Promoting competition in the building regulatory system
Giving competition a more prominent position in the building regulatory system and its decision-making supports the policy objective of safe, healthy and durable buildings.
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The Commerce Commission’s market study into residential building supplies found that competition for the supply and acquisition of key building supplies is not working as well as it could. The Commission recommended that competition be given more prominence in the building regulatory system and its decision-making, and that promoting competition be included as another objective of the building regulatory system, to be evaluated alongside building safety, health, and durability.
The options paper identified 5 options to give effect to the Commerce Commission recommendation and identified MBIE’s preferred approach as options 2 and 4:
- including competition as a purpose in the Building Act (option 1)
- include competition as a principle to be applied in performing functions or duties, or exercising powers, under the Building Act (option 2)
- include competition as a procedural requirement for acceptable solutions, verification methods, warnings, and bans (option 3)
- MBIE issuing guidance to territorial authorities on promoting competition in the building regulatory system and its decision-making (option 4)
- incorporate the promotion of competition into MBIE’s regulatory stewardship framework for the building system (option 5).
Submitters were asked if they agreed with MBIE’s preferred approach. There were 169 responses to this question, including 21 BCAs.
Only 34% of submitters supported MBIE’s preferred options and 20% somewhat agreed. 5% were not sure. 41% of submitters did not support MBIEs preferred approach.
Figure 2: Do you agree with MBIE’s preferred approach to progress options 2 (introduce competition as a regulatory principle) and 4 (issue guidance on promoting competition) as a package?
Text description: Figure 2
Some submitters supportive of MBIE’s preferred approach considered that incorporating a competition principle struck the right balance of giving prominence to competition in the building regulatory system while, at the same time, not undermining the overriding objective of the building regulatory system to ensure buildings are safe, durable and healthy.
There was strong support for non-regulatory options, including issuing MBIE guidance to territorial authorities on promoting competition (option 4) and incorporating the promotion of competition into MBIE’s regulatory stewardship framework for the building system (option 5).
The main concerns of submitters opposed to MBIE’s preferred options included the following:
- introducing competition as an objective in the building regulatory system would undermine the overriding objective of ensuring that buildings are safe, healthy, and durable
- unclear on how a competition principle in the Building Act would work in practice
- greater competition will lead to a “race to the bottom” and poor-quality building products and outcomes
- competition can be achieved through other means: for example, easier pathways for alternative solutions would result in more competition in the building supplies and products market
- concern about competition between regulators and a return to the failed 1991 building certifiers regulatory regime.
Submitters also noted that there is already scope for competition within existing Building Act principles – particularly in relation to allowing innovation (section 4(2)(g)) and cost of building considerations (section 4(2)(e)). Even if a new competition principle was inserted, some submitters questioned whether this would make a measurable difference for consenting outcomes.
Irrespective of their stated position on MBIE’s preferred approach, a group of submitters felt that they required greater clarity from MBIE regarding what the options might look like in practice, including guidance and the introduction of a competition principle in the Building Act.
Other broader options to promote competition
A wide range of submitters suggested other non-regulatory options to promote competition. Common suggestions included:
- competition between building consent authorities
- reducing regulatory barriers to entry for foreign building products for use in New Zealand
- privatisation of certification and consenting functions, like the approach taken by the State of Victoria
- establishing a national system to share information about building products.
Some submitters reflected that the current system for liability might be particularly influencing participant decision-making during the consent process, with a perception that ‘familiar’ products were more likely to be consented faster than new or overseas products.