Pre-fabricated Building Products – A Solution to the Housing Crisis?

Julia Flattery, Senior Associate at Duncan Cotterill, questions whether pre-fabricated building products is a solution to the housing crisis and its associated legal issues. She draws focus to its advantages, challenges, and key changes raised in the Building (Building Products and Methods, Modular Components, and Other Matters) Amendment Bill. Hear more from Julia on this topic at the Building and Construction Law: The Big Issues on 10 June 2021.

Pre-fabricated or modular construction is the process of constructing a building off-site in a factory under controlled conditions designed to required codes and standards. The building is constructed in modules which are then transported to and installed on site. These modules can include all the interior fixtures and fittings.

One of the biggest challenges to the current housing shortage is that conventional building methods will not construct homes quickly enough to meet the required housing targets. Add to that a skills and labour shortage and supply chain issues and there is a real need to explore alternative solutions. Given the efficiency and cost benefits of pre-fabricated construction, this could provide part of the solution.

Commonplace use of pre-fabricated construction will take coordination from both the Government and the construction industry as well as an increase in consumer confidence in the process.

There are many advantages to pre-fabricated construction, including:

• Quicker construction (up to 30-50% quicker than traditional construction methods) – the construction of the modules in the factory occurs simultaneously with the foundation and other site works enabling faster completion of construction projects than traditional construction methods and providing a quicker return on investment.
• Reduction of impact of weather delays – as the majority of the construction occurs within a factory environment this mitigates the impact of weather events on the construction process.
• Lower costs – pre-fabricated construction drives cost certainty for a project as higher efficiency is delivered. This in turn could lead to lower house prices as the construction costs are lower.
• Labour – there is a lower requirement for on-site labour. In addition the factories can be located in places where there are skilled workers and good transportation links or used to attract workers to particular areas, therefore having a wider socio-economic benefit.
• Opening up more land for construction – fewer on-site works and less need for heavy plant and machinery solves some of the logistical and practical issues that may be preventing some parcels of land from being developed.
• Waste – construction waste is a big issue and one which is gaining more and more attention. Pre-fabricated construction reduces construction waste as inventory can be controlled and left over products can often be re-used.
• Quality – it is easier to control quality in a factory environment rather than on site.
• Safer construction – reduced labour on site due to fewer site works and less work at height lowers the risk of on-site accidents. This also simplifies risk assessments for sites.
• Storage of materials – as the modules are constructed off-site, there are fewer materials needing to be stored on site. Not only is this highly advantageous on compact sites, it also reduces the risk of thefts and generally provides cleaner and safer sites.
• Impact on local area – it removes a large proportion of the building activity from the site therefore reducing noise and construction traffic.

As with any innovation, there are some challenges, including:

• Funding – greater cashflow is needed at an earlier stage in the project than investors and lenders are used to with traditional construction. The financing model therefore has to be different from that used for traditional construction.
• Consenting process – the current process is not applicable to pre-fabricated construction. The aim is to change this so that the modules can be inspected at the factory so that only connections and on-site works require local inspection.
• Earlier decisions – requires more decisions and design input upfront. It requires consultants and contractors who are familiar with this process and its intricacies.  The front-loaded design process requires decisions to be made earlier than traditional methods.
• Supplier risk – currently there is only a limited number of suppliers.
• Size and variety limitations – although there is no restriction on the size of modules that can be constructed the need to transport the modules imposes a limitation. In addition the greatest efficiencies come from standardisation of products which can limit variety.
• Transportation risks – transportation risks and routes are key to avoid damage to modules during transportation.

Pre-fabricated construction is not appropriate for all construction projects but the housing shortage and other demands on the construction industry make it likely that it will be seen far more widely on construction projects in New Zealand in the future.

The Building (Building Products and Methods, Modular Components, and Other Matters) Amendment Bill (Bill), currently in its consultation phase, sets out the proposed changes to the Building Act 2004 which aim to address some of the current barriers to the use of pre-fabricated construction by providing an appropriate regulatory framework enabling these methods to be used and developed with confidence by the industry.

The key changes which the Bill covers are to:

1. Provide better information and clear responsibilities for building products by requiring manufacturers and suppliers to make a minimum level of information publicly available regarding the building products that they sell. There will be a duty on manufacturers and suppliers to ensure product information is not false or misleading and provide evidence to substantiate product claims.  Currently there is no requirement for information to be provided about products leading to consenting Authorities having to raise queries regarding their use during the consenting process. This will assist in selecting the correct products for the proposed use and should also lead to more efficient consenting as the consenting Authorities will have the information they require to assess compliance with the Building Code. As a result there should be fewer delays during the consenting process which will reduce time and cost for building owners. The information that will be required will be the subject of later regulations but is anticipated to include a description of the product, details of the supplier, information on the scope and limitations of use of the product, design, installation and maintenance requirements and a declaration as to whether the product is subject to a warning or a ban.
2. Strengthen the CodeMark scheme to prevent the registration of unsuitable products and provide greater product assurance. Currently MBIE does not have any power under the Building Act 1994 (Act) to set scheme rules for CodeMark or intervene if rules are not met.  The amendments seek to give MBIE greater oversight of the scheme, the right to set compliance rules and the ability to suspend or revoke a body’s ability to certify products if they do not comply with these rules.  There will also be a registration requirement for certification bodies. These changes will provide greater confidence in the CodeMark scheme for both building owners and consenting Authorities.
3. Provide a new voluntary manufacturer certification scheme for modern methods of construction. This will allow manufacturers of off-site prefabricated and modular buildings to achieve certification and demonstrate compliance with the Building Code enabling manufacturers to produce consistent products which can confidently be seen as being safe and reliable. The certification process will involve an assessment of the whole process for the use of off-site materials from design and manufacture right through to transportation and delivery on to site.  There have been concerns regarding the quality of and consenting process for off-site fabrication and this scheme aims to address these concerns and will have many benefits including providing a shorter and more efficient consenting for certified manufacturers, saving time and money (without compromising quality) due to reducing duplications and delays, allowing consenting Authorities to focus on on-site compliance and providing assurance to building owners of the quality of construction. This should lead to wider use of off-site products in the building industry which could lead to quicker and cheaper construction.
4. Create new offences and penalties in relation to breaches of the minimum information requirements and certification of off-site products set out above. There are also increased penalties for existing offences under the Act with a higher rate of penalties being set for companies as opposed to individuals. There will also be an extension to the period to file charges from 6 to 12 months. These changes aim to provide greater protection for building users and deter sub-standard work and poor practices within the industry. The key to achieving this will be the appetite of the respective Authorities to enforce these penalties.
5. Increasing the scope for using the Building Levy which will enable MBIE to spend levy funds on activities relating to the broader oversight of the industry.

Hear more about pre-fabricated construction, how it could provide a solution to the housing shortage and the proposed changes to the Building Act to facilitate wider use of this methodology at the Building and Construction Law: The Big Issues on 10 June 2021.

Julia Flattery is an experienced construction and commercial property lawyer who brings significant large-project build expertise during twelve years’ working for a leading UK international firm. Her particular areas of expertise are property acquisitions, sales and leasing, infrastructure, construction and developments. Her property experience includes the full gamut of commercial property work with a recent emphasis on large mixed-use joint venture developments, typically owned 50% publicly, 50% private, as well as large-scale developments and infrastructure projects. She is UK qualified and have been practicing as a lawyer since 2005. Connect with Julia via email or LinkedIn .

Disclaimer: The content of this article is general in nature and not intended as a substitute for specific professional advice on any matter and should not be relied upon for that purpose.