The Post: The disaster scenarios arising from building consent deregulation

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Here’s a thought: if the government didn’t need to inspect your car before it was built, does it need to inspect your house?

Such are the questions raised by the Government’s announcement this week that it wants to allow certain tradespeople and builders to “self-certify” their work.

Construction minister Chris Penk wants, firstly, to see “qualified” plumbers, drainlayers and builders join electricians and gasfitters in being able to self-certify work – that is, avoid inspection – on “low-risk” builds.

Secondly, construction businesses with “a proven track record”, like those who build hundreds of near-identical homes each year, would get a “more streamlined” consent process.

For minor plumbing jobs, this might be fine. But for anything bigger, disaster scenarios immediately suggest themselves: cowboy builders do a bodge job, “self-certify” it, and are long gone – or conveniently bankrupt – when the homeowner finally discovers the fault.

In response, Penk says tradespeople would be eligible only after passing rigorous professional exams, and would have to put funds aside – through insurance or cash reserves – to fix defects and reimburse homeowners.

Then, theoretically, building practices would be reformed by the shift in responsibility. At present, the argument goes, councils are risk-averse and over-inspect, because they can be held liable for ushering through a defective build. If the responsibility lay with builders, they would carry the can for faults, while a layer of time-consuming inspection was removed.

Hence the car analogy, derived from AUT construction professor John Tookey, who argues that, even though cars are potentially deadly, the state doesn’t inspect each vehicle as it comes off the line. It relies, instead, on new models meeting rigorous quality standards pre-production, and firms being liable for any subsequent defects. This leads to safer cars, Tookey says. “So conceptually, could it work [in building]? Sure.”

Practical problems abound, though. First, there is ample evidence that even “qualified” professionals will do shoddy work.

Second, the industry would undoubtedly apply pressure for more projects to be deemed “low-risk”, until even relatively high-risk work was done without inspections.

Third, as The Post has reported, no insurer currently offers builders cover for non-completion or defective work, suggesting they don’t think it can be provided at a sensible price. And, if they did provide cover, insurers would – guess what? – want to do their own inspections and consents, thus partly nullifying the “streamlining” of the system.

Faced with this reality, Penk has gestured towards things like the Master Builders’ “guarantee”, but it doesn’t deserve the name. Heavily caveated, it only covers leaky-homes style defects for two years post-completion.

Master Builders, meanwhile, try very hard not to actually pay out. News reports are littered with headlines like “Family suffers 17-month Master Builder guarantee ordeal” and “Master Build guarantee ‘not worth the paper it's written on’ ”.

A better version is of course possible, but as Tookey notes, when New Zealand politicians are setting up new systems, “we tend to go for the economy version”. If Penk’s changes happen, they are likely to happen shoddily, marred by inadequate professional standards, powerful industry lobbying and weak insurance.

In the UK, the 2017 Grenfell Tower fire, which claimed 72 lives, was this year found to have been caused partly by deceitful firms installing products they knew were unsafe – but also by a privatised regulator captured by the industry. Any shift away from conventional state regulation is, in reality, a massive risk.

It could also generate a massive bill. Remember that the leaky homes crisis, incurred in the last bout of deregulation, has cost the country somewhere between $11 billion and $47b.

And even if, under Penk’s system, builders can get insurance, homeowners would have to spend huge amounts of time and money pursuing the payouts. Then there’s the costs of repairing defective work.

However expensive the delays caused by council inspections are, they are unlikely to be anywhere near as bad. Prevention is almost always much cheaper than cure.

Sure, council consenting needs to be streamlined, sped up and standardised across the country. But that doesn’t require deregulation.

Some might say that, under deregulation, the potential damage to reputation (and insurance profile) would encourage builders to do consistently better work. But that’s fantastical. It’s also the point where Tookey’s car analogy breaks down.

Such fears might motivate car manufacturers, but only because car faults are so deadly, so easily traceable, and so fatal to reputation. Building faults, by contrast, can take ages to emerge, are often hard to pinpoint, and generally aren’t fatal.

Plenty of firms will cut corners but bank on being able to frustrate clients, outlast them in the courts, deny responsibility, or – ultimately – declare bankruptcy. (The Government has nothing more than a vague “plan” to deal with the latter problem.)

Penk’s reforms are supposed to shift liability from councils to builders, but in practice would probably lump it onto a third party, the one least equipped to handle it: homeowners.