Labour says govt leaky homes bill unfair, will ask for owners of leaky apartments to be included in move that would cost taxpayer more

Banks are on board for the government's leaky homes assistance package, Minister for Building and Housing Maurice Wiliamson confirmed Thursday afternoon.

Meanwhile, the package is one step closer to passing into law, with the Weathertight Homes Resolution Service (Financial Assistance Package) Amendment Bill coming through the Committee of the Whole House in Parliament on Thursday evening. It will receive a third reading next week before it is passed into law.

During the Committee of the Whole House, Labour MP Phil Twyford proposed four amendments Labour wanted made to the Bill, which were turned down by Building and Construction Minister Maurice Williamson, who is overseeing the Bill.

Williamson confirmed to journalists before Parliament sat on Thursday afternoon that the government had reached an agreement with banks on the assistance package, although he would not speculate on details about a loss sharing arrangement for bank losses on loans made under the scheme.

It is understood the government will agree to cover between 15-25% of bank losses on defaulted loans made for the assistance package, which will see the government contribute 25% of repair or rebuilding costs and local authorities contribute 25% of costs in some circumstances. Homeowners would then be required to source the remaining 50% or 75% of costs themselves through a bank loan.

However discussions between the government and banks had hit a snag over how much the government would cover in any loss-sharing agreement.

“The banks are fine. We’ve got the banks fully onside, and local authorities onside," Williamson told journalists in Parliament this afternoon.

"The legislation gets through the committee stages and third reading hopefully next week. We’re ready to go to market, we’ve got the website set up, the 0800 [number set up], we’re ready to go to market with people coming and making their application and getting their 25-25-50," Williamson said.

The government has set aside NZ$1 billion for its share of costs arising for the package, although the final cost to the taxpayer could be considerably more. An estimate from PricewaterhouseCoopers in 2008 set the known costs of leaky homes at NZ$11.3 billion, with an upside risk that could end up being double that.

Finance Minister Bill English told journalists in Parliament this afternoon the government would not budge on its NZ$1 billion provision.

Only homes built within a ten year timeframe will be covered by the package, although homeowners approaching the limit can sign up to the Weathertight Homes Resolution Service to 'stop the clock ticking', and will be covered by the legislation if they applied before their home was ten years old.

A Department of Building and Housing report dated January this year estimated there were 23,500 eligible leaky dwellings to be fixed. This figure was based on a consensus forecast from a PricewaterhouseCoopers (PwC) report commissioned by the Government in 2009 suggesting 42,000 dwellings were likely to be leaky homes and only about 3,500, or 8%, had been repaired.

At the time of the PwC report it was estimated about 9,000 homes had fallen outside a 10-year liability limit, with another 6,000 homes estimated to have fallen outside this limit since the report was issued.

"It is estimated (therefore) there are 23,500 eligible households, so if as officials predict 70% of them take up this financial assistance package that equates to 16,450 leaky homes," the Department of Building and Housing said in January.

The PwC report estimated between 22,000 and 89,000 homes were leaky with the consensus forecast of 42,000. PwC estimated the total cost of fixing 42,000 leaky homes, including repair and transaction costs, at NZ$11.3 billion in 2008 dollar terms. The Government is currently incurring costs of about NZ$19 million a year running dispute resolution and related services. See the Government's Regulatory Impact Statement on the leaky home financial assistance package here.

The Government estimates the average cost of repair at NZ$27,500 to NZ$410,000 for stand alone houses depending on the level of repair needed from minor to full reclad, and NZ$16,250 to NZ$156,250 per unit for multi unit dwellings.

'Why it's 10 yrs'

In the Committee of the Whole House on Thursday evening, Williamson outlined why the government had stuck with the 10 year liability limit. The Building Act stipulated that local authorities could not be sued for signing off a building consent for a building that was more than ten years old, he said.

“If you have a leaky home, you’re coming towards the end of its 10 year cycle, all you need to do is register with the Weathertight Resolutions Service, and the clock stops," Williamson said in the House.

“The reason there is such a limit is it’s simple. The numbers. The dollars just make your eyes start to water if you leave it open-ended. And as soon as you draw a line in the sand, I fully understand that there’s always a person just on the other side of that line that will feel aggrieved. If you said, well we’ll make it 11 years, then the person who’s 11 years and one month will fell aggrieved," he said.

“If you make it 12 years, and if you don’t make it any limit, you actually start to basically gut the intention of the original Building Act, which says you have a period of 10 years – it’s actually in the Act – that a building must be fit for purpose and so on.

“But I’m sure members of this House will know that a lot of their constituents...will seek to do renovations after 12 or 14 years, or redo the bathroom and so on. So you can’t leave it open-ended, and if you did it’s just simply fiscally not achievable," Williamson said.

'Costlier than the quakes'

There were a number of things about the package Williamson said he would have liked to do differently, but the cost of the package would have risen.

“One of them was for a number of superannuatients their concern was, ‘if we have to do this 50% loan from the bank, [it’s] going to be very hard for us to make the repayment’. I fully understand that and we did explore an option of allowing for the Crown to pick up the 75 [per cent of the costs], not the 25 [per cent], the local authority do the remaining 25, and then the Crown get back its 50 on the estate on the death of that superannuatant," Williamson said.

“But again that just becomes numbers that go into the billions. Remember Pricewaterhouse [Coopers] estimated there’s NZ$11.3 billion of damage known, and estimate that over time, as places with a slower rainfall and moisture level going on, this number could end up being double. We could see a NZ$22.6 billion of damage. Now it puts in in perspective relative to the Canterbury Earthquake, which is around fifteen [billion dollars of damage]. So it’s a ginormous sum of money," he said.

“So I make no secret of the fact there were 101 different combinations and permutations looked at to try to get this through. We looked at one-third, one-third, one-third; we looked at the Crown only doing 20 and putting local authorities into the gun for 30, and that gave the 50."

In the end the status quo was the best option the government could come up with within the fiscal restraints the Finance Minister and the government’s budget could withstand.

"I repeat two things: One, it’s voluntary, and one, the government could have stood out and said, ‘we’re not taking part in this at all – we could have," Williamson said.

“When I heard John Gray [of the Homeowners and Buyers Association] last night saying [on the TV] ‘I don’t think the Minister’s looked into the eyes of people with a leaky home,’ boy is he wrong. What made me do this, more than anything else in my life, is I’ve looked into that many faces of people. I’ve never been to that many meetings where everybody at the meeting was crying. My colleagues will suggest I have that effect on a meeting when I go to it anyway, but these people were crying because they just had nowhere to go,” he said.

People had no way out and could not get loans because they were sitting in rotten, damp, smelly, unhealthy homes.

“I felt there was a moral obligation to come back and say, ‘well we’ve got to do our bit because I have to say right from the outset, if anyone thinks it’s simplistic as blaming the Crown for some of the things, or blaming poor quality builders, or blaming untreated timber, or blaming local councils, or blaming poor inspectors, it’s a systemic failure of the whole lot across the board from woe to go," Williamson said.

Labour wanted changes

Labour had earlier said the government's package to address the leaky homes problem was unfair, and needed to be amended to include cover for owners of leaky apartments.

MP Phil Twyford, who sits on the Local Government and Environment Select Committee which reviewed the Bill, made the call this morning before the bill went before the House.

“We recognise the package is a genuine attempt to help the owners of leaky homes, and divert resources to repair and away from lawyers, but given about one-quarter of the people affected are apartment owners it seems unfair to deny them assistance,” Twyford said in a media release.

To rectify that Labour would today table an amendment to the Bill to open up the package to owners of leaky apartments.

“The main problem is that banks won’t lend to bodies corporate because they can’t mortgage common property, which makes it difficult for them to raise the 50% contribution to repairs owners have to find under the package,” Twyford said.

“A simple solution would be for the Government to offer a loan guarantee to bodies corporate, which would then open the door for the banks to lend,” he said.

A bar on third party claims against councils who are party to the contribution agreement, was also unfair.

“Giving councils immunity from third party claims exposes builders and architects, and unjustly takes away their legal right to join councils who may have been at fault. We propose a more balanced approach," Twyford said.

“Other amendments Labour is making will exclude property speculators from picking up the 50% subsidy and then flicking the house on at a profit, and remove the Crown immunity that will mean Government assessors cannot be held accountable for their work in assessing the needed repairs,” he said.

Williamson will take a look

Williamson said he had given Twyford a commitment his amendments would be looked at while the bill was debated in the Committee of the whole House.

“I’ve got officials pouring over them right now. If they are things we can accommodate within the Bill we’ve got, we’d certainly try to accommodate them," Williamson said.

"But this is a package that’s been round and round. We’ve had huge numbers of negotiations with local authorities, with the banks, and it’s not just a matter of springing surprises on it. Everyone that’s now signed up to it has signed up. It’s got a billion dollars and more price-tag to it – it’s not something [where] you can just go and flick something and make a change that might make a big difference," he said.

“But we’re having a look at it, and if we can accommodate them then we will.”

Most of what Williamson understood Twyford was proposing was stuff that had been considered and gone through, and rejected for a number of reasons.

“I think Labour are being supportive of the Bill, so we’re going to try and make sure that it doesn’t need to be a fight. I think everybody’s going to benefit if we can get this through and we’re going to try and get it done,” Williamson said.

Whether Twyford’s proposed changes would mean the bill would cost more depended on what was included, and the on the uptake of the bill.

“It’s a very open-ended package. We don’t know how many people will accept, because it’s voluntary, we don’t know the costs of each of the individual applications, and then we’d have [to pay] our 25 [percent of the costs]," Williamson said.

“It’s a bit of a rubber number, and it always has been, and that’s one of the difficulties about this. It’s not something you can say, ‘this will cost…,’ and be specific,” he said.

(Updates with further Williamson comments from the House, Williamson comments on Twyford proposed ammendments)