Archive | Construction

Auckland above 10,000 home consents/year again

Auckland’s consent level for new homes got back above an annual rate of 10,000 in January after dipping in December. The 512 consents in January were 6 above the number a year earlier.

For the year, Auckland had 10,032 consents for new homes, compared to 9930 in the 12 months to December and 9275 in the 12 months to January 2016.

Nationally, consents for the month were up 3.4%, from 1695 to 1752, and for 12 months they were up 11.1%, from 27,124 to 30,123.

January is the traditional quiet month everywhere, but not usually as quiet as it got in Auckland’s central Waitemata & Gulf ward, where consents numbered only 9 in December and fell to 4 in January.

The Waitemata part of that ward covers the cbd & its western fringe, very much apartment & townhouse territory, so consent applications tend to be lumpy. In 8 of the last 12 months the ward had fewer than 50 consents, 3 months of 114, 155 & 179, and one outstanding month when 353 consents were issued.

In the previous 12 months, the ward’s consents exceeded 100 only twice, but they were months of 405 & 278, contributing to a total for 12 months that was 20% higher.

Looking forward into the new era of Auckland’s mostly approved unitary plan, when more intensification will be possible across 90% of suburbia, developers may disperse their search for cheaper land, resulting in more intensification in smaller centres.

Consents nationally for standalone houses fell slightly for the month but were up nearly 11% over 12 months, while consents for apartments have dipped slightly over 12 months and those for suburban townhouses & units are up nearly 28%.

Around Auckland by ward, this January & last, and the January 2017 year & previous 12 months:

Region: 512 (506), 10,032 (9275)
Rodney: 55 (60), 861 (865)
Albany: 194 (123), 2455 (2304)
North Shore: 17 (13), 455 (473)
Waitakere: 18 (46), 648 (465)
Waitemata & Gulf: 4 (80), 965 (1160)
Whau: 7 (11), 293 (189)
Albert-Eden-Roskill: 22 (29), 660 (449)
Orakei: 8 (10), 240 (490)
Maungakiekie-Tamaki: 25 (18), 423 (460)
Howick: 15 (17), 520 (572)
Manukau: 17 (36), 441 (419)
Manurewa-Papakura: 50 (37), 1079 (848)
Franklin: 80 (26), 992 (581)

Consents for the 4 residential market segments in January & the 12 months to January 2017 compared to the previous January & previous 12 months:

Houses: 1253 (1286), -2.6%; 21,277 (19,183), 10.9%
Apartments: 116 (89), 30.3%; 2430 (2511), -3.2%
Retirement village units: 98 (135), -27.4%; 1915 (1908), 0.4%
Townhouses etc: 285 (185), 54.1%; 4501 (3522), 27.8%.

Sector & total values against January 2016 or the previous 12 months:

New homes: $619 million/month ($641 million), -3.5%; $10.625 billion/year ($8.906 billion), up 19.3%
Alterations & additions: $129 million/month ($115 million), 12.4%; $1.899 billion/year ($1.728 billion), up 9.9%
Total residential: $748 million/month ($756 million), -1.1%; $12.524 billion/year ($10.635 billion), up 17.8%
Non-residential: $338 million/month ($310 million), 9.2%; $6.048 billion/year ($5.876 billion), up 2.9%
Total, including non-building: $1.108 billion/month ($1.083 billion), 2.3%; $19.055 billion/year ($16.922 billion), up 12.6%.

Earlier stories:
6 March 2017: Third quarter of plus-32% rises in Auckland construction input
10 February 2017: Townhouses & flats dominate shift in home styles

Attribution: Statistics NZ tables.

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Third quarter of plus-32% rises in Auckland construction input

The value of building work put in place in Auckland in the December quarter fell just short of $2 billion, and was up $500 million on the input a year earlier.

Image above: Residential work has soared well above the static input to commercial construction in Auckland.

Figures out from Statistics NZ on Friday show for the whole of 2016, $2 billion more was spent nationally on new homes than in 2015 – up from $8.4 billion to $10.5 billion – and across all construction sectors there was a $3.3 billion rise nationally to $19.87 billion spent for the year, all ex-gst.

Statistics NZ said residential work in Auckland rose 4.5% in the December quarter, and non-residential 17%.

Nationally, the 1.1% rise in residential work in the December quarter was the smallest increase in 6 quarters.

Combining the input in all sectors, the growth in construction input in Auckland hasn’t risen steadily since the market bottomed in 2011.

There was a spurt of 9-13% quarterly growth in 2012, and that was followed by quarterly growth of around 30% for the last 3 quarters of 2013, tapering off to a 20.5% increase in the March 2014 quarter and actually declining in the September quarter that year.

Since that dip, Auckland growth has been strong: 13.6% in the December 2015 quarter (compared to the same quarter a year earlier), then rises of 25.6% in the March 2016 quarter, 39% in June, 32.3% in September & 34.2% in December.

Attribution: Statistics NZ tables & release.

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Façades on 38 quake-hit streets to be strengthened within year

Councils from Hurunui (between Christchurch & Kaikoura) to Wellington have identified 38 streets where building owners need to secure unreinforced masonry façades & parapets within a year.

Building & Construction Minister Nick Smith said today: “The Kaikoura earthquake has increased the seismic risks in Wellington, Lower Hutt, Blenheim & Hurunui over the next 3 years. It is therefore prudent to require them to be secured and to help building owners with funding of these high risk, unreinforced masonry parapets & façades to secure them.

“The 38 streets have been selected by the councils on the basis of pedestrian & vehicular traffic and where the risks from unreinforced masonry parapets & façades are greatest. The next step is for councils to formally notify the building owners affected. Some owners may already have taken corrective work.

“The Government has established a $3 million fund to help building owners with the cost of securing the parapets & facades.”

Dr Smith said all 4 mayors had confirmed their councils would make financial contributions to this fund, raising it to about $4.5 million. The fund will be used to provide a 50% subsidy for the work up to a maximum grant of $15,000 for a façade and $10,000 for a parapet.

Link:
Full list of streets

Attribution: Ministerial release.

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Townhouses & flats dominate shift in home styles

Suburban townhouses & flats dominated the shift in building consent figures away from standalone houses last year.

The townhouse & flats segment of the market – essentially lowrise intensification outside the central urban areas – has grown by 330% since 2011, while the standalones have steadily lost market share, falling from 81% in 2011 to 71%.

Consents for all new homes last year totalled 29,970, up 10.5% on the 27,132 in 2015, according to Statistics NZ’s figures out yesterday.

Houses made up 21,310 of the 2016 total, 19,038 the previous year, so a rise of 11.9% for the year. For the month of December, however, the 1580 consents were down 4.9% for that month a year earlier.

Consents for the 4 market segments in December & the whole of 2016 compared to the previous December & the whole of 2015 were:

Houses: 1580 (1661), -4.9%; 21,310 (19,038), 11.9%
Apartments: 138 (427), -67.7%; 2307 (2539), -9.1%
Retirement village units: 193 (159), 21.4%; 1952 (1899), 2.8%
Townhouses etc: 294 (291), 1%; 4401 (3656), 20.4%.

Sector & total values against December 2015 or the previous 12 months:

New homes: $833 million/month ($868 million), -4%; $10.648 billion/year ($8.796 billion), up 21%
Alterations & additions: $156 million/month ($149 million), 4.3%; $1.885 billion/year ($1.727 billion), up 9.2%
Total residential: $989 million/month ($1.017 billion), -2.8%; $12.532 billion/year ($10.523 billion), up 19.1%
Non-residential: $595 million/month ($555 million), 7.2%; $6.019 billion/year ($5.919 billion), up 1.7%
Total, including non-building: $1.612 billion/month ($1.611 billion), 0.1%; $19.03 billion/year ($16.859 billion), up 12.9%.

Housing consents around the country:

Auckland: 740 (947), 9930 (9251)
Whangarei: 45 (41), 662 (447)
Kaipara: 20 (19), 267 (182)
Hamilton: 76 (142), 1179 (1205)
Bay of Plenty: 177 (176), 2520 (809)
Wellington region: 115 (106), 1992 (1721)
Christchurch & districts: 344 (510), 5202 (5830)
Queenstown-Lakes: 79 (62), 945 (816)

Around Auckland by ward:

Rodney: 60 (103), 866 (844)
Albany: 170 (156), 2288 (2274)
North Shore: 28 (143), 451 (480)
Waitakere: 43 (31), 676 (454)
Waitemata & Gulf: 9 (93), 1041 (1157)
Whau: 14 (24), 297 (201)
Albert-Eden-Roskill: 112 (144), 667 (445)
Orakei: 15 (70), 242 (506)
Maungakiekie-Tamaki: 129 (19), 416 (467)
Howick: 22 (46), 522 (585)
Manukau: 21 (26), 460 (406)
Manurewa-Papakura: 59 (55), 1066 (855)
Franklin: 58 (37), 938 (577).

Attribution: Statistics NZ tables.

Related story today: Smith exultant about figures that are plainly inflated

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Smith exultant about figures that are plainly inflated

Former housing minister Nick Smith, now building & construction minister, heaps praise on himself for a job extremely well done: “Building activity is at a record high, topping $19 billion for 2016 after 5 straight years of strong growth”.

But we all know it’s not true. Although Dr Smith said of yesterday’s building consent report that the figures he was quoting were “in inflation-adjusted terms”, both he & the rest of New Zealand know construction costs, land prices & house prices have been distorted way beyond the realm of the Reserve Bank’s narrow inflation focus.

It’s a sector which can be measured very accurately, but the figures Statistics NZ releases monthly on building consents for new homes carry distortions because of how applications are made. In some cases such as staged developments, consent applications & costs may be reported in different time periods. However, over a year, I suspect it’s reasonable to use these figures to carry out the calculations I’ve done here on changes in floor areas, values and values/m² of construction. The value of land is excluded from building consent figures.

Going back to the bottom of the market following the global financial crisis, 2011, the statistics show an average floor area of 191.6m². It rose the next year, declined for 3 years and recovered slightly in 2016. The percentage changes were rises of 2.9% in the first year and 1.8% in the last year, but falls of 2.7%, 2.6% & 4.3% in the intervening years.

The average value/dwelling was just under $280,000 in 2011, and rose in steps of $6600-16,000 during the next 4 years, equating to gains of 5.75%, 3.3%, 4% & 2%. Then, in 2016, the average jumped $31,000 to $355,300, a leap of 9.6%.

Putting those figures together to see what the consent value/m² has been, the starting point in 2011 was $1459/m². The end point, the average for 2016, was $1951/m² – a rise of $492/m² over 5 years, or 34%. In the first year off the market bottom the rise was 2.75%, but it’s since been consistently above 6% – 6.15% in 2013, then 6.75%, 6.71% and, last year, 7.67%.

An important factor in the equation is the falling proportion of total housing categorised as houses, distinct from 3 intensive categories – apartments, retirement village units and suburban townhouses & units – all of which generally have smaller floorplates than the average house but will generally be priced more highly per m² of building. The houses category fell from 81% of all housing consents in 2011 (when the apartment sector almost disappeared) to 71% in 2016.

Dr Smith habitually talks about consent figures as if they were actual construction. Statistics NZ doesn’t supply regular figures which would show the percentage of consents that turn into actual construction. Those percentages vary cyclically, according to figures I’ve seen long ago – heading into the peak of a boom the consent figures will have risen steeply, but once the boom ends actual construction can plummet.

In his release on the consent figures yesterday, Dr Smith said: “This is the longest & strongest growth phase in building activity in New Zealand history. It involves record levels of investment in homes, commercial buildings & infrastructure. The total value of consents in 2016, at $19 billion [for all consents, not just residential], is the highest ever and 30% more than the previous peak last decade, in inflation-adjusted terms.

“I am particularly encouraged by the ongoing strong growth in residential building activity, that has increased 19% nationally & 27% in Auckland over the past year. This is the fifth straight year of strong growth. You cannot grow a sector as large or as complex as building at more than about 20% compound/year without incurring problems with quality.

“The number of homes being built in 2016 – 29,970 nationally & 9930 in Auckland – is more than double that of 5 years ago and is the highest since 2004. This growth gives me confidence we will have the number of homes increasing in line with population growth by the end of the year.

“This ongoing strong growth shows the Government’s programme to increase housing supply is working. We have aggressively increased land supply with special housing areas in the short term, changes to Auckland’s planning in the medium term, and the national policy statement on urban development capacity & Resource Management Act reforms in the long term.

“We have complemented this with the Crown land programme and a record level of direct Government projects to build homes, such as Hobsonville. We’ve also provided record levels of assistance for first-homebuyers with the KiwiSaver HomeStart scheme, which has helped more than 20,000 people into their first home with about $500 million in KiwiSaver withdrawals for a deposit.

“This Government is, step by step, development by development, getting on and addressing New Zealand’s housing challenges.”

The figure of $19 billion includes $12.5 billion for new homes and alterations & additions to homes, $6 billion for non-residential buildings and just under half a billion dollars for non-building construction. The housing component has been rising rapidly – by 25.4% in 2012, 28% in 2013, then 20.5%, 10.5% and, last year, 19.1%.

The non-residential sector had 2 strong years – rises of 21.5% in 2014 & 15.9% in 2015, but was down to a 1.7% rise last year.

Related story today: Townhouses & flats dominate shift in home styles

Attribution: Statistics NZ tables & release, ministerial release.

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Smith lists the initiatives to improve coping with quakes

Building & Construction Minister Nick Smith listed 12 initiatives this week, not just to rebuild after earthquakes but to learn from the events and improve New Zealand’s resilience to future earthquakes.

Dr Smith made his points on the steps being taken to improve management of earthquake risks in a Rotary address in Nelson, as local MP.

You can read his full address here: Better managing New Zealand’s earthquake risks

The Kaikoura earthquake on 14 November measured magnitude 7.8, making it the largest in New Zealand since 1855.

Dr Smith: “We are one of the most seismically active countries in the world and we need to be at the leading edge of protecting people, infrastructure & the economy from earthquakes.”

The initiatives, those already legislated and those still on the way:

  1. New Earthquake-prone Building Act

The first initiative is the new earthquake-prone building legislation passed by Parliament last May, which comes into effect in June this year.

The first major change in the new law is a nationally consistent approach. However, Dr Smith varied the timeframes for buildings to be assessed & upgraded relative to the variations in earthquake risk. In high risk areas like Wellington, upgrades must be done within 15 years, in medium risk areas like Nelson 25 years, and in low risk areas like Auckland 35 years.

We have set the standard of an earthquake-prone building as being one that is less than one third of the current seismic standard. It is not a guarantee of safety. It is a pragmatic balancing between cost & safety.

We have also introduced in the law the notion of priority buildings such as schools, hospitals & buildings on major pedestrian access ways and required that these be strengthened in half the standard times.

A further new requirement is that if a building owner is doing a substantial upgrade of an earthquake-prone building, they must simultaneously strengthen it to this minimum standard.

  1. Adding natural hazards to the RMA

The second major change is to the Resource Management Act, scheduled to be made law in March: “This is one of those areas where politics has got in the way of rational risk management.

The Act lists seven matters of national importance that must be addressed in every single plan and consent considered across the country… but there is no mention of natural hazards like earthquakes. This lacks common sense. New Zealand faces multiple natural hazard risks and it was a serious oversight that these risks are not a mandatory consideration for new developments.

“Let me give a practical example of why this law change is so important: The Bexley subdivision in Christchurch was approved under the RMA in the early 1990s despite publicly available reports identifying the low-lying areas as having a high risk of liquefaction in a moderate earthquake. The several-hundred-page council report on which this subdivision was approved systematically works through each of the issues identified in the principles section of the RMA as required legally. There are many pages on the landscape, cultural & vegetation issues, but the report is silent on the very significant earthquakes risks.

“The hundreds of Bexley residents whose lives were literally tipped upside down, and the taxpayers who ultimately paid out hundreds of millions from the subsequent red-zoning process, would have much preferred these risks were properly assessed in the first place.

“This important change to the RMA is in the substantive second phase bill of Government reforms due back from select committee in coming weeks and due to be passed into law in March.”

  1. Post-quake Building Act reform

Next, the management of buildings following a significant earthquake: “This involves real clashes of people’s relative rights, and decisions in a high risk aftershock environment where lives can be easily lost by the wrong decisions.”

Cabinet approved Dr Smith’s proposed revamp of the Building Act to deal with these issues a week before the Kaikoura quakes.

“The bill provides greater powers to get damaged buildings down more quickly, and provides a quite sophisticated balancing of rights between private property, safety & heritage issues. I will be introducing this bill into Parliament in March with the aim of having it as law by year’s end.”

  1. Improving consistency of building assessments

An associated area of work is improving the consistency of engineering assessments. New regulations will be finalised in April.

“This is relevant to the short sharp assessment done after an earthquake as well as in determining what buildings are earthquake prone.

“We have introduced a new guide for post-quake building assessment. Buildings are stickered as white, meaning OK for continued use, yellow for restricted access and red for unsafe. There was a lot of confusion during the Christchurch quakes by both engineers & the public on the old system, but the experience from the Kaikoura quakes is that we now have a system that is the world’s best practice, well understood and which strikes a better balance between risk & the need for communities to be able to move into recovery mode.

“The more complex job is the regulations currently being consulted on for the seismic assessment of earthquake-prone buildings. There is significant frustration from building owners that different engineers can give quite different assessments of the proportion of the new building standard that a building meets. There are real practical difficulties in making engineering assessments of buildings that may be 50 or 100 years old with very little knowledge of the standards of concrete, steel or construction in any records.

“We are currently developing regulations under this new law to get greater consistency in these assessments. The new regulations will be finalised in April.”

  1. Standards, training of engineers & accountability

This concerns regulations, ethics & training of engineering professionals, but also what requirements there are to pass on information about potentially dangerous structures and the question raised by the ability of an engineer to escape accountability by resigning from their professional association.

“We made an important change to the code of ethics last year that is pertinent to the tragic collapse of the CTV building in which 115 people were killed, 60% of the total toll from the Christchurch earthquake.

“Much has been written about the inadequacies of the design of this building constructed in 1986. I am hesitant to comment on the specifics with police due to announce a decision in the next few months on whether to prosecute the engineers responsible, albeit there is frustration that this decision is taking so long.

“The pertinent and relevant issue is that in 1993, when the building was for sale, it was assessed by consulting engineers as deficient in its seismic design. The client wisely opted not to buy the building on this advice, but the system failure was that this information was not passed on to the relevant building authority – in this case the Christchurch City Council.

“The problem here is that consulting engineers are bound by commercial contracts and the information belongs to their clients, and in this case the client had no interest beyond deciding not to purchase.

“Commercial interests & privacy concerns must in these circumstances take a back seat to public safety. That is why the code of ethics, with the support of the profession, was changed in July last year requiring engineers to pass on such information to relevant public authorities.

“A second issue that I am testing in the courts is the notion that professional accountability can be avoided by an engineer simply resigning from the professional body.

“The circumstances are that IPENZ (the Institution of Professional Engineers) appropriately initiated an investigation into the issues of engineering practice around the CTV building, but the process could not proceed simply by the engineer resigning. This not only deprives the public of a proper process of accountability but the profession of the critical learnings that must flow from such failures.

“The courts will determine a definition of what the current law states and, if it is found that accountability can be avoided by simply resigning, we will need to amend the law.

“Our government has also significantly lifted our investment in the training of professional engineers with over $90 million of additional funding. There are 2500 more students studying engineering mainly at Canterbury & Auckland Universities today than in 2008.”

  1. Powers for addressing newly identified risks

Strengthening how the Government & councils can respond to newly identified building risks: “We do not currently have in law the equivalent of a product recall system in our Building Act. An example of such a problem is where we find an engineer whose work is not up to scratch, as has recently occurred in Masterton.

“A prudent response is to require other building owners to have their building designs checked. The Government & councils can try to persuade building owners that this should be done, and generally, as in the Masterton case, owners have co-operated. Where we know a particular engineer’s work is flawed, we need to be able to check their other projects.

“Another example is the recent problem identified in the Statistics NZ building in Wellington, where 3 precast floor components collapsed. The preliminary investigation identified problems associated with the long duration and how ductile beams interacted with the precast floor slabs.

“Seismic building design is an evolving science and we will identify new risks like this that have not previously been sufficiently considered.

“This potential design flaw can be fixed, and the prudent response is to require all buildings recently constructed with these features to be checked and, where necessary, repaired.

“We are doing this in the Wellington area using the special Kaikoura earthquake powers, but this is an area where public authorities need wider powers to ensure our buildings are safe.”

  1. Tackling high risk parapets & façades post-Kaikoura

Dr Smith announced on Wednesday that an order-in-council would be issued for owners of 300 buildings in Wellington, Lower Hutt & Blenheim to be given a year to tie back unreinforced masonry façades & parapets, and that regulations would be put in place by the end of February. The Government will provide a 50% subsidy up to $15,000 for a façade and $10,000 for a parapet.

  1. Supporting heritage building upgrades

A new heritage earthquake upgrade incentive programme fund of $10 million has opened for the first round of bids.

  1. Improving tsunami warning systems

The areas most vulnerable to tsunamis are near major faults. Dr Smith said the risks were greatest where you have deep water rapidly become shallow, and confined bays that exacerbate wave height.

“The most effective strategy for reducing these risks is a well informed public & improved warning systems. The Ministers of Civil Defence and Science & Innovation announced a further $3 million investment in improving Geonet’s natural hazard monitoring in December, in response to concerns about incomplete & confusing information about the tsunami risk following the Kaikoura quake.

“The Government is also exploring a wider investment in smart-phone warning technology that would further improve our capacity to ensure people are better informed during such events.”

  1. Supporting innovative design

Dr Smith said the Government was stepping up its support for innovative design in seismic-resistant buildings: “The Earthquake Commission and the building & construction ministry [which as far as I can see is actually part of the Ministry of Business, Innovation & Employment] are funding new guidance for low damage building systems, including seismic isolation, buckling restrained braces and viscous damping. The Pres-Lam system is one of these, and the first building in the world to use it is the Nelson Marlborough Institute of Technology.

“We should not underestimate the economic opportunities from these technologies. Countries like China & Turkey, who have lost hundreds of thousands of citizens in quakes and who are becoming a lot more wealthy, are looking for these sorts of technologies to step up their building safety.”

  1. Investing in seismic research

Seismic research is one of the Government’s 10 national science challenges, “which is why we are lifting our investment in improved science & engineering to support better earthquake resilience. New engineering research facilities have been built at both Auckland & Canterbury Universities.

“The natural hazards platform has been created with $14 million/year of funding to support improved research into all aspects of seismic design.”

  1. National policy on natural hazards

Dr Smith raised the prospect of a national policy statement on natural hazards in 2015, but said in his speech this week the Ministry for the Environment would start work on it this year.

He commented this week on councils’ questionable appreciation of risks: “I am not satisfied that councils sufficiently appreciated the scale of the sort of natural hazard risks that they are responsible for. It can be tempting to ignore significant risks in the hope that nothing happens.

“A current example is the challenges in the booming tourism community of Franz Josef.

This is one of the highest earthquake risk areas in the world, with the main alpine fault running through the town and significant movement of this fault projected every 80 years. This risk is compounded by the landslide risks of the foreboding surrounding country and the wild & dangerous Waiho River.

“We can design buildings that can withstand substantial shaking but, if a fault line rips through a building, there is little prospect of it remaining safe. Council had proposed to designate the area to prohibit any new structures in this strip but has come up against considerable resistance from property owners. It is currently proposing to drop the hazard zone.

“In a place like Franz Josef, where there can be more than 1000 tourists staying/night, there can be a tension between the local business interests and the national interests in ensuring the prudent management of safety of our visitors. The Government is working with the Westland District Council on these issues, but the example highlights the need for clearer national direction.

“This year the Ministry for the Environment will be starting work on a national policy statement on natural hazards to support the changes in the RMA.

“The purpose will be in strengthening the requirements & legal responsibilities on councils to ensure we more prudently manage these risks. This is a major piece of work that will take some years to complete, but will lay the national foundations for better long-term management of earthquakes & other natural hazards.”

Related stories today:
Better managing New Zealand’s earthquake risks
Smith lists the initiatives to improve coping with quakes
Fast fix ordered for Wellington & Blenheim unreinforced masonry

Earlier stories:
18 November 2016: Ministry to investigate buildings’ performance in quake
15 August 2016: Property Council calls Government’s new heritage support fund “underwhelming”
17 April 2016: QuakeCore lab opens
3 September 2015: Property Council suggests measures to help quake-affected owners
3 September 2015: Government bows to quake survivor’s submissions
14 August 2015: Smith talks up firmer hand on environmental rules
3 July 2015: Council falls into line on quake-prone checks
25 June 2015: Select committee seeks feedback on quake-prone buildings bill changes
20 May 2015: Changes proposed for managing buildings in emergencies
10 May 2015: 
Government eases quake strengthening targets
7 March 2014: Quake-prone buildings bill introduced

Attribution: Smith speech.

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Better managing New Zealand’s earthquake risks

Building & Construction Minister Nick Smith delivered a comprehensive address this week to a local audience – he’s also Nelson’s MP – on the steps being taken to improve management of earthquake risks.

I’ve pulled out his key points to highlight them in a separate item. This is his full address, unedited:

A big worry in this Trump era of modern politics is that complex issues are dumbed down to 140 character tweets. The beauty of this annual opportunity you give me as Nelson’s MP is to give a far more considered and thorough account of a topical issue. The focus of this 22nd Rotary address is the steps we are taking to improve New Zealand’s management of earthquake risks.

We were dubbed the Shaky Isles 170 years ago and at two minutes past midnight on November 14 we got another harsh reminder of why. That Kaikoura quake was the largest in New Zealand since 1855. We are one of the most seismically active countries in the world and we need to be at the leading edge of protecting people, infrastructure and the economy from earthquakes.

The challenge in Government is that there are all sorts of risks to manage – financial, terrorism, biological, trade, climate change, fire, and cyber-security, as well as the natural risks of floods, volcanic eruptions and cyclones, as well as earthquakes. We cannot pretend that Government can eliminate these risks and we will always be limited in the resources we have to reduce them. My long term ambition as a Minister and as a rare engineer in Parliament is to try and ensure as a country we manage these risks and allocate resources based on science-based risk assessment. Politics and rational science are not close relatives but tonight is an attempt to bring them closer together.

It is worth recalling our history of seismic events. We have had eight fatal earthquakes post-1840, or about one every 20 years. While it is true that two majors inside six years is unusual, we should treat the 40-year lull between Inangahua and Christchurch as unusually long.

There is no evidence the frequency of earthquakes in New Zealand has changed. GNS measures about 15,000 a year of which 150, or one every three days, is felt. What has been unlucky is that we have had major quakes close to major population centres where the effects are so much greater.

It is useful to compare the risks to life from earthquakes to other risks. Our history points to an average loss of three lives a year from earthquakes, as compared to 300 a year from road accidents, 120 a year from drowning and 30 a year from house fires. You can see in these numbers why I placed huge importance in getting a new law through Parliament last year requiring smoke alarms in rental properties, when the costs are so small in comparison to earthquake strengthening and the number of lives saved so much greater. These stats are not to discount the risks from quakes, but to keep the relative risk in perspective.

Average expected fatalities are just one factor to take into account in determining priorities. Earthquakes will cost New Zealand close to $50 billion in both public and private sector costs this decade, of which the Government’s share is about $20 billion – $18 billion for Christchurch and $2 billion for Kaikoura.

The loss of life from earthquakes in New Zealand pales by comparison internationally. The 185 deaths in Christchurch compares to 230,000 in the 2004 Boxing Day quake and tsunami in Indonesia, the 160,000 killed in Haiti in 2010, the 16,000 killed in the Tohoku quake in Japan of 2011 and the 70,000 killed in Sichuan quake in China in 2008.

It is of note that the last decade has been the deadliest on record for earthquakes globally and that fatalities have been on the rise over the past half century.

The big killers are building failures and tsunamis. The reason for the significant rise is not any increase in seismicity but many more people living in the cities and in coastal areas. Improved building seismic resilience and better managing tsunami risks are the issues we should focus on to reduce future fatalities.

New Zealand’s comparatively low level of fatalities despite being one of the most seismically active areas of the world is due to both our relatively low population density and the huge improvements in building standards over the past century.

The Christchurch and Napier earthquakes were similarly sized quakes but whereas one in 100 died in Napier, in Christchurch one in 2000 died. This 95 percent reduction in fatalities can largely be attributed to the huge improvements in buildings’ seismic resistance. To put it another way, there would have been about 4000 fatalities in Christchurch were building standards left as they were in 1931. The key issue for my Building Minister’s role is how we further improve our engineering and building standards into the future.

Seismic science & engineering

It is not my intention to spend too much time on the seismic and engineering sciences, but there are a few core facts needed to explain the Government’s priorities and direction of policy.

The first is to communicate the scale of energy release in a seismic event that makes designing and constructing earthquake resistant buildings so challenging.

The Richter scale used to report earthquakes is logarithmic. An increase from a 5 to a 6 magnitude quake actually represents a 32-fold increase in the energy being released.

To get some sense of scale, the Christchurch 2011 quake at a 6.3 involved a release of energy equivalent to four Hiroshima atomic bombs. The Kaikoura earthquake at 7.8 was 180 times more powerful and the equivalent of 800 Hiroshima bombs. But the magnitude 9, mega thrust Tohuku earthquake that struck Japan in 2011 was 80 times stronger again and the equivalent of 60,000 Hiroshima bombs.

So my first point is that earthquakes involve the release of phenomenal energy and that we cannot make our buildings totally safe.

The Christchurch earthquake was comparatively small and made deadly not by its size but by its location. We need to be prepared for the worse scenario of a Kaikoura or Tohoku scale quake close to a major city.

The analogy I would make to improved building design is the improvements made in vehicle standards.

Cars today are not 100 per cent safe in a crash but the risk of fatality has been made an order of magnitude better by smart design.

The challenge with buildings is more difficult because cars generally last 15 years, whereas buildings last 100, buildings are generally one off designed whereas cars are massed produced and accidents occur far more frequently than earthquakes, enabling design lessons to occur far more frequently. The common feature is that while we can make buildings a lot safer, a big enough crash or quake will still result in fatalities. My greatest concern is about the thousands of vintage buildings still in use that pose the most risk.

The second important scientific fact relates to the cause and probability of earthquakes.

We heard all sorts of phantom theories about earthquakes being triggered by the phase of the moon, by oil exploration activity and from Destiny’s Brian Tamaki that sexual sinning was the cause. Earthquakes are caused by the sudden movement along faults of the earth’s tectonic plates and the timing cannot currently be predicted beyond probability estimates.

I was particularly offended by the moon-man, who caused widespread alarm in 2011 when he publically predicted a major shake at the Sign of the Kiwi on Christchurch’s Port Hill’s at a particular date and time. I was part of Skeptics New Zealand’s protest on site to highlight the nonsense of such pseudo-science. Extensive studies have shown no correlation between phases of the moon and earthquakes.

The science does, however, tell us two things about the probability of earthquakes.

There are no surprises that the risk of earthquakes varies significantly with geography, i.e. that Wellington is much more prone than Auckland but the scale of difference needs highlighting.

We would expect a significant earthquake of intensity MM8 in Wellington about once every 120 years, in Christchurch or Nelson every 720 years, in Dunedin every 1700 years and in Auckland once every 7400 years.

For the record, the most high risk earthquake locations are Arthurs Pass, Hanmer Springs, Hokitika, Masterton and Kaikoura.

The importance of this is that we need to focus our policies on the areas of greatest risk and avoid imposing excessive costs in areas like Auckland and Dunedin, where the seismic activity is low.

The second factor about the timing of earthquakes that we know is that they are much more likely after a significant quake. One of the worst psychological impacts of earthquakes is the long tail of aftershocks that can last several years. There is nothing more soul destroying than fixing the sewer pipe or removing the liquefied silt only to have it re-break and re-appear time and time again.

The last technical issue I want to cover is an explanation of why some buildings failed and others did not in the Kaikoura earthquake.

People have been both mystified and unnerved by the fact that many older buildings labelled as earthquake prone had minimal, if any, damage in Wellington, while other new modern buildings had life-threatening partial failures.

The explanation for this lies in the way the frequency of shaking interacts with the natural frequency of a building.

Every building has a natural frequency. If you give it a strong enough shove, it will naturally rock back and forward with a particular frequency. A short building may have a period of 0.2 seconds, but a tall building may be at over 2 seconds per sway. If the frequency of the earthquake’s shaking coincides with the building’s own frequency, it will experience much more extensive damage.

An earthquake will typically release a whole lot of shaking frequencies, but the short sharp shaking abates in close proximity to the quake. So the Kaikoura earthquake in Wellington had strong frequency shakes in the range of 0.8-1.2 seconds that lasted for an unusually long time. That affected buildings in the five to ten storey range. For these buildings, the earthquake was stronger and longer than the design standards required. But these same buildings would not be the most vulnerable in a major quake close to the city. The one and two storey, unreinforced masonry buildings that were untouched by the Kaikoura quake would be more likely to be hugely damaged and cause significant loss of life in a closer quake.

The Government has been severely tested by the challenges of the Christchurch and Kaikoura earthquakes and, while some mistakes have been made, I think history will judge our Government well. I particularly give tribute to Gerry Brownlee who, through the Canterbury and Kaikoura earthquakes, has done the lion’s share of the work.

We have poured in billions of dollars, passed special pragmatic laws to facilitate the rebuild, bailed out failed insurers to protect householders and acted decisively on getting infrastructure quickly fixed.
The responsibility is not just to rebuild but to learn every possible lesson so as to improve our resilience as a country to future earthquakes. Tonight I want to outline a dozen initiatives we are taking to achieve this:

  1. New Earthquake Prone Building Act

The first is the new earthquake prone building legislation passed by Parliament last May which comes into effect in June this year.

From a policy perspective, it is relatively easy to pass laws and regulations on what you require of newly constructed buildings, but it is a far more difficult job in requiring existing building owners to upgrade. The vast bulk of seismically active countries have no legal requirement for older buildings to be upgraded with the exception of the State of California.

However, this is where the greatest gains are to be made in safety. Old buildings, those built before the development of seismic design standards, particularly those of unreinforced masonry, are responsible for the vast bulk of the thousands of people who die each year in earthquakes around the world.

The first major change in the new law taking effect this year is a nationally consistent approach. The Royal Commission into the Canterbury Earthquakes rightly concluded that for each of our 68 councils to have different definitions and different methodologies was inefficient and ineffective.

An innovation I added to the law is varying the timeframes for buildings to be assessed and upgraded relative to the variations in earthquake risk. In high risk areas, like Wellington, upgrades must be done within 15 years, in medium risk areas like Nelson 25 years and in low risk areas like Auckland 35 years.

We have set the standard of an earthquake prone building as being one that is less than one third of the current seismic standard. It is not a guarantee of safety. It is a pragmatic balancing between cost and safety.

We have also introduced in the law the notion of priority buildings such as schools, hospitals and buildings on major pedestrian access ways and required that these be strengthened in half the standard times.

A further new requirement is that if a building owner is doing a substantial upgrade of an earthquake prone building, they must simultaneously strengthen it to this minimum standard.

These new frameworks for strengthening older buildings are the most comprehensive of any country in the world.

  1. Adding natural hazards to the RMA

The second major change is to the Resource Management Act.

This is one of those areas where politics has got in the way of rational risk management.

The Act lists seven matters of national importance that must be addressed in every single plan and consent considered across the country. It includes such things as natural character, landscapes, protecting flora and fauna, Maori culture and customary rights, public access along rivers and lakes and historical heritage but there is no mention of natural hazards like earthquakes. This lacks common sense. New Zealand faces multiple natural hazard risks and it was a serious oversight that these risks are not a mandatory consideration for new developments.

Let me give a practical example of why this law change is so important.

The Bexley subdivision in Christchurch was approved under the RMA in the early 1990s despite publically available reports identifying the low lying areas as having a high risk of liquefaction in a moderate earthquake. The several hundred page council report on which this subdivision was approved systematically works through each of the issues identified in the principles section of the RMA as required legally. There are many pages on the landscape, cultural and vegetation issues but the report is silent on the very significant earthquakes risks. The hundreds of Bexley residents whose lives were literally tipped upside down, and the taxpayers who ultimately paid out hundreds of millions from the subsequent red zoning process, would have much preferred these risks were properly assessed in the first place.

This important change to the RMA is in the substantive second phase bill of Government reforms due back from Select Committee in coming weeks and due to be passed into law in March. Opposition parties will find all sorts of trivial reasons to try to block this bill, but this fundamental change to requiring proper assessment of natural hazards like earthquakes when doing developments is essential.

  1. Post-quake Building Act reform

A third area of reform in which we need to do better is in the management of buildings following a significant earthquake.

This involves real clashes of people’s relative rights, and decisions in a high risk aftershock environment where lives can be easily lost by the wrong decisions.

You have people wanting to get access to their personal property and business records, sometimes in buildings that are perfectly safe except for an adjacent building that may pose a risk. You have engineers working hideous hours making dozens of critical decisions often with limited information. You have private property owners, often in complex body corporate structures offended by officials having powers to demolish their most valuable asset. Add to the mix heritage issues and the inherent stresses people are under post-quake and you have an explosive mix of competing interests.

In November, only a week prior to the Kaikoura quakes, Cabinet approved my proposed revamp of the Building Act to deal with these issues.

The Bill provides greater powers to get damaged buildings down more quickly, and provides a quite sophisticated balancing of rights between private property, safety and heritage issues. I will be introducing this Bill into Parliament in March with the aim of having it as law by year’s end.

  1. Improving consistency of building assessments

An associated fourth area of work is improving the consistency of engineering assessments. This is relevant to the short sharp assessment done after an earthquake as well as in determining what buildings are earthquake prone.

We have introduced a new guide for post-quake building assessment. Buildings are stickered as white, meaning OK for continued use, yellow for restricted access and red for unsafe. There was a lot of confusion during the Christchurch quakes by both engineers and the public on the old system, but the experience from the Kaikoura quakes is that we now have a system that is the world’s best practice, well understood and which strikes a better balance between risk and the need for communities to be able to move into recovery mode.

The more complex job is the regulations currently being consulted on for the seismic assessment of earthquake-prone buildings. There is significant frustration from building owners that different engineers can give quite different assessments of the proportion of the new building standard that a building meets. There are real practical difficulties in making engineering assessments of buildings that may be 50 or 100 years old with very little knowledge of the standards of concrete, steel or construction in any records.

We are currently developing regulations under this new law to get greater consistency in these assessments. The new regulations will be finalised in April.

  1. Standards & training of engineers

The fifth area of reform is in respect of the regulations, ethics and training of engineering professionals.

We made an important change to the code of ethics last year that is pertinent to the tragic collapse of the CTV building in which 115 people were killed, 60 per cent of the total toll from the Christchurch earthquake.

Much has been written about the inadequacies of the design of this building constructed in 1986. I am hesitant to comment on the specifics with Police due to announce a decision in the next few months on whether to prosecute the engineers responsible, albeit there is frustration that this decision is taking so long.

The pertinent and relevant issue is that in 1993, when the building was for sale, it was assessed by consulting engineers as deficient in its seismic design. The client wisely opted not to buy the building on this advice but the system failure was that this information was not passed on to the relevant building authority – in this case the Christchurch City Council.

The problem here is that consulting engineers are bound by commercial contracts and the information belongs to their clients, and in this case the client had no interest beyond deciding not to purchase.

Commercial interests and privacy concerns must in these circumstances take a back seat to public safety. That is why the Code of Ethics, with the support of the profession was changed in July last year requiring engineers to pass on such information to relevant public authorities.

A second issue that I am testing in the courts is the notion that professional accountability can be avoided by an engineer simply resigning from the professional body.

The circumstances are that IPENZ appropriately initiated an investigation into the issues of engineering practice around the CTV building, but the process could not proceed simply by the engineer resigning. This not only deprives the public of a proper process of accountability but the profession of the critical learnings that must flow from such failures.

The courts will determine a definition of what the current law states, and if it is found that accountability can be avoided by simply resigning, we will need to amend the law.

Our Government has also significantly lifted our investment in the training of professional engineers with over $90 million of additional funding. There are 2500 more students studying engineering mainly at Canterbury and Auckland Universities’ today than in 2008.

This policy of expanding our engineering training is playing out locally where NMIT established a diploma engineering programme here in Nelson in 2015.

  1. Powers for addressing newly identified risks

A sixth area of work is strengthening how Government and Councils can respond to newly identified building risks.

We do not currently have in law the equivalent of a product recall system in our Building Act.

When a safety fault is found in a car or appliance, like a smart phone, you will have the product recalled, checked and fixed, usually by the manufacturer. The building sector is structured very differently, but the same sort of problems can arise.

An example of such a problem is where we find an engineer whose work is not up to scratch as has recently occurred in Masterton.

A prudent response is to require other building owners to have their building designs checked. The Government and Councils can try to persuade building owners that this should be done, and generally as in the Masterton case, owners have cooperated. Where we know a particular engineer’s work is flawed, we need to be able to check their other projects.

Another example is the recent problem identified in the Statistics New Zealand building in Wellington where three pre-cast floor components collapsed.

The preliminary investigation identified problems associated with the long duration and how ductile beams interacted with the pre-cast floor slabs. Seismic building design is an evolving science and we will identify new risks like this that have not previously been sufficiently considered.

This potential design flaw can be fixed and the prudent response is to require all buildings recently constructed with these features to be checked and where necessary repaired.

We are doing this in the Wellington area using the special Kaikoura earthquake powers, but this is an area where public authorities need wider powers to ensure our buildings are safe.

  1. Tackling high risk parapets & façades post-Kaikoura

A seventh new initiative I am announcing today is in response to the heightened risk from the Kaikoura earthquake of aftershocks.

The seismic advice is that Wellington, Lower Hutt and Blenheim are currently exposed to eight times the normal risk of a quake. This heightened risk will abate to about twice the norm by year’s end and to normal levels not until 2020.

A scenario is possible as in Christchurch where an aftershock occurs in this period close to one of these centres causing significant loss of life.

The New Zealand Society for Earthquake Engineering presented me with a proposal in December for us to respond to this risk by requiring and helping fund urgent upgrades of those parapets and facades on high risk unreinforced masonry buildings. These are the buildings that killed 39 people in Christchurch and for which relatively minor engineering works at a cost of around $20,000 to $30,000 per building can help mitigate the potential of these parapets and facades to fall.

Today I have announced that the Government will pass an Order in Council requiring all Earthquake Prone unreinforced masonry building owners with street facing facades and parapets in high occupation areas to tie back these features within 12 months in the areas of Wellington, Blenheim and Lower Hutt.

The Government has also set aside a fund of $3 million to assist with this cost which, combined with councils, we will be offering a dollar for dollar subsidy. We are also using the Hurunui/ Kaikoura Earthquake Recovery Act powers to exempt this tie back work from requiring building and resource consents if carried out by a properly qualified engineer. My Ministry is assisting this work with standardised designs that can be quickly implemented.

This is the sort of pragmatic, fast footed response we need to wisely manage these complex risks in the aftermath of a big shake.

  1. Supporting heritage building upgrades

This is paralleled by our eighth initiative as a Government to support heritage-building upgrades with a new Heritage Earthquake Upgrade Incentive Programme fund of $10 million.

Communities across New Zealand, particularly in those higher earthquake prone provincial areas, face difficult choices about what heritage to keep and what for safety reasons needs to come down.

This fund, championed by Culture and Heritage Minister Maggie Barry and currently open for the first round of bids, is about the Government sharing in the cost burden of making some of these heritage buildings safe.

  1. Improving tsunami warning systems

Most of this presentation has focussed on improving the safety of buildings.

The past decade has seen heightened concerns about the risk of Tsunami. The areas most vulnerable are those coastal areas close to major faults and the risks are greatest where you have deep water rapidly become shallow and confined bays that exacerbate wave height.

The most effective strategy for reducing these risks is a well-informed public and improved warning systems.

You will have seen the increased advertising by civil defence alongside “drop, cover, hold” with tsunami information advising people that if in a coastal area, during a long or strong earthquake to make immediately for higher ground.

In December, the Ministers of Civil Defence and Science and Innovation announced a further $3 million investment in improving Geonet’s natural hazard monitoring. This was in response to concerns about incomplete and confusing information about the Tsunami risk following the November 14th Kaikoura quake.

The Government is also exploring a wider investment in smart phone warning technology that would further improve our capacity to ensure people are better informed during such events.

  1. Supporting innovative design

The Government is also stepping up its support for innovative design in seismic resistant buildings.

New Zealand has a proud heritage in this area with the William Clayton building in Wellington being the first in the world to use base isolation technology – a feature now used in thousands of buildings worldwide.

EQC and my Ministry are funding new guidance for low damage building systems including seismic isolation, buckling restrained braces, and viscous damping. The Pres-Lam system is one of these and the first building in the world to use it is the Nelson Marlborough Institute of Technology.

We should not underestimate the economic opportunities from these technologies. Countries like China and Turkey, who have lost hundreds of thousands of citizens in quakes and who are becoming a lot more wealthy, are looking for these sorts of technologies to step up their building safety.

  1. Investing in seismic research

Seismic research has also identified as one of the Government’s 10 National Science Challenges which is why we are lifting our investment in improved science and engineering to support better earthquake resilience.

New engineering research facilities have been built at both Auckland and Canterbury Universities.

The Natural Hazards Platform has been created with $14 million a year of funding to support improved research into all aspects of seismic design.

  1. National policy on natural hazards

The 12th national initiative I want to mention is the importance of stronger national direction on natural hazard’s management.

I am not satisfied that councils sufficiently appreciated the scale of the sort of natural hazard risks that they are responsible for. It can be tempting to ignore significant risks in the hope that nothing happens.

A current example is the challenges in the booming tourism community of Franz Josef.

This is one of the highest earthquake risk areas in the world, with the main alpine fault running through the town and significant movement of this fault projected every 80 years. This risk is compounded by the landslide risks of the foreboding surrounding country and the wild and dangerous Waiho River.

We can design buildings that can withstand substantial shaking, but if a fault line rips through a building, there is little prospect of it remaining safe. Council had proposed to designate the area to prohibit any new structures in this strip but has come up against considerable resistance from property owners. It is currently proposing to drop the hazard zone.

In a place like Franz Josef, where there can be more than 1000 tourists staying a night, there can be a tension between the local business interests and the national interests in ensuring the prudent management of safety of our visitors. The Government is working with the Westland District Council on these issues but the example highlights the need for clearer national direction.

This year the Ministry for the Environment will be starting work on a National Policy Statement on National Hazards to support the changes in the RMA.

The purpose will be in strengthening the requirements and legal responsibilities on Councils to ensure we more prudently manage these risks. This is a major piece of work that will take some years to complete but will lay the national foundations for better long-term management of earthquakes and other natural hazards.

Nelson Cathedral strengthening proposal

I want to conclude this nationally focussed speech on earthquake hazards with a local initiative. We, like many centres across New Zealand, need to be upgrading our building stock in preparation for the earthquake that one day will strike.

We need to make some hard choices about which buildings are uneconomic to maintain and which have sufficient heritage and other community values that we need to strengthen.

We are making good progress. Ten years ago I outlined a plan with council and community groups to progressively upgrade our three iconic arts facilities – the Theatre Royal, the Suter Art Gallery and the Nelson School of Music. Two are complete with Council and Government support and the latter is well underway and due for completion in September. I also note progress with privately owned buildings with a number in the CBD like Trathen’s coming down and being replaced. This is to be welcomed, despite the loss of heritage.

I also commend the council for the courage and commitment in seeing through the substantial upgrade and strengthening of the Trafalgar Centre due for reopening in February.

Today I want to encourage our community to join me and the Anglican Church in a campaign to strengthen our iconic Christ Church Cathedral.

I rate our Cathedral as Nelson’s most important building, a landmark that helps define our heritage. It sits in the iconic position at the head of Trafalgar Street with the Church Steps serving as civic central where generations have seen off our servicemen to war, where we have greeted Royalty, where we protest, where we celebrate our victories and mark significant centenaries. I rate our Christmas Eve carols attended by thousands amongst our treasured annual events. The Nelson Cathedral is now, with the demise of the cathedral in Christchurch, the most visited in New Zealand.

The problem is that this 1929 building is earthquake prone, and could in a significant event suffer the same fate as Christchurch’s cathedral. A closer quake like Kaikoura’s would be likely to bring down the tower and do substantial damage to the nave.

I want to make clear that the Cathedral is not unsafe to occupy – it is not as earthquake prone as the likes of the School of Music or Trafalgar Centre that needed to be temporarily closed. But it is at risk of significant damage, and having seen the pain in Christchurch over theirs, I would much prefer we strengthen ours ahead of any such major quake.

The cost of strengthening our Cathedral up to about 80 percent of the new Building Standards would be between $5 million and $8 million according to preliminary work – a fraction of what it would cost for a replacement building. I also note that the building is currently uninsurable.

There may be those who will argue that this is a problem of the Anglican Church and Nelson diocese. I do not share that view. This building has a wider civic role and the Church generously opens it to visitors and all manner of community events. The Suter Art Gallery, School of Music, and Theatre Royal are all privately owned by trusts but received both taxpayer and ratepayer support for upgrading.

I am working with the Church Trustees and, in partnership with the council, I would like to work towards establishing a fundraising trust to help protect this valued part of our beautiful city. We should set a target of having this strengthening work done within five years, i.e. by 2022. That’s a prudent time frame that is realistic about the cost but also about the risk.

Conclusions

I thank you again for this opportunity to address an issue of importance in some depth. Our high seismic risk is the flip side of living in a country with such magnificent mountains, lakes and scenery that makes us the envy of the world.

The initiatives I have outlined tonight on the Government’s work programme for improving New Zealand’s management of seismic risks this year are ambitious.

The changes to our building and resource management laws are the most significant in decades. The new regulations on building assessments and natural hazard management will challenge our councils, engineering and planning professions. The new funds for unreinforced masonry façades and heritage buildings, and engineering training and research, will help improve safety.

This package of changes will save hundreds of Kiwi lives in future quakes and put New Zealand at the leading edge in earthquake preparedness.

My last point re-emphasises where I began.

We cannot eliminate all the risks that come from nature’s annual cruel game of seismic roulette and another Napier, Christchurch, Kaikoura or an even more devastating quake will strike again in the future.

But with smart science, innovative engineering and pragmatic policies, we can reduce the loss of life and the cost. That is what we owe future generations from our experiences from Christchurch and Kaikoura.

Related stories today:
Better managing New Zealand’s earthquake risks
Smith lists the initiatives to improve coping with quakes
Fast fix ordered for Wellington & Blenheim unreinforced masonry

Earlier stories:
18 November 2016: Ministry to investigate buildings’ performance in quake
15 August 2016: Property Council calls Government’s new heritage support fund “underwhelming”
17 April 2016: QuakeCore lab opens
3 September 2015: Property Council suggests measures to help quake-affected owners
3 September 2015: Government bows to quake survivor’s submissions
14 August 2015: Smith talks up firmer hand on environmental rules
3 July 2015: Council falls into line on quake-prone checks
25 June 2015: Select committee seeks feedback on quake-prone buildings bill changes
20 May 2015: Changes proposed for managing buildings in emergencies
10 May 2015: Government eases quake strengthening targets

7 March 2014: Quake-prone buildings bill introduced

Image above: Dr Smith in charge of a digger last October.

Attribution: Full speech.

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Fast fix ordered for Wellington & Blenheim unreinforced masonry

Owners of 300 buildings in Wellington, Lower Hutt & Blenheim will be given a year to tie back unreinforced masonry façades & parapets.

Building & Construction Minister Nick Smith said last Wednesday an order-in-council would be issued requiring the work. The Government will provide a 50% subsidy up to $15,000 for a façade and $10,000 for a parapet.

The regulations are to be put in place by the end of February in consultation with the councils, and after consideration by the independent Hurunui/Kaikoura Earthquakes Recovery Review Panel. The Ministry of Business, Innovation & Employment will administer the fund.

Dr Smith said the decision to order the work followed recommendations from the Society for Earthquake Engineers in late December in a report he’d requested after the 7.8-magnitude Kaikoura earthquake on 14 November.

He said in a release: “Unreinforced masonry façades & parapets posing a risk to the public in areas like Wellington, with a heightened risk of an aftershock from the Kaikoura earthquake, need to be secured within a year. The Kaikoura earthquake has significantly increased the seismic risks in Wellington, Lower Hutt & Blenheim during the next 3 years. The prudent response is to require and to assist building owners of these high risk, unreinforced masonry parapets & façades to secure them urgently. The tieback work comes at a cost of about $20-30,000, but significantly reduces the risk of fatalities in an earthquake.”

The Government is using its powers under the Hurunui/Kaikoura Earthquakes Recovery Act 2016 to require building owners to do the work within 12 months and has set up a $3 million fund to subsidise it. Dr Smith said the Government would also use its powers under the special law to exempt the work from requirements to gain resource & building consents provided it’s overseen by a qualified engineer.

He said the Ministry of Business, Innovation & Employment would provide guidance to facilitate the work.

39 people were killed by unreinforced masonry in the 2011 Canterbury earthquake.

Link:
MBIE, Improving seismic performance of unreinforced masonry building parapets & façades

Related stories today:
Better managing New Zealand’s earthquake risks
Smith lists the initiatives to improve coping with quakes
Fast fix ordered for Wellington & Blenheim unreinforced masonry

Attribution: Ministerial release, MBIE.

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Mt Maunganui company releases emissions-reducing cement

A New Zealand-owned cement company has taken lessons from ancient Roman concrete to create & launch a low carbon footprint cement that helps reduce CO₂ emissions.

HR Cement Ltd managing director Chris Hall said today the company, based in Mt Maunganui, “has managed to differentiate a basic commodity and develop a more environmentally friendly cement called Eco-Cem that has significant benefits when compared to standard cements.

“Eco-Cem has the potential to reduce the carbon footprint of concrete utilised on construction sites by 15-30% and set a New Zealand benchmark for low carbon concretes in New Zealand.

“We looked at millennia-defying concrete mixtures used by the ancient Romans and, after applying modern cement manufacturing techniques, engineered a new cement using Pozzolan from the central plateau of the North Island.

“Our focus when developing Eco-Cem was to produce a cement that has no downsides compared to the standard general purpose cement available, coupled with all the clear advantages of a Pozzolanic cement, at a similar cost.

“The use of pozzolan, and subsequently Eco-Cem, has significant advantages over standard concrete which are well known internationally. In comparison to standard cement, Eco-Cem gets stronger as time goes on, increases abrasion resistance, improves durability and permeability, alongside having a high resistance to the harsh climatic conditions experienced in New Zealand.”

Mr Hall said one of Eco-Cem’s greatest strengths was that it was far more environmentally friendly than the existing production of Portland cement, which is energy-intensive and results in higher global greenhouse gas emissions.

“The company’s location, within a volcanic field near high quality & natural Pozzolanic materials, gives HR Cement an economic advantage.”

The cement industry is one of the primary producers of carbon dioxide, a major greenhouse gas. Mr Hall said that, according to some reports, the cement industry accounted for 5% of global emissions.

The research indicated:

  • The CO₂ emission from cement production is directly proportional to the cement content used in the cement mix; 900kg of CO₂ are emitted for the fabrication of every tonne of cement
  • The New Zealand construction industry consumes about 1.5 million tonnes of cement/year, resulting in about 1–1.3 million tonnes of global carbon dioxide emissions. If Eco-Cem cement was used, the potential reduction in CO₂ emissions would be 200-400,000 tonnes of carbon dioxide emissions.

Links:
HR Cement
CDP research paper,  June 2016: Visible cracks

Attribution: Company release.

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Building consent highs still don’t match migrant demand

Statistics NZ said today consents for new homes nationally hit an 11-year high in November, Auckland hit a 12-year high for a month and for a year, and Auckland consents represented “almost 40%” of the month’s total.

Against those impressive statistics, the figures show:

  • Auckland is not meeting demand for housing arising from net immigration, let alone natural population increase
  • Christchurch consents continued to tail off as the post-earthquake rebuild has wound down
  • Despite that, Auckland’s share of total consents nationally was 5 percentage points below its national market share at the 2004 high, and
  • Non-residential consent growth has been lacklustre over the last 5 years.

Below, first the figures followed by considerable detail, including some international aspects.

The bald figures against November 2015 or the previous 12 months:
2973 (2831) November consents for new homes, up 5%
30,303 (30,161) new home consents in November year, up 13.1%
$1.001 billion ($911 million) value for month, up 9.9%
$167 million ($153 million) additions & alterations for month, up 9.4%
$1.88 billion ($1.72 billion) additions & alterations for year, up 9%
$1.168 billion ($1.064 billion) total residential consents for month, up 9.8%
$12.56 billion ($10.34 billion) total residential consents for year, up 21.5%

Auckland:
1156 (966) Auckland consents for the month, up 19.7%
10,137 (8934) Auckland consents for year, up 13.5%

Residential sectors:
1886 (1864) new house consents for month, up 1.2%
375 (270) apartment consents for month, up 38.9%
205 (321) retirement village units for month, down 36.1%
507 (376) townhouses & suburban units for month, up 34.8%
21,391 (18,823) new house consents for year, up 13.6%
2596 (2263) apartment consents for year, up 14.7%
1918 (2086) retirement village units for year, down 8.1%
4398 (3621) townhouses & suburban units for year, up 21.5%

Non-residential:
$411 million ($531 million) total for month, down 22.6%
$5.98 billion ($5.8 billion) total for year, up 3.2%
Offices, administration & public transport, $102 million ($114 million) for month, down 10.5%
Offices etc, $1.15 billion ($1.16 billion) for year, down 0.9%
Education buildings, $58 million ($99 million) for month, down 41%
Education buildings, $1.17 billion ($1.08 billion) for year, up 8.4%

Totals (residential, non-residential & non-building construction):
$1.61 billion ($1.62 billion) for month, down 1%
$19.03 billion ($16.55 billion) for year, up 15%

Auckland & its wards, residential month & year:
Auckland: 1156 (966), 10,137 (8934)
Rodney: 55 (75), 909 (787)
Albany: 254 (196), 2274 (2341)
North Shore: 26 (81), 566 (357)
Waitakere: 84 (44), 664 (466)
Waitemata & Gulf: 155 (68), 1125 (1071)
Whau: 19 (23), 307 (185)
Albert-Eden-Roskill: 104 (40), 699 (377)
Orakei: 42 (104), 297 (457)
Maungakiekie-Tamaki: 21 (34), 306 (481)
Howick: 25 (52), 546 (559)
Manukau: 129 (65), 465 (393)
Manurewa-Papakura: 116 (112), 1062 (852)
Franklin: 126 (72), 917 (608)

Outside Auckland:
Whangarei: 70 (51), 658 (444)
Kaipara: 27 (14), 266 (171)
Hamilton: 107 (100), 1245 (1131)
Tauranga: 168 (176), 1704 (1337)
Wellington region: 81 (291), 1536 (1449)
Christchurch & districts: 390 (525), 5368 (6008)
Queenstown-Lakes: 71 (88), 928 (793)

The monthly high

2973 consents for new homes were issued nationally in November, up from 2575 in October, 2831 in November 2015, and the 7th successive month of consents exceeding 2500. January was the only month of the year when consents fell below 2300 (to 1695, a normal summer fall; consent figures for December will be released on 29 January).

Statistics NZ attributed the 11-year high for a month to “increased consents in Auckland & the usual pre-Christmas rush”. The previous high for a month was in March 2005, when 3027 new homes were consented. As I wrote in 2005, the numbers that March were skewed for the second time in 9 months: “This time it was for a combination of 2 increases, both effective from 31 March. One was an increase in the Department of Building & Housing levy, the other new building requirements under the new Building Act – not a levy, but extra requirements.”

The annual figures, their trajectory and foreign influences

30,303 consents were issued nationally for the November year, 13.1% up on the 26,793 in the previous 12 months. The annual rise has been steady since 13,529 consents were issued in the November 2011 year, which was the downpoint of the global financial crisis. On a rolling annual basis, consents fell just short of 30,000 in September and got just over that mark, to 30,161, in October.

Consents averaged just 2200/month over the first 4 months of 2016 and 2700/month through to November. Increasing to 31,000 consents/year will be hard to achieve over the next 6 months unless constraints are reduced on loans to investors and on the ability of first-homebuyers to borrow, and construction costs are constrained. The main cause for those constraints to change is that it’s election year.

Winding back immigration would also affect the election, which means the housing pressure in Auckland should continue unless the other big factor, Chinese investor interest, wanes. The Chinese government signalled tightening on the export of funds over the last few weeks but, as a report from the Asian Financial Forum in Hong Kong on Monday indicated, China’s largest sovereign wealth fund, CIC (China Investment Corp), expects to invest more in the US this year than it did in 2016. It spent $US1.7 billion on 2 Manhattan properties in 2016, the second of those a $US1 billion investment for a 45% stake in a building in the Rockefeller Centre in December.

China’s foreign exchange reserves have slid from a peak of $US4 trillion in June 2014 to $US3 trillion last month – incredibly, a dangerously low level. Trading Economics said the yuan depreciated 6.6% against the $US in 2016, the biggest one-year loss since 1994.

As analyst Jim Rickards has posted in various Daily Reckoning financial newsletters over the last few weeks, China runs into a fight with new US president Donald Trump if it devalues (more), but it doesn’t have the leeway to support its currency’s rise. Further devaluation or the threat of it, official or in effect, would encourage Chinese citizens to keep finding ways of getting money out of the country and, in the blink of an eye, into assets – such as New Zealand property.

Minister says it’s as fast as you can go

Nick Smith, who was housing minister (a title Bill English abolished after taking over as prime minister in December) and remains building & construction minister, said it was the first time in 12 years that consents for new homes in Auckland had topped 10,000.

“The 1156 consents issued in Auckland during November makes it the strongest month in more than 10 years. It is more than treble the 325 consents issued in Auckland in November 2008, when National became government. We need to consistently achieve more than 1000 consents/month in Auckland to match population growth….

“This is the 5th straight year of strong growth in construction, with growth averaging more than 20%/year. This is as fast as you can practically grow a sector as large & as complex as construction without compromising quality.

“This ongoing strong growth shows the Government’s programme to increase housing supply is working. We have aggressively increased land supply with special housing areas in the short term, changes to Auckland’s planning in the medium term and the national policy statement on urban development capacity & Resource Management Act reforms in the long term.

“We have complemented this with the Crown land programme and a record level of direct Government projects to build homes, such as Hobsonville. We’ve also provided record levels of assistance for first-homebuyers with the KiwiSaver HomeStart scheme, which has helped more than 20,000 people into their first home with about $500 million in KiwiSaver withdrawals for a deposit.

“This Government is step by step, development by development, getting on and addressing New Zealand’s housing challenges.”

Consent figures fall short of migrant need

The statistics show 38.9% of new home consents in November were in Auckland, up from 34.1% in November 2015. For the November year, Auckland’s market share was 33.5% (29.6%). Back in November 2004, the previous high for Auckland, the 1181 consents represented 44% of the market.

At a ratio of 2.7 residents:household, Auckland would have needed 12,421 new homes for its net intake of migrants for the latest year. The 10,137 consents for the November year (homes to be built) represent 81.6% of homes required in the last year. But for homes to be built in time to receive those immigrants in the last year, consents would have been needed beforehand. In the previous 12 months to November 2015, the 8934 consents issued for new homes in Auckland would have met 71.9% of the requirement for the next 12 months’ immigrants, ignoring natural increase.

Under the government-council special housing accord that ran from October 2013-September 2016 (with an extension for approved areas not fully processed), the target was 39,000 consents over 3 years (initially emphasised as houses, later emphasised as houses & sections consents, though the Ministry of Business, Innovation & Employment thinks it’s just houses) – 9000 the first year, 13,000 the second, 17,000 the third.

Dr Smith and Auckland’s mayor until last October, Len Brown, maintained they achieved 123% of the target in year 1 and 98% of the target in year 2 – 23,806 dwellings consented & new sections created.

The final government-council report on the accord said 37,538 net sections had been created & dwellings consented – 96% of target. It added: “Over the next 14 years, over 98,000 new greenfield & brownfield dwellings & sections are known to be in the development pipeline delivering an average of just over 7000 dwellings/year.”

Non-residential still in doldrums

Non-residential consents almost matched those for new homes in the November 2011 year – $3.64 billion against the residential $3.756 billion. But in the next 5 years, consents for commercial & public sector buildings have been left well behind.

Over those 5 years consents for new homes rose steadily – to almost $5 billion, then $6.3 billion, $7.7 billion, $8.6 billion and, for the last 12 months, $10.7 billion. That’s a total $38.3 billion for new homes since 2011.

In contrast, the non-residential sector’s consents almost made it to $4 billion in 2012, got to $4.15 billion the next year, then to $5 billion, $5.8 billion & just under $6 billion for the latest 12 months – a total just under $25 billion.

Links:
MBIE, Auckland housing accord
Final accord report
Mingtiandi, 17 January 2017: No capital controls here! China’s CIC set to boost US investments in 2017
Daily Reckoning, 17 January 2017: China’s bogus currency war promise
Trading Economics: China foreign currency reserves

Earlier stories:
23 December 2016: 48% of net migrant inflow stops in Auckland
2 November 2016: National policy statement on urban development capacity takes effect in December
1 November 2016: Auckland share of new home consents drops, intensive ratio holds

Attribution: Statistics NZ, MBIE, Mingtiandi, Daily Reckoning, Trading Economics, ministerial release.

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