Tuesday, 27 Jul 2021

Home truths: Are prefab homes the answer to high house-building prices?

As the cost of building houses increases, some say it’s time to change our construction methods. Property editor Anne Gibson examines the arguments for and against prefabricated and tiny homes.

Prefabricated, modular, kitset, transportable, container, tiny – whatever the name, some people hope a new style of building could revolutionise the sector, help ease our housing shortage and bring down prices.

The proposed change comes at a time of turmoil for the industry, which has had a mix of good and bad news lately.

Stats NZ data is a reason for cheerfulness: the sector is now close to breaking 1970s records and building more than 40,000 houses annually.

But entrenched high labour and materials costs, shipping issues due to the pandemic and spiralling land prices continue to slow residential construction.

And the Government is poised to set the Commerce Commission loose to probe high building costs in a sector dogged for decades by monopoly positions.

Officially residential building costs have risen 19 per cent over the past four years, according to CoreLogic chief property economist Kelvin Davidson. But he adds; “Our teams are also hearing through their research and conversations about increasing material and labour costs as there are shortages and substitutions and the expectation is for this to have a continuing impact on the cost of building in the near future.”

Auckland’s deputy mayor Bill Cashmore has a striking example. He said housebuilders on the former Wesley College site at Paerata near Pukekohe told him in June that last year’s $3200/sq m was now $4100/sq m.

Timber restrictions, goods shortages, shipping’s strangulation, labour supply problems, lack of industry training for apprentices, shut borders and the pandemic – can it get any worse?

Bryce Glover, national sales and marketing manager for Papakura-based tiny home business HouseMe Transportable Homes says something has to change.

His firm, which he describes as “the largest tiny house builder in New Zealand”, has sold around 300 new places last year. The mini-homes are a standard 3m wide and the smallest is 7.4m long. Prices start from $49,500 for a 20.7sq m place and go up to $115,000 for 42.5sq m but without all the consents or land.

“People say ‘we just can’t afford a normal house’,” said Glover.

“Our growth is due to a lack of affordable alternatives to traditional housing. People come to us because they can’t afford other places and we get a lot of people in their 20s, living at home, can’t get on the property ladder, so they want an alternative.

“We also get retirees who can’t afford a place later in life as well as farmers who need to provide places for their staff.”

Diane Wood realised she needed a change after her partner died two years ago and maintaining her motor home became too much for her.

Encouraged by her son-in-law, she bought a tiny home from HouseMe for $75,000 and is enjoying living in it on her section north of Auckland.

“It was the best I saw out of all the others that I looked at,” she said while showing the Herald around the lounge, kitchen and bathroom areas of the 29sq m home. “It was the price and how it looked and all the facilities it had in it.”

Glover said prices were just for the house and did not include the price of a section, consents if needed, connections to services, landscaping or transportation to sites. The average North Island transport cost was $3500-$4000.

HouseMe expects to sell about 600 new built-to-code double-glazed insulated homes this year, all built at its Papakura factory on order.

It is also an approved supplier to Kāinga Ora and Oranga Tamariki.

“Around 156 customer house orders are now in the queue. They usually only take three weeks to build but due to popularity, it’s now taking 16 weeks,” Glover said.

He doesn’t feel the need to defend the model, saying tiny homes are a revolution because customers demand them. The business has partnered with lending specialists Squirrel to help consumers get mortgage money.

“If we were creating low-quality products and trailer parks, you’d be writing a different story,” Glover said, adding that a new 4000sq m Takanini factory would be opened in three month’s time – a clear sign of expansion.

He is less complimentary about tiny homes on wheels built by other firms, which he says are classified as vehicles, and therefore not built to code and not meeting insulation or glazing requirements.

It’s a reminder that disappointments abound in this part of the house-building sector. Two transportable home businesses failed in June even after forging Government connections: NZHousing and Affordable Homes Construction of Dairy Flat, owned and directed by Ian Ralph Fotheringhame of Orewa, hit liquidation and receivership.

Fotheringhame claimed his tiny homes were the answer to the Ministry of Social Development’s “$100m problem” – paying out an average $1500 per week to keep 1900 households in motels and emergency housing and another 780 households in transitional housing and motels.

A ministry spokesperson said it had cut ties due to concerns about the viability of the business and following complaints about Fotheringhame’s failure to deliver the cabins.

The larger more traditional group housebuilders point out that most New Zealand houses are still built in the age-old fashion.

New Zealand’s biggest housebuilder G.J. Gardner will build its 20,000th home later this year and some franchise owners are inter-generational now. Managing director Grant Porteous is a prefab sceptic.

“Prefabrication or house-building factories are no silver bullet for the stretched residential construction sector,” said Porteous.

“These alternative methods don’t provide the cost savings, quicker construction or better quality which some claim over more traditional on-site construction, hence why worldwide, traditional construction methods dominate the sector and modular homes are traditionally used in, for example, places where climatic conditions make on-site construction time windows very small.”

Porteous said GJ Gardner already used many products from factory systems and technologies, including pre-nailed wall frames and roof trusses, pre-made design-specific cassette midfloor floor systems, flooring and wall systems that cut structural timber needs, concrete wall systems when best suited and fast, cost-saving ground floor slab systems.

All were designed to enhance the building envelope’s performance, reduce cost, save waste and increase the speed of construction.

Porteous is concerned that senior industry people and the Government might be tempted to invest in modular factories, where some owners have been calling for more help.

So far factory-style house component manufacturing is up and running at Spanbild company Concision at Rolleston near Christchurch and at Fletcher Residential at East Tamaki in Auckland.

But a spokesperson said Concision was running at only 20 per cent capacity because of low demand for products as businesses had not embraced the concept. Some Government assistance was needed, she said.

Kerry Edwards, Spanbild chief executive, said: “We’re frustrated we can’t increase our shifts and make more products. It’s been a lack of consistent demand, continuity.”

Concision made products for around 250 homes last year “but we know we can do 1000 a year if we get that demand and consistent flow of orders,” Edwards said.

Fletcher’s much-vaunted house-building factory CleverCore is turning out parts for about 200 houses annually. Using all methods, that giant of the sector is still yet to reach its golden 1000 houses per year goal, despite trying for years.

Fletcher Resident’s chief executive Steve Evans said several issues were causing the hold-up.

“We’re constrained by land availability, consenting timeframes and the assumption we made some time ago was that we were going to get more coming from Government channels and that hasn’t happened as much or as fast as anyone thought.”

Fletcher built nearly 900 houses in the year to June 2021. Most Fletcher houses take months to build.

“We’re building in non-traditional ways, using off-site manufacturing and penalised products, putting up homes in as little as 11 weeks at Whenuapai, Waiata Shores, Hobsonville and between Karaka and Drury,” Evans said.

More use of new technology, Resource Management Act reform and working more closely with the Government were keys to getting more houses, Evans said.

Scott Fisher, chief executive of membership organisation PrefabNZ, says alternative building methods are growing. Asked to quantify that across the entire sector, he said: “Offsite, including hybrid solutions, panelised and modules accounts for about 10 to 15per cent.”

Traditional builders’ attitudes were changing: “After all, about 90 per cent of new builds already use (pre-nailed) frame and truss – part of the offsite sector.Panelised solutions are now being adopted more widely and there are some large businesses in that space,” Fisher said, citing Concision and Fletcher.

The Commerce Commission has been due for some time to investigate New Zealand house building costs but that’s yet to materialise. Finance Minister Grant Robertson gave an update when he told a Deloitte event in May: “We pay far too much for building supplies. We’ve currently got the Commerce Commission having a good look at supermarkets and I suspect you will find the next cab off the rank might take us in the direction of that particular issue.”

Labour promised last year to direct ComCom to study the sector.

Julien Leys, chief executive of the NZ Building Industry Federation, says building materials are only one factor in high house prices and he points to widespread consumer choice between PlaceMakers, Carters, Mitre 10 and Bunnings.

Leys said a 2018 study by Deloitte into the high cost of building homes in New Zealand was the most up-to-date and best document for examining the sector.

“That found that building materials only make up about 16 to 19 per cent of the cost of a new home,” he said citing other factors including the cost of labour, gaining territorial authority approvals and paying for inspections and contributions, as well as the high cost of land in many of our cities.

House hunters respond

On Saturday we shared the stories of first-time house hunters. Here’s what they have to say about the ideas in today’s Home Truths coverage.

Samantha

Tiny homes are an economic, environmentally friendly and feasible option for housing affordability.

They’re small, able to move and can provide an option for individuals and families who are wanting to get into a home.

However, when one is over $100k plus new, can we use that KiwiSaver deposit? Unlikely. Can we find a piece of land to put it on? Unlikely.

Can we have a 10-20 per cent deposit to put on a piece of land to then put our home? Banks like 50 per cent, if that.

There’s not enough information in councils for what consents they need – let alone connection to services, if it’s a dwelling or vehicle and more.

More needs to be done from banks, councils and companies to make this a more affordable and easier option.

Tim

I looked into tiny homes even before Covid slowed shipping and eliminated part of the workforce.

Finding small sections of affordable land in useful locations, getting local and national government and law to accept these ideas, and paying for consents looked to be real barriers to doing anything other than ‘the traditional Kiwi way’.

Kelly

This story is very relatable because we have looked at a tiny home for close family to move into at our new property in Whāngārei.

Are tiny homes something for us to consider? Absolutely, for those who don’t need space, tiny homes are a great idea.

They are cheaper to buy upfront than a standard home and can be moved around easily.

The only issue is you have to have land available for use or have someone willing to let you put your tiny home on their land for a small fee or exchange for power and water etc.

Great if you have family or a stable offer on the cards, not so great if you have to go hunting to put your house somewhere.

Are tiny homes going to help the market demand? I am not sure. It’s not for everyone and I myself don’t know anyone currently living in a tiny home.

Would I consider it? Yes.

Would I be worried my three kids would tear the whole thing down from lack of space? Yes too!

But if they become more readily available, cost effective and New Zealanders as a whole are more accepting of them, then this could start a new trend!

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