Fancy a 25 to 40% rise in house-building costs?

One of the results of the Greens taking on the trade union agenda is the coming crisis for independent contractors in the housing industry. House-building can be a very efficient process due to the flexibility and productivity of the small traders involved and practically all the increase in housing costs in recent decades can be attributed to the land component (and demands for more things in houses these days).

This will change radically, as described by Robert Gottliebsen and by Ken Phillips of the Independent Contractors.

Let me add a home-grown threat [to house prices] that few would currently recognise – the carefully orchestrated government campaign to decimate independent contracting in Australia. If the government succeeds it’s very likely it will increase the cost of building a house by 25 or 40 per cent and devastate contractor-dependent industries like IT.

In commercial building, including high rise apartments, the going hourly rate is between $50 and $60 which can rise above $100 for contracts where unions have negotiated more expensive deals such as the Victorian desalination plant. But there are a whole series of work practices in commercial building that restrict productivity which is one reason why apartments are more expensive than houses. Of course in the case of ‘rort’ contracts these practices go much further requiring many more workers.

 In housing most (but not all) independent contractors charge an hourly rate in the vicinity of $45 an hour, but the real difference is not the hourly rate but the flexibility and efficiency that the independent contractors deliver. Take that away by imposing employee relationships and union work practices and my contacts in the contracting industry say you will see the cost structure probably rise between 25 and 40 per cent.

No single action could decease productivity in Australia by a greater amount. But it is being pushed by the groups who fund the ALP and the Greens. This is going to be one of the toughest fights Australian business has ever had and the odds are that business and the economy will lose. So will those who want to build or renovate a house.

 

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8 Responses to Fancy a 25 to 40% rise in house-building costs?

  1. TerjeP

    So this could make my already finished house worth even more!

  2. benson

    See TerjeP? Rentseeking can be fun AND easy!

  3. Sean

    A friend worked on a government contract recently to build social housing in the city. He had to sign a non disclosure statement before taking the job such that he could not tell the media how much he was earning. Because of course, the government was paying well over the market rate to his employer whilst he still got a market wage. More to the union coffers.

  4. benson

    Fancy a 25 to 40% rise in house-building costs?

    Be interesting (and possibly depressing) to see which side of politics gets the blame for it.

  5. Ooh Honey Honey

    Here’s my theory.
    You appropriate the concept of workplace safety as a motherhood-style defense against any sort of criticism and you use that as a cover to implement every possible “date to completion”-extending, “number of comrades on site”-increasing work practice.
    Then you vote Labor in.
    As your reward for voting them in they encourage inner city high-rise high-density residential development, and discourage low-rise suburban sprawl. This campaign extends to the cultural war of endlessly disparaging “McMansions” and endlessly extolling café lifestyle in the media.
    High-density and high-rise necessarily involves a number of factors: cranes and work above 3 metres – so the number of safety issues and related regulations is much much greater than low rise work. And the average contract value is much higher so the size of the builder is much greater than low rise and so inevitably the number of workers with whom they collectively bargain is so great as to necessarily involve unions.
    That’s my theory. Labor’s payback to the union movement for giving them power to change our world is to ensure more and more of them are working on sites that suit their agenda. Not as blatant as handing them the cash in envelopes, but still.

  6. Louis Hissink

    And if that road is gone down, the construction industry will be, er, somewhat underemployed since their product is unaffordable.

  7. Rafe

    On the topic of workplace safety and regulation in the US, a sports entreprenuer built two stadiums, one recently and the other 30 years ago. The first one cost about $8M and the second about $200M, sure we have had inflation but the cost of workers insurance for the second was as much as the full cost of the first.

  8. jumpnmcar

    A friend of mine is in the MUA(rep) and works on a tug( doing very little and doing very well thank you), he said “you idiots in the construction industry are getting RIPPED OFF!!!
    I pointed out that if we were on the same wage and conditions(22 weeks a year off ) as him, his modest, 4 bed, 2 bath, low set brick veneer home would have cost him over $2m and 2 years +to build.

    He changed the subject.

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