By Alex Tarrant
The government's 'leaky homes' bill should refer to a possible agreement between banks and the government to share any losses under a joint venture between the two to provide assistance for the nationwide problem, the New Zealand Bankers Association says.
Banks and the government are still in talks over the Weathertight Homes Resolution Service (Financial Assistance Package) Amendment Bill with the main sticking point being who takes the hit of any losses arising from any financial assistance package. Currently central government will pay 25% of repair costs for homes affected, with local authorities to pay another 25% if it signed a consent for the building work.
Government is then expecting home owners to borrow the other 50% of repair costs from a bank. However, many borrowers don't have enough equity or income to borrow more and the banks want the government to agree to share in any losses from such loans.
The Bankers Association made its comment in a written submission to Parliament's Local Government and Environment Select Committee, which is looking at the bill after it passed its first reading in the house last year. The select committee is due to report back to Parliament in April.
The NZBA said it supported the objectives of the Bill to improve, for owners of leaky homes, access to finance to repair their homes.
"Banks are supportive of the Government’s efforts to address this important issue and to help owners of leaky homes in a positive way," it said.
However it said that, "for the purpose of clarity and given that negotiations between the Government and banks have not yet been completed, the Bill should explicitly recognize the options being discussed".
"In the Explanatory Note, the definition of financial assistance measures and Clause 125G, the reference to “guarantee or indemnity” should be replaced with a reference to “guarantee or indemnity or loss sharing agreement”. Currently, the Bill does not appear to contemplate a loss sharing agreement," the NZBA said.
Furthermore, the NZBA said a line in the Explanatory Note should be replaced with the words:
“the Crown will provide credit support (by way of a guarantee or indemnity or loss sharing agreement) to banks who agree to provide loans, to eligible owners who meet the banks' lending criteria, to assist with meeting the remaining agreed repair costs."
"The Government has strongly indicated in negotiations that the existence of a loss sharing agreement should not influence banks’ decisions about whether to lend, that banks should not lend more or lend in circumstances where perhaps they otherwise would not, and that the agreement is not intended to provide banks with increased confidence to lend the required amounts," the NZBA said.
A report in 2008 by PricewaterhouseCoopers 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.
See more on the potential costs of leaky homes in Gareth Vaughan's February 17 article here.
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