Wellington apartment owner Michael Cummins speaks with New Zealand Herald reporter Georgina Campbell about the escalating costs to strengthen his building. Photo / Mark Mitchell.
Wellington apartment owner Michael Cummins speaks with New Zealand Herald reporter Georgina Campbell about the escalating costs to strengthen his building. Photo / Mark Mitchell.
Owners of apartments in earthquake prone buildings say the Government should foot some of the bill for strengthening costs, like the leaky homes bailout.
It's a contentious issue because a grant involves a transfer of taxpayer funded wealth to private property owners.
As one Twitter user said in response to a recent Herald article about the problem: "We wouldn't have much sympathy for anyone who gambled on Bitcoin as a retirement plan, why is investment in property any different?"
But the Government did have sympathy for leaky homeowners to the tune of paying a quarter of their repair bills, so why aren't earthquake prone building owners getting the same deal?
In both cases homeowners purchased a property expecting that it was compliant and safe for them to occupy as long as they chose to live there.
Instead, they've been lugged with bills worth hundreds of thousands of dollars to repair their buildings.
At the weekend the Herald revealed Wellington apartment owner Michael Cummins is facing a $400,000 earthquake strengthening bill effectively "wiping out" his retirement plan.
Escalating costs for these owners across the city have played out against the backdrop of a volatile construction industry and changing earthquake legislation.
They say it's unfair for them to have to pay the full cost of strengthening and the Government should chip in.
Why a loan scheme?
Last year the Government announced a loan scheme of up to $250,000 each for unit owners struggling with strengthening costs.
A Cabinet paper on the scheme, which has been proactively released, shows the Government was keenly aware of the need to balance fairness to taxpayers by minimising wealth transfers to homeowners.
They settled on the loan scheme as the best way to do this, but a grant was also investigated.
Wellington apartment owner Michael Cummins is facing a $400,000 earthquake strengthening bill effectively "wiping out" his retirement plan. Photo / Mark Mitchell.
The big advantage of a grant in the eyes of property owners is that they don't have to pay the money back.
But the Cabinet paper outlined any grant would mean less money on the table in order to keep the scheme affordable to the Crown.
That would, therefore, risk owners still not being able to afford strengthening costs.
The Cabinet paper set out that hardship should be determined by whether applicants could get finance from a lender.
The Government received independent advice in late 2018 estimating there were about 216 residential earthquake-prone buildings, housing 1261 individual units, within 38 territorial authorities, and in high seismic risk areas.
It was noted this number could increase ahead of July 1, 2022, because councils have until then to identify all earthquake-prone buildings.
Most of these known residential earthquake-prone buildings are located in Wellington City where there are estimated to be 128 buildings housing 1013 individual units.
The Government decided the eligibility for the strengthening loan scheme would be restricted to owner-occupiers.
Building and Construction Minister Jenny Salesa told the Herald: "The loan is not available to residential property investors because investment in residential property is essentially a commercial undertaking - if the owner is unable to raise the finance to strengthen the building, they have the option to sell their property."
She said it was possible the Government may review this scheme after implementation.
Both 'catastrophic' issues
But Wellington City councillor Iona Pannett asks the question: "These people have worked hard all their lives, so why should they be punished with such extreme costs?"
Pannett, who is the associate urban development portfolio leader, said taxpayer money should come into the equation.
She said apartment owners were also paying for public safety outcomes by strengthening their buildings.
Wellington City councillor Iona Pannett. Photo / Mark Mitchell.
That's because many of them, especially in the case of Wellington, are in the middle of the city on high priority routes and thoroughfares used by the general public.
"Owners need to take the bulk of the responsibility because it is a private benefit, but there are social, cultural, and economic benefits from living in resilient towns and cities", Pannett said.
She suggested the bill be split between owners, Local Government, and Government.
"The cost of strengthening has just blown out to some of the ridiculous figures that you're hearing. If this was a $40,000 fix, I'm not sure many people would be very sympathetic.
"Now that the costs are getting so unreasonable, what's the point in having legislation if it's not practicable?"
They key difference between these buildings and the leaky homes saga is that an earthquake is a naturally occurring phenomena that can't be prevented.
But Pannett said the parallel to be drawn between the two is that they both have "catastrophic" implications.
"They have the ability to ruin people, I get the argument of course that we're in a housing crisis and some people don't have a home at all, but the worry is that people aren't going to have a home either if they're made bankrupt from these costs."
Leaky home bailout
In 2010 the then National Government announced a financial assistance package for leaky home owners.
The Government would meet 25 per cent of homeowners' agreed repair costs, local authorities would also contribute 25 per cent, and homeowners would fund the remaining 50 per cent, with a loan guarantee underwritten by the Government.
Sharon Leigh in a water-damaged room in her Porirua house in 2015. Photo / Mark Mitchell.
Building and Construction Minister Maurice Williamson said at the time that the scale of the leaky homes issue was equivalent to a natural disaster of huge proportions.
He said it was having a considerable impact on the wealth and health of many thousands of New Zealanders and their families.
"This package will assist affected homeowners to get access to money so they can get their homes fixed and move on with their lives," Williamson said.
The most comprehensive study with consultants PwC, now a decade old, estimated in 2009 that up to 89,000 homes could be affected.
"If, as officials forecast, 70 per cent of affected homeowners within the 10-year liability limit take up this package, the Government is anticipating its share will be around $1 billion over the next five years", Williamson said.
The issue of leaky homes was happening right there and then with water getting into places it shouldn't by the second.
Earthquake prone buildings, on the other hand, are a part of what's quite literally a natural disaster waiting to happen.
It's not if a big earthquake hits Wellington, it's when.
'Loan scheme doesn't cut the mustard'
National's building and construction spokesman Tim van de Molen said there was a case for looking at giving owners of earthquake-prone buildings more support.
"The existing loan scheme that's only available for owner-occupiers doesn't cut the mustard. There are many other numbers of arrangements or people who were excluded as a result of those criteria.
"The underlying aim here is to make people safe in their homes, whether they currently own or rent should be irrelevant."
Van de Molen warned landlords would likely recoup strengthening costs from tenants by driving up rent prices.
He said any additional assistance under a National Government would only be available for a specific time period to incentivise owners to get strengthening work done.
