By Gareth Vaughan
Five years ago we were told it would cost taxpayers about $1 billion. In 2011 the Crown accounts carried a $567 million provision for it. But to date it has cost taxpayers just $19.89 million, and is now forecast to cost little more than $112 million.
"It" is the Government's Financial Assistance Package, or FAP, for leaky home owners.
Unveiled amid much fanfare by Prime Minister John Key and then-Building and Construction Minister Maurice Williamson alongside the then-mayors of Auckland and Wellington John Banks and Kerry Prendergast in May 2010, the FAP was touted as something that could assist tens of thousands of leaky home owners.
Five years later it has helped just 700 households.
Information provided to interest.co.nz by the Ministry of Business, Innovation & Employment (MBIE) shows the FAP, since its introduction in July 2011, has helped 700 households move into or finish the remediation stage of repairs on properties with leaky problems. All figure are as of February 28. MBIE says the Government has contributed $19.89 million under the FAP scheme to these householders to repair their properties.
MBIE says 1,217 claims have been assessed against the FAP contribution criteria with 979, or 2,937 properties, qualifying for the Government portion of the assistance package. The average agreed repair costs under the FAP have been $245,830 for single dwellings and $3,203,846 for multi-unit complexes, or $101,912 per unit, excluding betterment, the MBIE spokesman said.
A government commissioned report by PwC in 2009 estimated there were up to 89,000 leaky homes in New Zealand, with a consensus forecast of 42,000 dwellings settled on by the report as likely to be leaky homes.
The FAP sees the Government meet 25% of homeowners' agreed repair costs, and local authorities another 25% leaving homeowners to find the remaining 50%. A loan guarantee underwritten by the Government is available, provided applicants meet bank lending criteria.
'A dreadful bind'
Back in 2010 Williamson said government boffins estimated there were 23,500 eligible households. So if, as the boffins predicted, 70% of affected homeowners within the 10-year liability limit took up the package, this would equate to 16,450 leaky homes, costing taxpayers around $1 billion over five years.
At the time Key said his government had taken the lead in creating a "fair and effective" package that could "deliver real support for many thousands of New Zealand homeowners" who were "stuck in the dreadful bind" of owning a leaky, rotting home.
However, MBIE now says the latest Crown estimate, from an independent actuary, is for the FAP to cost taxpayers $112.4 million. This includes any potential changes following the Weathertight Homes Resolution Services Amendment Bill, which was unveiled by Building and Housing Minister Nick Smith earlier this month. The $112.4 million represents the Crown’s 25% contribution to eligible owners.
"The Financial Assistance Package is an option available to leaky home owners who have made a claim with the Ministry. The situations for owners of leaky homes are complex and their choice on accessing the Financial Assistance Package will be based on their individual circumstances. The Ministry does encourage owners of leaky homes who believe that this package is a positive option for them to make a claim to enable them to repair their home," an MBIE spokesman told interest.co.nz.
'It is just one option'
These comments are similar to ones Williamson made to interest.co.nz in 2013 when asked why he thought uptake of the FAP was running so low.
"It is true that demand for the scheme is lower than originally forecast. But it is just one option available to homeowners with weather-tightness issues. In addition to the FAP, claimants can also seek adjudication through the Weathertight Homes Tribunal or redress through the Courts. Many homeowners have done just that," Williamson said.
The FAP scheme became available to homeowners from July 2011 and eligible homeowners must lodge claims by July 2016. There's a 10-year limit for bringing a claim meaning a claimant's house must have been built, or altered if the alterations leak, within 10 years of the date of lodging a claim. Homeowners close to the 10-year limit are able to “stop the clock” by lodging a correctly completed claim.
Significantly to be eligible to lodge a claim the building work behind the leaky problem would have to have been done since July 29, 2001, rendering ineligible thousands of leaky homes built in the 1990s.
Homeowners signing up for the FAP must agree not to sue their council or the Government, although they're still allowed to pursue compensation from other potentially liable parties such as builders, developers and makers of defective building materials.
'Providing clarity of eligibility & helping more leaky home owners'
In Smith's announcement on March 10 he said proposed changes to the FAP available under the Weathertight Homes Resolution Services Act would provide clarity of eligibility and help more owners of leaky homes access assistance.
“The first change is extending the definition of the ‘built’ date to align with last year’s Osborne v. Auckland City Council decision by the Supreme Court. The High Court and Court of Appeal had previously ruled that the ‘built’ date was the date of the last building inspection, but the Supreme Court determined it was when the code compliance certificate was issued, a date which in some cases is many months, and sometimes years later. This affects who is eligible for assistance, given the 10-year limitation on claims. The Bill will enable about 70 homeowners previously deemed ineligible to be able to pursue their claim without the expense of individually taking each case through the courts,” Smith said.
“The second change relates to the expiry of the Financial Assistance Package, which is due to occur on 23 July 2016. It is possible that by this date, some claims may still not have reached the ‘notice to proceed’ stage, which is the critical point of the claim process. The Bill will mean homeowners who are actively progressing claims in the system as of 23 July 2016 will be able to continue to do so, rather than have the expiry date arbitrarily prevent a claim from proceeding where good progress is being made."
“The third change is aimed at removing any doubt about the validity of the eligibility criteria for access to the Financial Assistance Package. Two of the criteria – 1B and 1C – are presently located in the Gazette notice by regulation, which the High Court has raised concerns about. The Bill consequently moves them into the Act to provide a greater deal of legal certainty so that their validity cannot be questioned. Previous decisions made on the basis of these two criteria will be validated," said Smith.
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