Everywhere you look in Australia in the post-pandemic economy, cost of construction is a hot topic. There was already debate on cost of homes prior to Covid-19 but the subject is now a raging inferno, a pot of hot lave being stirred by politicians who have co-opted the details in an attempt to win favour as though their short sighted ambitions ever achieve much other than adding fuel to fire.
For context it’s important to understand that the National Construction Code (NCC) was recently updated to to NCC version 2022 from NCC 2019. This new national initiative required that energy efficiency be increased from a minimum of 6 stars to a minimum of 7 stars and that a new rating mechanism that’s focused on annual energy budgeting be adopted - this is known as Whole of Home assessment (WoH). Industry review of these changes resulted in much debate and polarisation. As a practisioner of high-performance buildings I’ve watched this topic closely and been involved in discussion and industry advocacy and I’ve been frustrated by the result of lobbying against the adoption of improvements as we’ve watch one state government after another go limp on the issue, delaying adoption of NCC 2022 and watering down the code.
Some designer's may not be in a position to make statements around the cost implications of thermal performance upgrades but I feel confident in drawing conclusions about the impact of the thermal performance specifications within the buildings I design and help procure.
I can say confidently that for my projects, the products, materials and methods which make up the 'high-performance' aspect of the homes which I drive for, have little to no bearing upon the MASSIVE cost increases I've been witnessingin the last 5 years. That is to say that whilst quality windows, thermal mass, choices of materials, cladding and depth of wall framing do have a cost, their cost is presented in my projects early on (much like what's now required by NCC2022 / WoH). (And yes I often seek quotes form window companies as provisions for cost comparison since windows are often the canary in the dirty, hot stinky coal mine).
As I've always sort cost appraisals early in the process I know that these things are not so much of a challenge to the total cost as people fear they may be. I can say that with certainty because the example I gave above of my clients experiencing a 30% price increase in the space of 2-3 months is one of many I've experienced like this in the last 5 years (without changing scope or spec', only adding detail).
It’s no secret that the cost of building works has risen significantly over the last five years (various links to articles sited below). We know that global heating is affecting how we inhabit buildings to such an extent that rapid and wholesale change is required and hence we can no longer be simply undertaking business as usual. I’ve been asking my constituents to think more deeply about the situation and I think it’s simple to distill the various opposing economic arguments into a brief question about expenditure and value.
Given the large sums of money being spent in construction, when considering what percentage of money should be apportioned to the improvement of buildings from the perspective of thermal performance upgrades, it’s crucial to consider the bigger picture (one which political lobbyists ignore). That is this:
Other than the well documented reduction in cost that’s available to occupants of energy efficient homes, what other values should be placed upon the health and amenity, safety of future inhabitants, social and environmental benefits? What are those very tangible benefits worth to society and what value should we place on them as a percentage of construction cost? When thinking about that, keep in mind that construction companies work to a profit margin of between 15-25% or greater and that means that if we pursue business as usual, for every $1million spent on glass, metal & concrete, >$150k-$250k is being spent on just 'business as usual'. Is this of any inherent value?
The fear that’s circulated about the rising cost of building being due to improving standards, has certainly been stocked, if not completely driven by building companies and commercial developers who are are evidently unwilling to forego their extensive profit margin's. Instead they’re hell bent on pushing the economic argument to blindside people so we’re distracted from the affect which their profit model has on the real ‘cost of housing crisis’ and focused on ‘the devil’ of their creation.
Put simply, commercial developers have such a phenomenally profitable business model that they'd prefer to spend their time screaming about cost increases than getting on with improving building stock.
As the director of a building design company and someone who continues to advocate for energy efficient, thermally optimised buildings, what I find so deeply frustrating is that lobby groups always use the monetary argument as their weapon of choice to strong arm state governments to submit to their will. The idea being that elements such as better glazing, thicker insulation and thermal mass cost more money and increase the bottom line. The sheer irony is that the proportional cost of additional performance upgrades are hugely exaggerated. In truth those costs are vaslty outweighed by the cost of labour which now, post covid, seems to be THE major factor within rising costs.
The part that pains me so greatly; the cost of thermal performance improvement is used as a scapegoat throughout the industry and this hurts us all. Without improving the base line of the products we manufacture and install or the methods that builders adopt, things which should be standard practice are still considered special, in which case they attract a premium even as they become more common. At every turn there’s push back, even from companies like window manufactures who’d do well to adopt a different attitude - their rep’s keep peddling the same old mis-truths about minimal benefit and ‘beware the cost increase’ when they’re talking about their own products.
State governments like South Australia seem to have adopted the strategy of placating the noisy powerful lobby groups whilst patting themselves on the back for charting a pathway to net-zero (by adopting policies which see the roll out batteries and solar for example). Contrary to popular politics, PV, EV's and batteries aren't the silver bullet to our multi-faceted problems and anyone who says 'they are the singular solution to getting to net-zero' obviously haven't fully considered the carbon dept' those technologies contribute.
So whilst my business supports PV, EV’s and home batteries, and my family and business has fully adopted those crucial technologies, I also acknowledge the complexity of the issues we’re facing.
Technological solutions like installing rooftop solar are broadly appealing but they also tend to create as many problems as they solve and they don’t help to raise the quality of building stock for the lower-socio economic end of the housing market. That strategy then amounts to passing the buck / living in denial and feeling good whilst int he longer term adding global pollution and landfill without addressing core problems.
Fear of change, of doing better; that’s the most powerful force that’s holding back Australian businesses, our society and our built environment! Playing petty politics is costing us more than the billions spent each year in this sector. Inaction is costing us dearly and it’s robbing our children of a prosperous, safe, stable future.
As someone who works with clients from concept through to construction, often over a 18-24 month period of engagement, the affect of these discussions, of maintaining the status quo is very tangible in terms of the impact on my day to day business. Not only do I have to navigate what seems like exponentially increasing costs with my clients, being ethically forced to tell them to add maybe 20% to their budget to allow for realistic cost increases purely as a result of rising demand, but I have to continually be the voice of reason amongst a tide of misinformation and fear-bating from lobbyists who would have everyone believe that increasing to minimum 7.0 star homes is going to make building companies insolvent. What a load of hot air!
References:
Building costs 37pc higher than four years ago
https://www.afr.com/policy/economy/building-costs-37pc-higher-than-four-years-ago-20240626-p5jotu
CoreLogic’s Cordell Construction Cost Index (CCCI) for Q3 2022 showed national residential construction costs increased at a record rate in the year to September 2022,
https://www.corelogic.com.au/news-research/news/2022/australias-construction-costs-continue-to-rise-at-record-rates
Building Activity, Australia - Reference period September 2024
https://www.abs.gov.au/statistics/industry/building-and-construction/building-activity-australia/latest-release