Steve Evans, CEO of Fletcher Residential, opens up about the pressures facing his industry.
Q: How do you go about starting a development – do you find the land first?
About a third of the business we develop is on land we source ourselves and we look at what value is best defined. If you look at Riverhead, in Auckland, where we bought 20ha, that’s probably five years away. When we look at where we’ve bought 120-odd ha at Taupaki that’s 10 years away, but then you look at places in Tamaki and Glen Innes, for instance, that will be land we will buy for immediate development.
The next third of what we do is buy sections from developers. We say to them we can a guaranteed buyout of 80% of your development and you can make more money selling retail sections on the remaining 20% but we want 80%. In exchange for 80% we want to help you master-plan your development. We’re buying sections at reduced prices, i.e., not at retail, because we’re buying at scale and we’re adding value to their developments.
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The final third is the importance of relationships - with iwi, with the Government, with local government, where it gets us access to land that wouldn’t have otherwise come our way. Think about some of the iwi RFR (right of first refusal), think about some of the land that Panuku Development Auckland, Kāinga Ora and various others have. That’s about sharing success with those people.
Q: What about Ihumātao? Didn’t that backfire? You had planned to build on the sacred site in south Auckland after buying it in 2016, but it ended up being bought back by the Crown after protests.
I don’t think that backfired at all. There were things that everyone could have done better - the outcome that hopefully will be delivered on Ihumātao is housing because it’s a fantastic area of Auckland to have as housing. We were partnered with the local iwi. It’s a broader issue, in my mind, of iwi dislocation over time and urban Maori versus traditional Maori. That reflects a move from 50 years ago, when 80% of iwi went to their local marae, to a position where 50% of iwi no longer have that local marae because they live in urban areas.
Protesters at Ihumātao, in South Auckland, opposed private housing development at the site. Photo /Getty Images
Q: What is your philosophy on building?
The approach we take is that we build communities. We look to buy pieces of land or buy sections at scale where it can create that community. Whether it’s at Waiata Shores, the old Manukau Golf Course, Red Beach or One Central in Christchurch, it gives you the scale to be able to concentrate on providing the amenities people want.
Q: Are all your developments master-planned?
Yes, and we have our own master-planning team. We do a lot of research in terms of what the needs of both the immediate and the broader community are. When you go into a development, particularly large-scale ones, we think about where people are going to go to school, what the local neighbours, stakeholders and iwi think about the needs for a particular area. We don’t always get their wish list completely satisfied but we feed that into our master plans.
Q: Do you do infill housing?
No. To us, that’s house-building rather than community-building - you see examples of it being done well and examples of it being done badly. We’ve got enough on our plates through the delivery of communities that we don’t need to worry about buying a 1000sq m block and turning it into five townhouses.
Q: Why are amenities so important?
If you provide really good public amenities, people don’t need big backyards. As a result, you can provide smaller blocks of land with well-designed, quality houses.
Fletcher’s house-building factory in Auckland. Photo / Dean Purcell
People get to form a community because they’re no longer necessarily playing a game of football in their backyard; they’re playing it in the park which is 50 metres away. That creates a network and then a community. And that creates a neighbourhood.
Q: You’ve said in the past the industry is fragmented. What do you mean by that?
One of the issues this industry has is that barriers to entry are so small you can finish your carpentry apprenticeship and effectively create a building company. So when you look at the big players there aren’t many of them. Many big builders are franchises.
Fletcher’s master-planned community in Stonefields, in Auckland, is one of the New Zealand housing market’s big success stories. Photo / Fiona Goodall
The biggest builder is GJ Gardner but actually it’s a franchise. It doesn’t have that consistency, that commonality that we have as Fletcher Living where we build all our houses. There is a commonality, down to the supervisor’s level, on what we expect from our builds.
Q: Why is that an issue?
The consenting environment in New Zealand is not that bad. People say councils are too slow - from a builder’s point of view the quality of the response you typically get from the council is directly aligned with the quality of the documentation you provide to council, and the quality of the build.
There are stories of small builders relying on Auckland Council to do their quality control for them - they go through four or five inspections of an element of a house because they don’t get the first one right. You can’t blame council for it, you blame the builders.
Q: You operate in Christchurch. What are you building there?
If you go for a walk along One Central (the old east frame development) you’ll see we’ve got seven-storey apartment buildings, we’ve got three-storey terraces, we’ve got unit over unit. The lowest density is a two-storey terrace, so people in Christchurch are recognising, like in Auckland, that in order to live closer to transport hubs and urban centres, density will change. The dream of the 200sq m house on a quarter acre block is in the outlying suburbs, not in the inner suburbs.
Fletcher Residential CEO Steve Evans. Photo / Michael Craig
Q: What are the biggest changes you have seen over the last decade?
The dominant house type that we now deliver is a terraced home. We also do apartments but you go out to places such as Beachlands, in east Auckland, and most of the products are standard homes but not on 800sq metres; they’re sitting on 350/400sq m. There has been a recognition that what our parents could do, or what we could do when we first bought houses, is no longer the expectation of what the current generation, or future generation, will be able to afford.
Q: What improvements need to happen from your perspective?
The council is the last one standing in terms of a consenting environment. That’s defined by legislation, so when people say council takes a long time to certify consents, one of the main reasons is that the risk and liability council take is disproportionate compared to the amount of money it is paid to do so. A person can build a house, fold a business and start a new one tomorrow, and it’s inevitably going to be the council that’s responsible for the repair of that house. Councils are the gatekeepers of quality and they take that role seriously. Until we change the risk and liabilities settings through legislation, then we’re going to have to accept that councils will do that role.
Q: How can the consenting environment be better?
The council should not accept poor quality, and in my view it should penalise those that aren’t delivering that quality. So if someone doesn’t put in the adequate building consent paperwork they’re told, “No, fix it and submit it when it’s right - and by the way, the next time the cost will go up by $100 because you just wasted $100 of my time.” It’s the same thing on quality inspections. The first inspection in terms of the various components of the house should continue to be free, but if it’s not right why should you and I as ratepayers pay for future inspections? Why isn’t the builder who isn’t developing in accordance with the right quality not being penalised?
Q: You say councils need to “supercharge” their technology. How so?
We continue to have to deliver certain parts of the consenting process in paper form – why is that not a technology-enabled solution, for instance? If you’re doing quality inspections, can’t you send out the inspectors’ photos rather than having to wait for inspectors to come out? There’s some danger with that, but that kind of thinking and innovation need to be put into traditional concepts and traditional processes. That will help speed up the consenting environment.
