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Twenty-eight years ago, I watched a mate in Auckland discover rot creeping through his weatherboard villa’s walls. The house was barely five years old, the builder had vanished, and the council? Well, they became his insurance policy of last resort. That single conversation changed how I think about risk, liability, and who really pays when our regulatory systems fail.
Now, the Coalition Government wants to rewrite those rules entirely. Their decision to scrap “joint and several liability” for building consents isn’t just another bureaucratic tweak—it’s the most significant shift of financial risk from local government to private players since the leaky homes crisis. The question isn’t whether this changes everything. It’s whether we’re finally learning the right lessons.
Let me explain how we got here. Under current law, if your new house develops serious defects, you can sue everyone involved: the builder, the building certifier, the council, and even the designer. It’s called “joint and several liability,” and in practice, it means councils often end up footing the bill because they’re the only party left standing with deep enough pockets.
I’ve spent enough time in council chambers to know this creates perverse incentives. Councillors become obsessed with avoiding liability rather than enabling development. Processing times blow out because every consent becomes a potential million-dollar lawsuit. Rural councils, in particular, live in constant fear of a single expensive claim wiping out their annual budget.
The numbers tell the story. Building costs in New Zealand are roughly 50% higher than in Australia, and consent processing times that would embarrass a Soviet bureaucracy. Meanwhile, councils across the country are sitting on liability provisions that could fund a small city’s infrastructure programme.
So what does the Coalition’s proposed system actually look like? Think of it as the Australian model with New Zealand characteristics. Builders and certifiers will carry mandatory insurance. Professional indemnity requirements will increase. Councils will still issue consents, but they won’t be automatically liable if something goes wrong down the track.
On paper, it sounds sensible. In practice, I have questions.
First, let’s talk about insurance costs. When councils were liable, those costs were spread across all ratepayers. Under the new system, they’ll be built directly into building costs and passed on to individual homeowners. That might sound fairer, but it could actually increase the total cost of building. Insurance companies, unlike councils, need to make a profit and build reserves for catastrophic claims.
Second, there’s the competency question. Councils might be slow and risk-averse, but they employ qualified building professionals who understand local conditions. Private certifiers, under competitive pressure, might prioritise speed over scrutiny. We’ve seen this movie before in other industries.
Here’s what my economics background taught me: you can’t eliminate risk, you can only decide who bears it. The trick is making sure whoever carries the risk has both the capacity to manage it and the right incentives to get it right.
The Coalition’s reform does shift risk away from councils, but does it create better incentives? A private building certifier who gets paid per consent processed has different motivations than a council building officer whose salary doesn’t depend on approval rates. That’s not necessarily bad, but it’s different, and different always comes with unintended consequences.
Here’s where theory meets reality. This reform will hit different councils in dramatically different ways. Auckland Council, with its massive rating base, might welcome the reduced liability. But what about the Kawerau District Council, with around 8,000 residents? Their building consent revenue barely covers current costs. If private certifiers capture that income stream, what happens to local building expertise?
Rural councils face another challenge: insurance availability. Try getting professional indemnity insurance in Westport versus Wellington, and you’ll quickly understand why market-based solutions don’t always reach every corner of New Zealand.
The Government argues this reform will boost construction productivity and reduce costs. They’re probably right about productivity—removing council liability will definitely speed up consent processing. But lower costs? I’m sceptical.
We’re essentially moving from a system where risks were socialised through rates to one where they’re privatised through insurance premiums and higher professional fees. The total cost of managing building quality might not change much; we’re just changing who sends the bill.
Strip away the policy jargon, and this reform is about answering a fundamental question: in a market economy, who should bear the risk when private actors make mistakes?
For decades, we’ve made councils the ultimate guarantors of building quality. That created safe, slow systems that frustrated developers and homeowners alike. Now we’re moving toward a model where private professionals carry their own risks and homeowners rely on insurance rather than litigation.
It’s not inherently better or worse—just different. But different systems create different winners and losers.
Large developers with sophisticated procurement processes will likely benefit. They can negotiate better insurance rates and have the resources to manage private certifiers effectively. Small builders and owner-builders might find the new system more expensive and complex. Homeowners will trade the security of suing councils for the uncertainty of insurance claims.
This reform will almost certainly speed up consent processing and reduce council liability. Whether it reduces overall building costs or improves building quality remains to be seen. What’s certain is that it represents a fundamental philosophical shift from risk socialisation to risk privatisation.
My prediction? Like most significant policy changes, it will work better in some places than others, and we’ll spend the next decade fine-tuning the details. The real test won’t be whether buildings get consented faster, but whether they’re still built properly—and who ends up paying when they’re not.
Councils have spent two decades as reluctant insurers for the construction industry. Now they’re handing that role back to the market. Let’s hope the market is ready for it.
Steve Baron is a New Zealand-based political commentator and author. He holds a BA with a double major in Economics and Political Science from the University of Waikato and an Honours Degree in Political Science from Victoria University of Wellington. A former businessman in the advertising industry, he founded the political lobby group Better Democracy NZ. https://stevebaron.co.nz