New Zealand’s residential construction industry contributes roughly NZ$26 billion annually to the economy and employs around 70,000 workers. Yet despite its significance and scale, the sector’s productivity levels have flatlined since the mid-1980s.
In housing construction, “productivity” isn’t a simple measure of output per worker; it refers to the industry’s ability to deliver the right quantity of high-quality homes without significant delays or flaws.
If a builder spends ten hours rectifying avoidable mistakes, for instance, their productivity for the day is effectively zero. And this has become all too common within the sector.
A 2014 study by the Building Research Association of New Zealand (BRANZ) confirms 92% of new houses surveyed had compliance defects.
Subsequent analysis carried out for BRANZ by the New Zealand Institute for Economic Research estimated the annual cost of defective building to the overall economy:
The results show that economy-wide effects of an increase in productivity would see New Zealand’s GDP rise by $2.5 billion, as the industry’s overall costs of production decrease.
That means nearly 10% of the sector’s total value is lost to systemic quality failure. Based on the average construction cost of an Auckland house, that loss represents around 5,000 missing homes every year.
Recognising the productivity problem, the government last year introduced major reforms aimed at speeding up consent processes and allocating financial liability for defective buildings to those responsible.
But while poor productivity is often blamed on procurement methods, technology or labour, our research suggests better quality management is key to remedying the industry’s “build now, fix later” culture.
Commercial viability before quality control
We surveyed the views of 106 residential construction professionals, including general managers, construction managers, site managers, project managers and subcontractors.
They were asked about the influence of quality management on improving residential construction productivity, and about the effects of government policy. The views expressed suggested a culture prioritising time and cost over quality is a systemic norm at the industry level.
We then traced the industry’s problems back to the major policy shifts that began in the mid-1980s. Before then, building quality was anchored in the prescriptive standards set by the Ministry of Works.
By specifying how to build, the ministry acted as a national governor of technical standards. But by 1988, those standards were viewed as a barrier to efficient market operation, effectively ending the era of the state as master builder.
The New Zealand Building Code subsequently replaced the previous prescriptive system with a performance-based model focused solely on outcomes.
Without strict procedural guidance, the industry moved towards a culture that prioritised speed and commercial viability over rigorous quality management.
A ‘tick-box’ culture
To understand why industry performance stalled, we refer to what’s called the “theory of constraints”, which argues a system is only as strong as its weakest link.
In New Zealand’s residential construction sector,