MBIE to monitor building supply prices - Ministers

Building supply prices will be monitored by the government in response to the Commerce Commission's building supplies study, Ministers have announced.

Land covenants across the entire economy will also be reviewed.

It's part of the government's response to the Commerce Commission's final report in its Residential Building Supplies Market Study, delivered in December.

The government has largely agreed to eight of the commission's nine recommendations and said it would go further on three, with the only recommendation not taken up - to promote compliance with the Commerce Act - fitting "within the commission's current work programme".

One of the eight recommendations agreed to, seven were agreed in full with one - introducing competition as a regulatory objective - agreed "in principle" and will be considered as part of the Building Consent System review.

The government said it would go further on this measure, by requiring MBIE to monitor building supply prices.

In a statement, Building and Construction Minister Megan Woods thanked the commission for its work, saying the finding that competition was not working as well as it could needed to change.

"We need to remove market barriers that make it hard to introduce new building products and for competing suppliers to expand their businesses. This drives up costs and means homeowners end up paying more than they should. At a time when the cost of living is hurting families, that needs to improve."

She told reporters it was not about supply chains, it was about affordability and cost.

"This is about making sure that we address what has been a very long-run issue in New Zealand, which is that we pay more for our building materials. We need more competition.

"Issues around suppply chain are vitally imporant, and ... I asked the taskforce that addressed plasterboard to actually become a critical materials taskforce so we could continue to monitor those supply chains, but this is about affordability and cost."

She said she thought offsite manufacturing would be the most effective measure.

"Government has pushed further than the Comm Comm's recommnedations, and we're setting all-of-government targets. It shouldn't just be our housing programme we should be looking at it for our schools, we should be loooking at it in our defence buildings. We should be looking at how we grow this industry in New Zealand."

She rated more accessible pricing information and more emphasis on product substitutions as also having a big effect.

"We can look at the evidence and we can see today there are more brands of plasterboard being used in New Zealand than before ... and more competition will decrease prices."

"Consumers now have a choice, they don't have to just use GIB. Their builders and their designers and their architects understand that because we issued the guidance how it is that we can use alternative products."

Commerce and Consumer Affairs Minister Duncan Webb said the government would also soon begin consultation on a broader review of land covenants covering the entire economy, after they were also identified as a problem in previous market studies.

"These types of land agreements can be used in a way that make it harder for new businesses to enter a market, or for existing businesses to expand, and that can impact on competition. We have seen this in three markets now - building supplies, retail fuel and groceries," he said.

"We want to have a deep dive into what land covenants there are and what impact they're having on competition generally. What we've seen is everywhere we've looked so far land covenants have been a problem, and it woudln't surprise me if we saw more problems the harder we looked."

He said he had personally seen that land covenants were widespread in other sectors.

"Meat processing is one that's happened as well, so we absolutely want to have a good look and ascertain how widespread they are and whether they're having a significant impact on competition.

"I'd say to anyone who's using any land agreement to lock out competition, it's likely to be a short-term solution."

Recommendations and responses:

• Making competition an objective - agreed in principle - would be considered alongside other options as part of the building consent system review. The government says it will go further by requiring MBIE also be required to monitor key building supply prices, working alongside the Critical Materials Taskforce and the sector
• Better serving Māori through the regulations system would be done via the Construction Sector Accord Transformation Plan, with changes already having been consulted on
• Clearer compliance would be tackled through building product information regulations and the CodeMark scheme, with MBIE also considering options for improving the approach to Building Code compliance
• Removing barriers to product substitution and post-consent changes, a problem highlighted by the plasterboard shortage, could be done through changes to regulations, with options to be considered by MBIE. Government would go further by including guidance for decision-making guidelines for builders, architects and authorities in the discussion document
• Nationwide information showing how building products meet Building Code requirements would be achieved through new minimum information requirements set to be introduced on 11 December, which demand manufacturers and importers provide the information at point of sale and online
• Education and mentoring would be supported by MBIE without needing to change the Building Act, starting with a package of short-term measures and as part of the building consents review
• Coordinating and boosting offsite manufacturing through an all-of-government strategy would be done. The government wants to go further through "practical actions ... to create a pipeline of demand". The existing offsite manufacturing forum has also already been asked to plan for increasing uptake. Kāinga Ora has also set a goal of minimum 20 percent offsite manufacturing, and the government is looking at encouraging other agencies to set a 10 percent target
• Promoting compliance is noted, rather than agreed to, with the government saying it "fits with the Commerce Commission's current work programme" after changes to the Act. "The Commission must act independently in the performance of its enforcement functions," the government says
• Considering economy-wide use of land covenants, exclusive leases and contractual provisions would be done through an economy-wide review, with scoping to be carried out by MBIE. Related work already under way includes a separate review of development-limiting covenants by the Ministry of Housing and Urban Development, and the resource management reforms