The Te Atatu site, abandoned by the Australian modular specialist, in liquidation. Photo / Google
Seven-month delays and $2.5 million cost escalations at a 21-unit Auckland social housing project has drawn criticism from developers and political party leaders.
Yesterday, the Herald reported Kāinga Ora Homes and Communities' development problems.
An Australian modular apartment developer it contracted for work on a 21-unit Kervil Ave, Te Atatu, site went into liquidation, abandoning the project. Instead of it costing $8.3m to develop the places, it will now cost $10.8m and be delayed seven months.
"Embarrassing," said Matthew Horncastle, co-founder of New Zealand's second-busiest residential developer Williams Corporation.
"No surprises there," said Shane Brealey of NZ Living, which is building hundreds of new homes.
Nicola Willis, National's deputy leader and housing spokesperson, said: "It's deeply concerning that Kāinga Ora is failing to deliver in this way. We have a significant modular housing industry of its own and people keen to grow their business. They'll be disappointed that the state has gone offshore and gone with operators who have failed to deliver."
The well-funded agency had hired "hundreds" of staff and had very large budgets yet it wasn't delivering the new homes that were so severely needed, she said.
Act Party leader David Seymour called for Kāinga Ora to stop developing new homes.
"They're using other people's money - your taxes. It's not obvious why the government even needs to be in the home-building business when every possible supply is tightly constrained from land to infrastructure to builders to materials.
"There is no need for the government to be there. Government involvement in a tight market would make some sense if they had some insight nobody else has. They don't have that - just taxpayer money to play with.
"At Kāinga Ora, they're facing challenges the whole sector faces. But when they get it wrong, it's the taxpayer money that's lost. All they seem to be doing is inflating prices," Seymour said.
On the state entity contracting a foreign business to make the apartments, he said there was nothing wrong with importing technology.
"But there are major risks involved. How is it a good idea for Kāinga Ora to take that risk with taxpayer money?" Seymour asked.
On modular construction, he said he had little faith in the state entity using it: "If there is innovation to be had from modular building, a government department would be the last one to figure it out. The only advantage KO has is cheap money from the taxpayer."
Asked how the state entity should proceed, he said: "I think they should just stop trying to build houses. It's not a good idea for the government to get into these activities. We should leave it to the experts who are risking their own money."
But Auckland councillor Chris Darby praised the state house-builder's innovation attempts: "Good on Kāinga Ora for having a crack at doing things differently in an attempt to up the pace of building homes. I expect they will be reviewing their due diligence processes after the Australian company Integrated Modular failed."
Darby acknowledged conventional building methods prevail in the sector but that didn't make them right.
"We can't rely on what we already know and are comfortable doing to build houses faster and tackle the national housing crisis," Darby said, encouraging a wider view, heartened by an examination of alternative methods.
Nick Seymour, Kāinga Ora delivery programme director, said the state entity's projects "are about increasing house supply by building quality homes for New Zealanders".
Traditional methods of new builds, redevelopments and buy-ins were already operating close to, or at, full capacity due to high levels of activity across the construction sector and significant pressure on supply chains, Seymour said.
As the largest provider of homes in New Zealand, Kāinga Ora has a responsibility to invest in build methods that showed a clear pathway to delivering more quality homes, at a faster rate and with the best possible outcomes for people, communities, and the construction industry, he said.
Offsite manufacturing was playing an increasingly important role in New Zealand construction as it has been successfully done overseas.
Asia, Europe and North America have been building using these techniques for many years, as has New Zealand, he said.
Around 15 per cent of public homes under construction or being designed are using offsite manufacturing techniques, Nick Seymour said.
"We are committed to ramping that up by 20 per cent each year. Since 2020, Kāinga Ora has completed or has in construction, hundreds of off-site manufactured homes – in full, or in part with bathroom or kitchen pods. These are all over the country," he said.
Modular construction offered efficiency, speed and fewer variables.
But one private developer told the Herald yesterday about the size of the bureaucracy and the number of people at a meeting to discuss a development proposition. He complained of a top-heavy entity, inefficient and overly populated.
"Kāinga Ora had a senior development manager, a development manager, an assistant development manager and a project manager at this meeting. My guy was doing most of the work. On top of that, none of those people at the meeting could make a single decision. It all had to go back to an associate precinct director, a precinct director or the general manager - none of whom were at the meeting," he said.
The Herald has reported how Kāinga Ora has now contracted a Vietnamese business to develop apartments at a Northcote site. Like the choice of an Australian previously, the Vietnamese choice has caused private sector concern, with bosses asking why Kāinga Ora is not choosing locals.
A construction sector leader who owns one of New Zealand's biggest builders said: "It's sad that the Government thinks building houses in Asia and shipping them halfway around the world is sensible. It's not a sustainable solution and effort should be put into finding ways to cut through the red tape so we can build more economically in New Zealand - by Kiwis for Kiwis."
In January, the Herald reported how the Government spent more than $1b buying existing homes for state housing in the past five years.
It bought 1608 private houses between July 1, 2016, and June 30, 2021, for $1.01b. At least 700 were in Auckland.
The organisation bought 312 in 2017, 356 in 2018, 376 in 2019 and 327 in 2020. It added another 195 in the first half of last year.
Around 24,000 people are waiting for state accommodation.
'Apartments on the site and more than likely offices' – Andrew Moore, CMP Construction.