Frank Newman: Modular homes and mod' cons

One would think prefabricated home-building companies would be inundated with orders and have a bulging bottom line. That's why the collapse of Matrix Homes, one of New Zealand's largest modular home builders, has raised eyebrows.

The company's factory in Lower Hutt was opened in February 2015 by the then Finance Minister Bill English.  At the time Matrix said it would be different from other companies because, "we're turning fully finished houses with code compliance certificates".

In the last three years it has built 100 homes. Clearly that was not enough to sustain the business, which by all accounts was set up on quite a significant scale and, one assumes, with high volume expectations. There is no doubt building modular homes should achieve significant economies (although it does have the disadvantage of having the overheads associated with a large commercial building that onsite builders avoid). So why did it not get the critical mass of sales it needed and expected?

In speaking to media, Matrix's chief executive and a founding director said the reason for the failure was a "lack of orders and slow planning regime changes…The rules were stacked against what we were doing...The [Auckland] Unitary Plan should have been done ages ago. I'm not trying to blame anyone for anything. It's just these things should have been quicker."

No doubt Matrix was also hoping that having the PM open their factory and say good things about them would help them secure the support of Housing NZ Corp. Not so. "They kept delaying and delaying and delaying and never bought one".

It seems Matrix learnt the hard way that dealing with local and central government is fraught with risk. Government agencies are not known for their speed and it would have been naive of Matrix to assume local and central government would embrace their transformational approach to solving the housing crisis, and foolhardy to base the success of their business model on it, if that's what they did.

There is no doubt Matrix was ahead of the game. There probably is good money to be made in modular housing and it may well be a way to bring housing costs down, but the regulations will need to catch-up and become more enabling, if that potential is to be realised.

Interestingly, I notice that there are now companies importing container houses from China. They are converted 20 and 40 foot shipping containers (which makes shipping easy and cost effective), fully kitted out to the buyers’ specifications. The theory is great, and it would be a serious option - if local councils standardised their consenting. The problem is that landowners not only have to deal with the Building Code regulations but they are also likely to be snared in Resource Management Act issues, given the restrictive nature of Council Plans.

Health and safety

A commercial property owner recently asked me to sit in on a meeting they had with a health and safety consultant to discuss their legal obligations.

Instead, what they got was a sales pitch as to why an expert was needed to protect the landlord from the "significant penalties that could be imposed should they breach the law". And the cost was a mere $55 a week - on a five-year contract - which the expert pointed out was minor compared to the potential penalties! The expert said their service included being present when tradespeople arrived to undertake maintenance, in order to brief the worker on the potential hazards. I mischievously asked a ridiculous question: Would he need to brief a sparkie who was visiting the site to repair light fittings, to let them know the hazards of live wires? He quite seriously said, yes!

This is of course typical of ‘experts’ jumping on the latest government-created gravy train, and using fear to justify their existence. This is what the Work Safe website has to say about a landlord's obligations:

"A commercial property owner/landlord is a Person Conducting a Business or Undertaking (PCBU). This means you have a duty of care, so far as is reasonably practicable, to ensure the health and safety of everyone involved with or affected by work on or at your property. This includes work that you organise or are responsible for. Those that could be affected include tenants, contractors engaged by you, or members of the public visiting your property."

They then quite helpfully, say that the steps that you can take to meet your legal duties are straightforward. These are:

"Engage competent contractors to do any work on the property. Once a tradesperson or appropriate skilled contractor has been engaged, that contractor then has the responsibility to ensure that the work they do does not put the health and safety of others (including tenants) at risk.

Ensure any serious injury or illness arising from work is notified. Contractors should notify us if any serious injury or illness occurs while work is being undertaken. Landlords should check this has been done (where they become aware of such incidents).

None of this requires extensive manuals or paper-based systems, although property management companies or landlords with numerous properties may choose to use documented systems to keep on top of requirements and make it easier to track the progress of work activities."

So no need for experts to tell you a load of self-serving nonsense.

Frank Newman, an investment analyst and former councillor on the Whangarei District Council, writes a weekly article for Property Plus.