Construction Minister Jenny Salesa confident KiwiBuild targets will be met

The Government won't be making it easier for foreigners to get construction work in New Zealand, despite being tens of thousands of workers short.

Construction Minister Jenny Salesa told Newshub Nation on Saturday despite the grim outlook, she's confident the targets will be met without increasing

"We have 10,700 here on work visas for construction. The majority of our workforce in this area - 256,000 people - are New Zealanders. We're looking long-term at how we train up our own people… the majority of our workers are New Zealanders, they are local people."

There are around 10,700 foreigners here on construction visas. The new KiwiBuild visa will allow for another 1500, and Ms Salesa said 23,000 Kiwis are currently training as apprentices.

"Just last year we had in terms of architects and engineers graduating out of our universities, over 6000 people. We're not just looking at overseas people coming through. Long-term, we have to train up our own."

Ministry of Business, Innovation and Employment (MBIE) documents released to Newshub Nation under the Official Information Act say we have a shortfall of 30,000 already, and that will grow to 46,000 by 2020 as KiwiBuild ramps up if nothing is done.

The documents also say employers are already having trouble finding skilled staff, driving up wages and costs.

"The rise in costs, wages and capacity utilisation is contributing to increased residential construction output prices, which have risen 28 percent from 2010 to 2017, well above the 11 percent all-industries average," according to advice delivered to Housing Minister Phil Twyford last year.

It's worst in Hamilton, Tauranga, Wellington, Queenstown and Auckland. The latter last year saw 10,300 consents for new dwellings issued, short of the 14,000 MBIE says it needs built - not just consented - each year. Nationwide, the country will need 44,600 consents by 2022, as KiwiBuild reaches its 10,000-a-year target.

KiwiBuild's first-year target is only 1000 homes, rising to 5000 in the second and 10,000 from there.

"We expect that we would be able to have enough people coming through, and enough people that we're training ourselves in New Zealand, to meet our KiwiBuild targets," said Ms Salesa.

Jenny Salesa.
Jenny Salesa. Photo credit: Newshub Nation.

Authorities have been aware of the problem for a long time.

"In 2011, 2012 Auckland Council and construction industry employers got together here in Auckland, they wrote a report, they presented it to the minister of the day. That report actually stated that by this year, 2018, we will be short in Auckland by 30,000 skilled workers. That was in 2013. What we're doing as a new Government is addressing that issue head-on."

Prefabs - the magic bullet?

Ms Salesa said building more prefabricated homes is likely to be a key part of the Government’s plan to reach its KiwiBuild targets. She said she and Mr Twyford recently visited a prefab factory in Masterton.

"When you look at how fast those houses are built and put up, it takes one registered builder - one licensed builder - and four semi-skilled people, and they can build a whole house in four to six weeks."

She said at a recent conference, prefab industry executives told her by 2020 they will be able to produce around 7000 homes a year.

But she wouldn't say whether there will be incentives in the upcoming Budget to encourage more prefabricated homes.

"Both Minister Twyford and I have had a few discussions with a few people. There are no announcements to be made. Any announcements in this area will be made by… Minister Twyford."

She said Mr Twyford is looking at easing financing rules on prefab homes. Banks are reportedly reluctant to lend to first-home buyers until a house is on site, but prefab homes are built elsewhere.

"It is not practical to do a relocation as a first-home purchase," mortgage broker Bruce Patten told NZME in March.

ANZ told NZME they require a 50 percent deposit on prefab homes, which is out of reach for most first-home buyers.

Apprentice requirements

Ms Salesa said any firms wanting a KiwiBuild contract would be expected to take on apprentices.

"We expect them as part of taking on Government contracts in the procurement process to build KiwiBuild homes, we expect that they will agree - hopefully - to take on apprentices."

But it's not clear yet whether it will be a requirement.

"It's not set in stone yet… We would expect that our developers and our construction companies would be in agreement, moving forward."

If it becomes a requirement, small companies won't be exempt. Ms Salesa said that won't be unfair, because "they already are training apprentices right now".

More details would be known after the Budget and the July 1 launch of the KiwiBuild scheme.

"KiwiBuild will begin on the first of July… we will know much more about the details of KiwiBuild, including for prefabrication, terms of procurement," she said.