Productivity Commission chair Danielle Wood: “We generally expect to get better and more productive at doing things over time. That has not been the story in housing.” Photo: Ian Bushnell.
The numbers don’t lie. Productivity in the building sector is in the toilet, as Productivity Commissioner Danielle Wood explained to a post-Budget Master Builders event at the National Press Club.
But it was the saga of an asbestos pipe and a tree from Village Building Company CEO Rob Fisher that illustrated starkly just how often well-intended regulation was strangling the industry.
Essentially, it is taking far too long to deliver the homes people need.
Ms Wood is less worried about the budget’s housing tax changes than the fact that completing apartments, townhouses and houses takes about 40 per cent longer than they did 20 years ago.
Industry productivity, or the amount of houses built per hour worked, has fallen 50 per cent over 30 years.
“So we build half as much house per hour worked as we did in the 1990s, so it’s not that we’ve got slower at bricklaying … but it is all the other bits in the process,” she said.
If the fact that bigger and better quality houses are being built was taken into account, there was still a decline in productivity of 12 per cent.
“We generally expect to get better and more productive at doing things over time. That has not been the story in housing construction productivity,” Ms Wood said.
Red tape was a key factor in that, something Mr Fisher detailed in his story about a tree and asbestos pipe that had to be removed from an unnamed Village Building project.
The situation meant alerting the asbestos regulator and the tree regulator, both with very clear but conflicting mandates that didn’t consider time or housing productivity.
“Twelve months later, I have got through enough paperwork to build a new tree,” Mr Fisher said.
“We arrived at the obvious solution, and we removed both the pipe and the tree.
“After 14 months, the site is no longer listed as contaminated, unlike our balance sheet.
“Fourteen months of capital costs, 14 months of holding costs, and 14 months in which hundreds of houses were not being delivered.
“Fourteen months of labour hours hitting the denominator of the calculation with zero output added to the numerator.”
This lack of coordination between regulators was madness, but it was starting to change, Mr Fisher said.
Village Building CEO Rob Fisher says it takes far too long to get to market. Photo: Thomas Lucraft.
Ms Wood said the budget included a broad package of reforms on red tape that was particularly targeted at the financial services sector, but should be extended to construction.
She said AI tools offered both industry and government opportunities to hasten project and workflow management.
On the government side, regulatory and approval processes could be sped up.
“We already see that happening in some places, everything from fast processing of very simple applications, speeding up the backend of more complex ones, to more consumer-focused tools that allow [builders] to navigate some of the more complex pieces,” she said.
But these tools should not be a substitute for the hard work of regulatory reform and trying to simplify the backend, Ms Wood said.
She said new technologies, new ways of working, and new processes were critical in pushing productivity over time, but the sector was generally a slow adopter with relatively low levels of R&D.
The use of modern methods of construction (MMC) – modular housing, pre-fabrication, and 3D printing – also offered the potential to increase construction speed once the approval hurdles were cleared, if not the cost.
Governments were coming to the party by underwriting demand by using MMC in their own projects, such as public and social housing, schools, and hospitals.
On skills, the Productivity Commission was concerned about licence creep, which makes it harder and more expensive for people to enter the various trades.
Ms Wood said there should be more sub-qualifications with shorter training periods to reduce barriers to entry into in-demand areas, as well as mutual recognition among the states and territories to increase mobility.
There should also be fewer barriers in skilled migration to bring in the talent the industry needs. At the same time, the budget also moved to speed up the recognition of qualifications of those already here.
The budget’s $2 billion infrastructure fund would also help new housing, Ms Wood said.
She remained sanguine about the tax changes but said the effects were overblown on both sides of the argument.
“It’s not going to be a silver bullet for first home buyer affordability, but I don’t think it’s going to crash prices,” Ms Wood said.
It would have only a modest downward impact on prices, she said, backing the Treasury’s 2 per cent figure.
Original Article published by Ian Bushnell on Region Canberra.
