Govt stumped as leaky home bill skyrockets

Building and Construction Minister Maurice Williamson (left). Photo / Wanganui Chronicle

The cost of the leaky building crisis has grown so "gianormous" that the Government has almost despaired of finding a solution, says the minister in charge.

Building and Construction Minister Maurice Williamson told the Weekend Herald the official $11 billion figure - which experts believe is half the true cost - was about what the Government spent each year on health or education.

"It's simply ginormous. A Government who's running very large surpluses would still struggle to find the money to help with this.

"But a Government who's running deficits - and has a forecast track of deficits for many years out - has to just sit there with its head in its hands, saying, 'Well, I just don't how to do this'."

Mr Williamson described the leaky building crisis as the "elephant sitting in the room" as the Government tried to finalise its numbers for the May Budget.

It was vital to find a solution soon so homeowners could start spending their money on fixing leaks instead of lawyers' bills.

He predicted a painful shock for ratepayers in the main centres - Auckland, Tauranga, Wellington and Christchurch - if the multi-billion dollar claims against their councils continued.

"If they have to face the true liability of what's working its way through the system now, you will see rate increases in some of those areas of proportions that would make your eyes water."

He hoped to get a new offer for homeowners through the Cabinet within the next few months, which could include extending the time limit for reporting claims from 10 to 15 years.

However, building experts believe the Government has still seriously underestimated the true scale and cost of the problem, possibly out of concern for its own liability.

An expert panel advised officials and consultants last year that 89,000 homes would fail at a cost of almost $23 billion.

The experts also warned that:

The vast majority - between 80 and 100 per cent - of homes built with monolithic claddings (seamless-looking sheets finished with paint or plaster) would fail within 15 years.

90 per cent of apartments, terraced houses and other multi-unit homes built between 1992 and 2005 would leak badly at some point.

90 per cent of multi-unit legal claims were stalled because owners could not afford to pay their fees to lawyers and building experts.

The average cost of recladding a leaky home has reached $300,000.

The report, Weathertightness - Estimating the Cost, described the 89,000 estimate as "the extreme view" and said Government officials believed it was likely to be an overstatement.

They devised a formula, called "the consensus view" in the report, which applied the experts' failure rates only to homes considered high risk in the building code.

This formula cut the total in half, producing the official figure of 42,000 homes and an $11 billion repair bill.

One member of the experts group, Home Owners and Buyers Association president John Gray, said the "so-called consensus view" was "bollocks".

"I think the 89,000 homes is far more realistic ... We have other experts saying they think it's higher than that."

The group had been pushed to produce a quick answer and came up with a sensible number "but I think the figure was so big that [the officials] had to come up with some way of taking the sting out of it".

Another group member, Institute of Building Surveyors representative Russell Cooney, said the experts were left in the dark about how their predictions were being used.

When the report was released three days before Christmas, he was surprised to see their view replaced with a much lower figure.

The Kapiti Coast-based assessor predicted the cost for all leaky buildings would be even higher because the report only covered houses.

"You've got an equal number of commercial buildings - motels, hotels, retirement homes, hospitals, schools, you name it. They are leaking in equal numbers.

"Every government department, I would suspect, has got part of their money at the moment going into addressing leaks and defects in buildings. All the major owners of buildings will be facing similar problems."

Mr Williamson said he could not say why the figures had changed because the report was prepared independently by consultants at PricewaterhouseCoopers. He had not received any draft version with the experts' estimates.

A PricewaterhouseCoopers spokesman said he could not comment on the report as it now belonged to the Government.

THE COST

Official view: $11 billion (equals Government's annual education spending)
Experts' view: $23 billion (equals annual health and education spending)