Government backs greater competition in building supplies to reduce costs for Kiwis

Building and Construction Commerce and Consumer Affairs

The Government will take action to increase competition in the residential building supplies sector, says Building and Construction Minister Dr Megan Woods and Commerce and Consumer Affairs Minister Dr David Clark, following the release of the Commerce Commission’s market study final report.

“We asked the Commerce Commission to review our key building supplies markets and industry supply chains, to find what can be done to improve competition and ensure consumers were getting a fair deal,” David Clark said.

“The Commission’s report found two key factors negatively impact competition in this crucial sector, including incentives that favour familiar building products in the building regulatory system and quantity-forcing rebates.

“This means it’s harder for alternative products that offer consumers a choice, to get into or expand in the market.

“We welcome these findings and will consider the recommendations, to understand what changes are necessary to help increase competition, and ultimately bring down costs for consumers, which is hugely important in these challenging global cost of living times.

“In the coming weeks and months, we will talk to stakeholders, with a Government response expected in March 2023. In the meantime, important work already happening, will continue,” David Clark said.

“Building supplies make up a sizeable chunk of the costs of new residential housing so we already have building sector reforms underway, including a review of the building consent system. The Commerce Commission recommendations dovetail into MBIE’s current review of the consent system,” Megan Woods said.

“System changes take time because they are important to get right, we continually look for opportunities to improve the way the current building consent system works while more significant reforms are developed. Today, the Ministry of Business, Innovation and Employment (MBIE) released updated guidance on the building consent process and a new standardised checklist for residential building consent applications. This will help lift the quality and consistency of building consent applications. 

“Recommendations in the report align with moves we made to help resolve the national plasterboard shortage. The Commerce Commission notes this success, saying that MBIE initiatives and the Ministerial Plasterboard Taskforce illustrate what can be done to improve greater competition.  The recently announced Critical Materials Taskforce springboards off that work to prevent further acute building supply shortages.

“But we know there is still more to be done to ensure consumers get a better deal and builders have the materials they need to do their jobs,’ Megan Woods said.

“The Commission also identified land covenants and exclusive lease terms as other key issues, which we have swiftly addressed and actioned in follow up to previous market studies,” David Clark said.

“These market studies are maturing, and with that we can see recurring themes starting to emerge. The use of land covenants and exclusive leases is a good example of this. The Commerce Commission has now recommended Government looks into the scale and use of land covenants, exclusive leases and contractual provisions with similar effect across the economy – which we will do.

“I would like to thank the Commerce Commission for its important work on this market study” David Clark said.

This is the third market study of its kind in New Zealand. It follows the retail grocery sector market study and the fuel market study both of which has led to action by the Government to improve competition.

The report is available on the Commerce Commission’s website.


Notes to Editors:

Government work that currently aligns with the Commission’s recommendations

Recommendation 1: Introduce competition as an objective to be promoted in the building regulatory system

  • The review of the building consent system will develop a suite of reform options which could include consideration for this recommendation.

Recommendation 2: Better serve Māori through the building regulatory system

  • MBIE is developing options for consultation that ensure the building consent system is able to better meet the needs of Māori.  The Commission’s engagement will help inform this work.
  • The Construction Sector Accord have established Kōtuiā te Hono, Māori Reference Group to lead the Transformation Plan initiatives to strengthen Māori construction across business as well as workforce.

Recommendation 3: Create more clear compliance pathways for a broader range of key building supplies

  • MBIE's Building Code Update programme regularly revises existing and develops new acceptable solutions and verification methods, to ensure they reflect new technology and evolving practice. Opportunities to use section 262 of the Building Act are being considered as part of the Critical Materials Work Programme.

Recommendation 4: Explore ways to remove impediments to product substitution and variations

  • MBIE has provided guidance to designers and building consent authorities to help to facilitate product substitutions and variations, including specific guidance on plasterboard.
  • Work is planned to review the MultiProof scheme.

Recommendation 5: Establish a national system to share information about building products and consenting

  • Building (Building Product Information Requirements) Regulations 2022 are expected to achieve a similar outcome by ensuring universal access to information about how a product is expected to contribute to Building Code compliance in its intended use.

Recommendation 6: Establish an education and mentoring function to facilitate a better coordinated and enhanced approach by BCAs to consenting and product approval processes

  • Options to improve MBIE's stewardship of the system and promote greater collaboration and consistency across the 67 building consent authorities are being developed for public consultation, as part of the building consent system review.
  • MBIE is working on a package of shortterm measures (over the next 3-12 months) to improve the current building consent system.

Recommendation 7: Develop and implement an all-of-government strategy to coordinate and boost offsite manufacturing

  • The Construction Sector Accord is leading alongside key agencies (including Kāinga Ora and Ministry of Education) a co-ordinated cross agency strategy to grow the market for offsite construction.
  • MBIE is considering ways to incentivise uptake of BuiltReady and scale up offsite manufacturing.
  • Implementation and operationalisation of legislative changes to the BuiltReady scheme.

Recommendation 8: Promote compliance with the Commerce Act, including by discouraging the use of quantity-forcing supplier-to-merchant rebates that may harm competition

  • The Commission will be opening an enforcement investigation into the use of rebates as an action following-on from information discovered in its market study. It will also be issuing guidance relating to the misuse of market power that will apply to all businesses but will be informed by information the Commission has collected during the course of this market study.

Recommendation 9: Consider the economy-wide use of land covenants, exclusive leases and contractual provisions with similar effect

  • MBIE proposes to scope a project in consultation with the Ministry of Justice and Land Information New Zealand reviewing the use of anti-competitive land covenants and exclusive leases across the economy