Government taking action to improve building supply competition

The Government will build on its measures to improve competition and transparency around building materials, with its response to the Commerce Commission’s market study into Residential Building Supplies published today.

The Minister for Building and Construction Dr Megan Woods and Minister of Commerce and Consumer Affairs Dr Duncan Webb say the Government agrees, or agrees-in-principle, to eight of the nine recommendations made by the Commission to improve the sector for businesses and consumers.

Key actions will include:

• Monitoring and publishing prices of key building supplies
• Doing more work on guidance to support builders and councils make good decisions on alternative equivalent products
• Drive the uptake of offsite manufacturing by Government agencies by a minimum of 10% year on year, to improve productivity and competition.

“The Commission’s findings that competition in the building supplies market is not working as well as it could be lines up with what we have heard from those working in the sector,” Megan Woods said.

“This has 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.”

The Government will go further than some of the Commission’s recommendations and expand on its existing review of the building consent system. It will also widen its work to ensure alternative building products are more easily used, following last year’s plasterboard shortage.

Significant progress has already been made to address issues identified in the report,

This includes:

• Reviewing the building consent system to address issues identified by the Commerce Commission.
• Establishing a Critical Materials Taskforce to proactively explore supply-constrained building materials, as well as market imbalances.
• Implementing a Construction Sector Accord Plan to tackle the sector’s challenges with a greater focus on growing innovation, resilience, the Māori construction economy and sustainability.

Broader to building supplies, the Government will soon consult on an economy-wide review into the use of land covenants.

“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,” Duncan Webb said.

“Time and time again, land covenants have come up. Competition is a driver of lower prices and better quality – good for businesses and consumers. Now we’re going to look across the whole economy at how these agreements are being used and whether changes need to be made to level the playing field for new businesses.”

“Effective competition, alongside the building regulatory system, helps to deliver safe, healthy, durable and affordable homes and buildings for New Zealanders. We’ve made a good start in tackling these issues. Now we must go further,” Megan Woods said.

“The Government would like to thank the Commission for its important work on this market study. We look forward to delivering on the recommendations to enhance competition in this vital sector,” Megan Woods said.

ENDS

Notes for editors:

Key relevant Government actions to date:

• MBIE has issued new guidance to support people to understand and use the building consent system in a way that gets faster and more consistent decisions from building consent authorities. 
• Offsite manufacturing regulations introduced in 2022 for a new certification scheme – BuiltReady – to provide certified offsite manufacturers with access to faster, more consistent building consent approaches.
• CodeMark scheme changes in 2022 to strengthen the scheme and help new and innovative building products demonstrate they comply with the Building Code.
• New regulations in 2022 that require manufacturers and importers to provide a minimum level of information about their building products to improve use of alternative products.
• A Critical Materials Taskforce established in 2022 following the plasterboard shortage. MBIE released guidance for designers and building consent authorities to help facilitate product substitutions and variations, including specific guidance on plasterboard.
• The Government’s 2022 review of the building consent system aims to address   barriers to competition for building products, following public feedback. MBIE is developing options for a new or revised building consent system. Further information on next steps will be announced in the coming months.