes and infrastructure.   Today, we are announcing plans to ease the cost burden on ratepayers for defective building work.   Right now, councils are hesitant to sign off on building consents and inspections because they could be held liable for all defects, leaving ratepayers to foot the bill.  This often happens when one of the parties responsible cannot pay for repairs, for example, if a business goes bust.    Currently, building owners can claim full compensation from any responsible party – and it’s often councils, with the deepest pockets and no option to walk away, that end up paying out.    The risk-aversion this creates leads to frustrating delays and extra cost for builders and homeowners.    A case in Queenstown shows the scale of this issue. In 2015, the Oaks Shores body corporate filed a $160 million claim for weathertight defects. The developer had been placed into voluntary liquidation and was not sued, leaving ratepayers exposed to the entire claim.    If the case hadn’t been settled privately, ratepayers could have faced rates increases of $300 a year for 30 years.   It’s time to put the responsibility where it belongs.    The Government will scrap the current framework, known as joint and several liability, and replace it with proportionate liability.    Under this new model, each party will only be responsible for the share of work they carried out.   Building owners will be protected if things go wrong and we’re exploring options such as requiring professional indemnity insurance and home warranties, similar to arrangements in Australia.   The second major change I am announcing will allow councils to voluntarily consolidate their Building Consent Authorities (BCAs) functions with each other.   It is ridiculous builders, designers and homeowners must navigate 66 different interpretations of the Building Code, because of the number of council BCAs across the country.   Builders can be rejected on paperwork that would be accepted by a neighbouring authority simply because each BCA applies the rules differently.    Many councils have asked for this and I expect they will seize the opportunity to consolidate, share resources like building inspectors and IT systems, and pass the savings on to ratepayers.  Clearing blockages in the building consent system to make it easier and more affordable to build is an important part of this Government’s economic growth plan.We know the sector is behind us. New Zealand Certified Builders have said that this is the most significant change for the building industry in a generation, that it has been a long time coming and the change is welcomed by the industry.We are determined to get the building and construction sector firing on all cylinders, and that requires bold change.  This Government is making that change. Notes to editor: Changes to liability settings and measures to enable voluntary BCA consolidation will be made by amending the Building Act 2004. The Government expects to introduce a Bill to Parliament in early 2026.

The Government is investigating supporting mechanisms for proportionate liability. These may include: Requiring home warranties for certain building projects, with an option to opt out Requiring professional indemnity insurance Regulatory changes to support BCA consolidation will include removing the requirement for a Territorial Authority (TA) to be a BCA providing they transfer their building control functions to another accredited BCA, removing restrictions on TAs transferring their building consent functions to a non-TA organisation, and updating and standardising regulations to eliminate duplication and incentivize collaboration.