Cheap loans to fix leaky homes

The Government is proposing councils pay a third of repair costs. Photo / Martin Sykes

A much-anticipated leaky homes bailout could be in place by the end of the year - but only if owners cough up more than a third of the $11 billion repair costs.

It is understood that part of the package would see taxpayers underwrite an interest-free loan scheme for homeowners in financial difficulty.

Councils would pay a matching 35 per cent - bringing the funding package to 70 per cent. It is unclear whether the Government will fund the remaining 30 per cent, although it is understood to be reluctant to commit taxpayer money beyond the loan scheme.

It is hoped that the plan will cut out lengthy delays and hefty legal bills facing those taking claims through the courts or Weathertight Homes Tribunal. But it has already been slammed by leaky home owners' advocates as putting too much of the cost on to those who are already suffering.

Mayors from the six worst-affected cities - Auckland, Waitakere, North Shore, Wellington, Christchurch and Tauranga - have been asked to consider the proposal after a new report is believed to put the nationwide bill at up to $11.5 billion, from the previously estimated $3.6b.

Details of the report and the proposed bailout remain a secret: all Building and Construction Minister Maurice Williamson would say was that the focus was on fixing homes, rather than litigation.

Williamson is to meet mayors next week. It is not clear whether mayors will be amenable to paying one-third of the bill when the Government is committing so little.

The Government has long signalled it wants to see money going into repairs, rather than the costly Weathertight Homes Resolution Service.

The deal would also see lawyers cut out of the process, with homeowners waiving their right to take action against councils in return for a payout. They could still seek to recover costs from other parties, including builders or developers.

It's understood the Government would guarantee loans and pay the interest. Elderly homeowners could opt to pay the money from their estate after they died.

Mayors wouldn't confirm details yesterday, but said they were pleased the Government was tackling the problem.

"We've got an opportunity to work with this Government and, at the end of the day, taxpayers and ratepayers have got to work together with homeowners to fund a solution," Wellington's Kerry Prendergast said.

Auckland Mayor John Banks said the liability for his city, which faces the most claims, was now "north of $1 billion". "My best estimate is that the Supercity council's is probably $2 billion or $3 billion. We're going to be funding these settlements for the next 20 years."

Banks said the matter had been left to drift for too long. "Lawyers have had far too much benefit and progress has been far too little."

The new Supercity council will take on the liabilities of the existing Auckland councils after amalgamation. With just over 500,000 commercial and residential ratepayers, the debt works out at $6000 each.

North Shore Mayor Andrew Williams said that meant the region's ratepayers would be chipping in to cover Auckland City's settlements. "That's going to be a bitter pill for many people to swallow."

He said councils would be unlikely to agree to a scheme without a Government contribution. "Much of this came out because of building standards and standards set by the Government, so the Government has a role to play here."

John Gray, president of the Home Owners and Buyers Association, said the scheme was unfair to owners who were not at fault.

"It is abhorrent that the innocent victims of this sorry saga are being asked to pay a third of the repair costs themselves."

Gray also slammed the Government for keeping details of the deal secret. "There are just so many questions that remain unanswered about this proposal," he said.

Leaky home owner Jill Sterling asked who would determine the cost of and quality of repairs under a no-fault settlement system. "I think this is still ambulance at the bottom of the cliff stuff - they're not getting in and sorting out the cause."

Leaky homes lawyer Paul Grimshaw said the proposal sounded like "a very bad deal" for homeowners, who could potentially win 100 per cent of costs through the courts. "From the councils' point of view it's great because they get out of it for a third."

Grimshaw said he advocated setting up a building division of the district court, which could fast-track leaky homes cases.