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Reporting on the insulation market last year in these pages, players in this category were both excited and concerned with changes to the Residential Tenancies Act (RTA) that made correctly installed underfloor and celling insulation compulsory in all rental properties (where reasonable to install) by July 2019.
While most agreed that this was an obvious step in the right direction to address the overall health of New Zealand homes, they were also concerned that landlords would wait until the last minute to comply creating a massive bottleneck of demand.
A year later and these concerns remain, with some players expressing disappointment in the number of landlords stepping up to get their affairs in order ahead of time.
Adding to their worries is a general feeling of uncertainty in the market about the number of homes still uninsulated and the level of insulation required.
This confusion been compounded by the December 2017 passing of the Healthy Homes Guarantee Act (HHGA) that will come into effect on July 2019, amending the Residential Tenancies Act 1986 “with the purpose of ensuring that every rental home in New Zealand meets minimum standards of heating and insulation.”
(See separate story on page 40 for more details.)
SUPPLIERS SUPPORTIVE, WITH CAVEATS
Regarding the HHGA, InZone’s Tony Snushall makes his feelings clear that he is a big supporter of the direction of the Act.
That said, he does have some concerns about the effect this might have in the market based on previous funding schemes such as EECA’s Warm Up New Zealand: Heat Smart and Healthy Homes programmes.
“There’s a risk that the Government through these initiatives creates excess demand or creates an over expectation that can’t be met by the sector and then disrupts the current sector from their plans and trajectory by either a lolly scramble or constrained mentality,” Snushall says.
While the previous schemes undoubtedly had plenty of positive effects Tony Snushall argues that they were products of a post GFC environment and that a different approach is needed for our current market.
He also suggests that if funding is on the cards in future it would be better spent trying to bump up the number of qualified installers rather than discounting.
“The last time we did this, we opened it up to a wide field of competition because we were trying to create new businesses and stimulate the market. And it’s taken a long while to get to our current position and if we did the same thing now it would have a potential negative effect on the people that are currently working,” he says.
These concerns aside, he does admit that the current model has been starting to work as landlords begrudgingly take action to meet the insulation deadlines.
And, while it sounds like plenty of them will miss the deadline, as fines for non-compliance start to come into play Tony Snushall feels the following three to four years should see outstanding properties get up to speed.
Of course the actual policing of this isn’t straightforward with landlords currently operating under an honesty scheme when declaring their insulation status.
Addressing this issue the concept of a Rental Warrant of Fitness for Homes has been bandied about for some time in the media and in Parliament with a voluntary scheme starting up Wellington in December last year.
Asking InZone’s Tony Snushall for his thoughts on the Rental WOF he expresses concerns for the cost involved in the process.
“With ideas like the Rental WOF we are just at total risk of spending all the money on box ticking and processes and not delivering outcomes.
“And for the cost of a checking one house you could put a thermal imaging camera on a helicopter and fly around a suburb at 4am on a winter’s morning. You could tell exactly which properties were leaking heat in a whole suburb then address them individually.”
EVEN WITH THE BEST INTENTIONS…
Another supplier with concerns around the 2019 deadline and the potential effects of the HHGA is Autex’s Dan Szczepanski.
Like everyone in the game he is concerned that there simply won’t be enough feet on the ground to cope with last minute demand as July 2019 approaches.
“We can manufacture until the cows come home but on the labour side of things there are only so many installers out there and with commercial going pretty strong as well they’re going to go where the money is,” he says.
The other issue is that the July 2019 deadline also coincides with the changeover to the HHGA.
Dan Szczepanski feels that there is already considerable confusion among landlords about the insulations requirements and that the HHGA is only adding to this general uncertainty.
After speaking to several players in this market I can confirm that there is definitely some confusion about what levels of insulation are required both up to and after the 2019 deadline even among suppliers.
Looking into the issue I was eventually able to find more definitive answers but only after a thorough investigation of the Tenancy Services website and a number of phone calls and emails to Tenancy Services and the MBIE.
The important takeaway here is that finding the right information isn’t easy. If major players in the industry are confused then it’s reasonable to assume that landlords will be as well.
Speaking on the 2019 deadline and the potential rental WOF, Dan Szczepanski shares the thoughts of some in the media that putting the financial onus solely on landlords could put pressure on their finances that could be passed onto tenants.
“There needs to be some give and take. If the Government just keep hitting landlords with a sledge hammer then you’re going to see rent increases. Alternatively you may see less ‘mum and dad’ landlords and more career landlords or large groups for good or bad,” says Autex’s Szczepanski.
THE MERCHANT PERSPECTIVE
For a different take on the uptake of insulation I spoke to PlaceMakers’ Insulation Category Manager, Todd Lindsay.
He admits that, while the category has seen some “solid steady growth” it wasn’t at the levels he was hoping for with the RTA opportunity.
“At the end of the day it’s an expense and there’s no real return on that expense [for landlords]. That’s particularly true in Auckland where demand for rental properties exceeds supply and people aren’t struggling to keep tenants.
“So there’s not a lot of impetus for them to spend the money other than to meet the legislation requirement.”
Imagining a worst case scenario once the deadline approaches, Todd Lindsay worries that labour shortages and extended waiting times could negatively affect the quality of install with people either doing it themselves or hiring opportunistic man-in-a-van style installers with limited experience.
AN INSTALLER’S TAKE
Getting to the coalface now, I spoke to Murray Durbin (formerly of Knauff), whose new business Landlord Solutions specialises in insulating Auckland’s rental properties to support the July 2019 deadline.
Murray Durbin is very positive about the level of business predicted for the next 12-18 months but confirms that there is major confusion about how big the job of insulating rental properties really is.
“No-one really knows how big the market is. I don’t even think the Government and MBIE know exactly how many homes need to be done. I stood on the IAONZ ( Insulation Association of NZ) committee for a while and a while a lot of the installers were feeding information back to us there were always questions about how accurate that was,” he says.
Looking at the current Auckland market, he reports that some of the property managers he calls up are “100% up to date with their portfolios” while many others have done “nothing at all”.
For those who don’t have their ducks in a row, Murray Durbin predicts significant fines in their future even without a comprehensive auditing process.
“The declaration is purely honesty and what’s going to happen is potentially the landlords that think that they can get away with it and maybe cheat on their certificate the tenants are eventually going to complain.
“And then there are obviously fines that are in store for the landlord and it’s just not worth it for them.”
How about the argument that Auckland tenants, already at a disadvantage in an undersupplied rental market may be too scared to “dob” their landlord in, for fear of retribution?
“It’s not ideal but I’m guessing the Government will be thinking ‘let’s see how many we can get done with the honesty system and then they’ll probably do some investigation next year just to see how the industry is.”
What if they find that there are a lot of landlords who haven’t upped their homes’ insulation and the tenants that are too scared to complain?
“One option is to increase the fines!” says Murray Durbin. “At the moment it’s $4,000 but if they make it $20,000 if you intentionally mislead, that might really motivate them!”
Hopefully it won’t come to that.
Still confused? We Q&A with MBIE
Seeking to help stem the tide of seeming confusion in the industry I talked with a spokesperson from the Ministry of Business, Innovation & Employment (MBIE) about the July 2019 Residential Tenancies Act deadline and the recently passed Healthy Homes Guarantee Act.
In the current Residential Tenancies Act, do landlords have to have rental homes insulated to NZS 4246 by July 2019?
Under the Residential Tenancies (Smoke Alarms & Insulation) Regulations 2016, landlords are required to have ceiling and underfloor insulation in tenanted properties, where it is reasonably practicable to install, by 1 July 2019.
Any insulation present in a rental property must meet certain ceiling and underfloor R-values (R values being a measure of insulation effectiveness) required by the Building Code at the time it was installed and be in reasonable condition. If new insulation is required, it must be installed in accordance with New Zealand Standard NZS 4246:2016.
For more information see visit https://bit.ly/2IYtXvW
From 1 July 2019, this requirement must be met at the beginning of the tenancy and at all times during the tenancy unless there are special circumstances (e.g. it is not reasonably practicable to do so, the landlord intends to demolish or substantially rebuild premises within 12 months or the tenant is the former owner). A landlord who fails to comply with the regulations is committing an unlawful act and may be liable for a penalty of up to $4,000.
Is there potential for the Healthy Homes Guarantee Act to change the standard required of insulation once it amends the Residential Tenancies Act? If so, how?
The Healthy Homes Guarantee Act (passed in December 2017) enables regulations to be made setting out a required standard for insulation in rental homes (as well as standards for heating, ventilation, draught stoppage, moisture ingress and drainage).
The Minister has stated in Parliament that he wishes to explore if the current minimum insulation standard should be increased and will be consulting the public on this in May and June this year.
If the minimum standard for insulation were increased under the Healthy Homes Guarantee Act then additional rental homes would require insulation top ups. However, any landlords that have had to install insulation under the current requirements are unlikely to have any further underfloor or ceiling insulation obligations providing they installed insulation in accordance with the existing regulations.
Rather, the question the Government will consider in the development of insulation standards under the Healthy Homes Guarantee Act is whether the properties that do not meet the current trigger (minimum R values) for needing to upgrade insulation should then have the requirement to do so extended to them.
What other potential implications could the Healthy Homes Guarantee Act bring to players in the insulation market?
Professional suppliers and installers of insulation will be integral to the implementation of any new standards, as will contractors working across other areas (e.g. heating, ventilation) required under new Healthy Homes Guarantee legislation. Industry capacity and capability to meet any increase in demand from the changes is important. Your feedback to the discussion document in this area on, for instance, capacity and capability, challenges, risks, costs and so on, would be particularly useful to help inform our work and viable compliance dates.
What other potential implications could the Healthy Homes Guarantee Act bring to landlords and tenants?
The proposed regulations under the Healthy Homes Guarantee Act place responsibilities on landlords related to insulation, heating, ventilation, moisture ingress, drainage and draught stopping.
The regulations can also include requirements about how to showcase compliance including what records need to be kept and any maintenance requirements.
Is there a danger that landlords may invest heavily in the insulation requirements set out by the Residential Tenancies Act only to have to invest more once the Healthy Homes Guarantee Act brings further changes?
We are mindful of the costs to landlords from the proposals related to insulation, ventilation, heating, moisture ingress and drainage and draught stopping. This is one of the factors we are considering when developing advice on the proposed regulations.
James Hardie pre-cladding continues to gain momentum
For a quick word from pre-cladding I spoke to James Hardie Technical Support Manager, Singh Kamboj.
His key concern for the coming year is around the Government’s proposed KiwiBuild projects which, while potentially good news for the construction sector, will come up against the same labour shortages that have plagued the whole channel.
“From what I gather from builders or the group home companies, finding enough installers – especially those with experience – is really hard. So what’s happening is the labour rate is slightly eschewed because people know there is a shortage and they are demanding more.”
On a positive note, James Hardie’s Residential Market Manager, Jerry Friar, reports that with 2018 getting off to a very busy start for builders the early close-in benefits of James Hardie HomeRAB and RAB Board make have made them an ideal solution for scheduling issues, particularly in winter downtime periods.
Jerry Friar has also seen demand increase in the past year for HomeRAB and RAB Board in the construction of medium density and apartment style builds where the increased fire and acoustic requirements make them a good fit.
Pink Batts offers even more
For projects with 140mm framing for a “stronger” structure, Pink Batts has higher R-value insulation available in the 140mm range with R values up to R4.0 compared to the R2.maximum for 90mm framing ranges.
When the spacing between studs is 400mm, then Pink Batts’ new width “Narrow Wall” range (360mm instead of 380mm) provides products correctly sized to the framing dimensions, reducing waste as no cutting is required and improving the installation time and the effectiveness of the install.
One system to rule them all?
Nigel Brown from Weather Barrier Systems, supplier of DuPont Tyvek HomeWrap, reports that the past year has been “steady as she goes in the building envelope business.
He’s seen the market increase of course with New Zealand’s push toward new home builds but he also reports that competition in this area has more than doubled in the last three years.
In such a tough environment, Nigel Brown stresses that builders look to whole systems rather than individual products when browsing the aisles.
“Systems based solutions for the building envelope is the way to go. Don’t use three or four different brands to do a wall,” Brown says.
“And we’ve got a full complete building envelope system which covers roof, wall, windows, ceiling and everything which nobody else has, with one brand on it, the DuPont brand.”
CosyWall Insulation System awarded CodeMark Certification
The team at Safe-R Insulation is very proud to have achieved CodeMark certification for the CosyWall Insulation System.
General manager, Wade Maurice, says: “Obtaining CodeMark for our CosyWall system is the culmination of 15 years research and development. It will enable a streamlined consent process, providing significant time and cost savings. The end result will be more warm and healthy New Zealand homes”.
CoseyWall’s CodeMark Certification covers the entire system rather than just the product itself: “This means every facet of the process is covered, from the first assessment of a house through to a post assessment to confirm that everything has been done correctly, along with helping with any paperwork that the council may require.”
Landlord Solutions: getting Auckland sorted
One of the newest insulation installer businesses in the market is Landlord Solutions. The management team of Anthony “Thomo” Thomson, Rob Sweeney and Murray Durbin have over 50 years’ combined experience in the building industry and insulation.
Thomo and Rob managed tens of thousands of homes under EECA programmes and more recently in new construction, and Murray has looked after insulation nationally for Mitre10, Carters, and was involved in successfully launching both Mammoth and Knauf Earthwool glasswool into the market.
Landlord Solutions is focusing its business solely on rental properties in the Auckland market to provide the best possible service and guidance to the region’s property managers as the July 2019 deadlines for insulation approaches.