By Gareth Vaughan
The Government says its financial assistance package for leaky home owners, announced amid great fanfare in May last year, will be up and running some time this year despite talks with the major banks dragging on.
(Story updated with detail on number of homes eligible for repair, 10-year limitation, estimated government costs and average repair costs).
A spokeswoman for Building and Construction Minister Maurice Williamson told interest.co.nz that discussions with the banks were "progressing well." However, she refused to comment on when the talks might be concluded or on what issues were still to be worked through.
Her comments came after building materials manufacturer and distributor Fletcher Building noted in its interim results yesterday that the Government scheme to "facilitate the remediation of tens of thousands of leaky homes" is now not expected to get underway until the 2012 financial year. Fletcher's 2012 financial year begins in July.
Announcing the plan last May Williamson said the Government aimed to have the new package up and running early this year. However, there's now a bill before Parliament's Local Government and Environment Select Committee - the Weathertight Homes Resolution Service (Financial Assistance Package) Amendment Bill - with submissions open until tomorrow, February 18 and the select committee due to present a final report to Parliament on April 28.
An estimated 23,500 eligible leaky homes to fix as of January
A Department of Building and Housing report dated January this year estimates there are 23,500 eligible leaky dwellings to be fixed. This figure is 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 says.
It also notes that the Government expects its share of the financial assistance package to be about NZ$1 billion over five years. The Government says homeowners who think they have a leaky home should lodge a claim under the Weathertight Homes Resolutions Services Act with the Department of Building and Housing.
"This stops the clock on the 10-year limitation for claims," says the Department.
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.
'Out of our hands'
Williamson's spokeswoman said the progress of any bill was dependent on the Parliamentary system "which we don’t have any say over."
"Fletcher’s statement is correct in as much as the Bill is now looking to be passed in the middle of this year, meaning the scheme will be up and running in 2011," she said.
The Government's plan envisages taxpayers paying for 25% of the repair costs of fixing or rebuilding a Leaky Home, while local government ratepayers pay 25% with the homeowner covering the other 50%. But the package is dependent on home owners borrowing from their banks using existing lending criteria, even though the loan will be backed by a government guarantee.
The problem is many home owners are not in a position to borrow more using existing lending criteria because they are either already heavily indebted or there is little or no equity left in the property to back a loan.
BNZ CEO Andrew Thorburn told interest.co.nz last September the discussions between the banks and government were focused on what form the Government guarantee for the loan would take and "what sort of arrangements there might be to share potential losses."
The Government says the Bill is designed to facilitate the supply of financial help to eligible leaky homes owners. It aims to improve the homeowners' access to the finance required to repair their homes and to divert litigation costs toward repair costs.
The Bill sets out that:
the Crown and the participating territorial (local) authority will each provide a 25% direct payment to agreed repair costs. However, the participating territorial authority will only make a direct payment if it signed off the work:
if an eligible homeowner opts into the scheme, the homeowner must agree not to sue the participating territorial authority and the Crown (eligible homeowners will still be able to pursue legal action against other parties):
the Crown will provide assistance to eligible homeowners in accessing bank finance for the remaining agreed repair costs by offering credit support to banks (by way of a limited Crown guarantee or indemnity) for loans made to eligible homeowners who can meet the banks' lending criteria.
Key features of the Bill include:
capping the liability of participating territorial authorities (in accordance with a contribution agreement) and the liability of any other contributing parties (for instance, other solvent defendants) for claims being addressed through the financial assistance package. This is designed to ensure that the financial assistance package diverts litigation costs toward repair costs. If participating territorial authorities or other contributing parties are joined to litigation where they have paid a contribution through the financial assistance package, they will face both the cost of the package and potential ongoing costs of litigation, if any:
removing the Crown's liability for the failure of repairs made under the financial assistance package and any losses suffered as a result of the actions of the Department of Building and Housing or the Crown under the financial assistance package process. The amendment recognises that the Crown is making a significant contribution to solving the leaky-home problem where it has no liability to do so:
authorising the appropriate Minister to give a Crown guarantee or indemnity in respect of loans for repairs made under the financial assistance package:
limiting the period in which eligible homeowners may apply to enter the financial assistance package to 5 years from the time the financial assistance package becomes operational.
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