Analysis: Do long-term delays from big building companies' market domination, medium-term delays caused by international supply chain disruption, and short-term delays caused by Auckland's Level 4 lockdown point to a wider industry problem?
Morrinsville plumber and gasfitter Dave Strong is juggling materials, robbing Peter to pay Paul to finish his jobs. There's the extension at Cambridge East School, and the construction of a whole new classroom block at Te Kura Amorangi o Whakawatea on the southern outskirts of Hamilton. They need toilets, hand basins and kitchen facilities.
For another job he's meant to be installing a disabled toilet, but the seat has been stuck in transit since being dispatched from Auckland at the start of lockdown, two weeks ago.
It's not just that he can't get supplies sent south over the Bombay Hills from the big importing and manufacturing firms; it's also that he can't go north without first being buried in days of paperwork.
He services the egg farms in Pukekohe; one of their gas heaters has broken down but he's struggling to get approval to drive north cross the boundary to get it working again, and keep the chicks warm on the wintry nights.
We hear similar stories from all around the country. With 800 building consents and 600 homes under construction, Matt Horncastle and his business partner Blair Chappell run one of New Zealand's biggest residential construction companies.
They specialise in mid-sized projects, Horncastle tells me. Blocks of 20 townhouses dotted throughout Auckland, Wellington and Christchurch.
One of their biggest, a 42-home project in Christchurch's Gloucester St, was nearly done before New Zealand went to alert Level 4. Now they're struggling to get supplies to progress any of their projects. Plasterboard, PVC, steel framing, it's all locked up in the locked down city of Auckland – and approval to truck it south is tied up in a bureaucratic debate between MBIE and the Ministry of Health.
Poto Williams, the Minister for Building and Construction, says she's looking into options but for now, businesses can seek an exemption under the Health Order. MBIE acknowledges the slow start to that exemption process, but says it just assesses the applications for travel exemptions and advises the Director-General of Health; the final decision sits with him.
And Dr Ashley Bloomfield, the Director-General, is forthright. There are exemptions available for people crossing the border for essential travel reasons – but few are being granted. As of 8am Thursday, the Ministry had received about 384 applications, and declined 95 percent of them. Moreover, it's only going to become more difficult: everyone who crosses out of Auckland will have to do a Covid test, he has announced.
But talking to builders and tradies and their suppliers, one thing becomes apparent. These delays are worse, but they are not new. For the past 18 months there have been worsening problems with the construction industry supply chain (as there has with every other supply chain) and projects are being delayed.
And that, in turn, ties in with bigger questions about competition in building supplies – the fact that the biggest suppliers of concrete, glass and wool insulation, and plasterboard are owned by the two big big construction groups. This is a bugbear for Labour: it promised at last year's election to seek a Commerce Commission study of the perceived lack of competition in the building industry that it said was delaying the construction of new homes.
Every building company, big or small, has struggled to get supplies over the past year. Tradies have been closely scrutinising Fletcher and Carter Holt to see whether their subsidiaries are supplying their building projects with plasterboard and timber, at the expense of the little players.
The Commerce Commission announced this year it would look into Carter Holt Harvey’s decision to halt timber supply to some retailers like Mitre 10, Bunnings and ITM, while continuing to supply large customers likes its own subsidiary Carters – and indeed, Fletcher Building-owned PlaceMakers.
Right now, the industry is understandably focused on the here and now: breaking through the government red tape across SH1, north of Wellsford and south of the Bombay Hills. "The fact is that Auckland is New Zealand’s engine room for manufacturing and distribution – this is just where most building materials are based before going to the rest of the country," says Julien Leys, chief executive of the Building Industry Federation.
Leys points out there are different reasons why so many builders and tradies are dependent on a few big suppliers in Auckland. For example Fletcher subsidiary Winstone Wallboards has a 90 percent share of the GIB board and insulation systems market. It's been in business for 75 years, invested heavily in R&D and has developed an excellent customer service model.
There are manufacturers of other products, many of which are imported, such as window frames, handles, glass, glues, and metal plates that are attached to reinforce timber frames which are brought in by a few companies that have specialised in these specific products and created a niche market. Leys says they, too, supply the entire New Zealand building industry from warehouses all based in Auckland.
"We just need to allow exemptions so [they] can distribute these essential products to building and construction sites around New Zealand," he says.
But as Auckland eventually follows the rest of New Zealand down the alert levels, it would be facile to not ask the wider question: to what extent do the long-existing delays caused by the big building companies' market domination, and the medium-term delays caused by international supply chain disruption, and the short-term delays caused by Auckland's Level 4 lockdown, point to a wider structural problem in the industry?
For instance, the fact that it is centralised in Auckland, where the big companies are based. Or the fact that the industry relies on the big companies for a significant proportion of the trucking and logistics – much like the supermarket duopoly.
This latest supply crisis makes the start of the promised Commerce Commission study ever more pressing. Commerce Minister David Clark has indicated that, for workload reasons, the building supplies study is unlikely to begin until the commission completes its grocery retail study next year.
But when so much hangs on speeding up the supply of housing in New Zealand; when Finance and Infrastructure Minister Grant Robertson has said the Government is trying to pull every possible lever, breaking the longstanding building supplies gridlock must be an urgent imperative.
