The Government's Leaky Homes Bill has been passed unaminously after its third reading in Parliament, but interest.co.nz understands talks are still ongoing between government and the banks, with the sticking point being a loss-sharing arrangement for losses experienced by the banks for loans made under the scheme that turn sour.
This is despite Building and Housing Minister Maurice Williamson saying last week that the banks were "fully onside" for the scheme.
The Bill will be sent to away for Royal consent to become law most possibly on Monday, although affected homeowners will still be in limbo in terms of accessing funds for repairs until the negotiations are concluded. Interest.co.nz understands the negotiations are close to finishing.
The Weathertight Homes Resolution Service (Financial Assistance Package) Amendment Bill was supported by all political parties, although Labour continued to express its view that various changes should have been made to the legislation. See Labour MP Phil Twyford's concerns here.
Discussions between government and the banks have been taking place for about a year, with early versions of the package looking at a 100% government guarantee for all loans banks made under the scheme.
Interest.co.nz understands the extent of the guarantee has between whittled down to between 15-25% of banks' 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, with the majority to be through a bank loan.
Despite a range having been identified for the loss-sharing arrangement, talks between government and the banks are still dragging on.
Last week, Williamson told the banks were onboard for the scheme.
“The banks are fine. We’ve got the banks fully onside, and local authorities onside," Williamson told journalists in Parliament last Thursday.
"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.
Asked last week what the state of the government’s guarantee for bank losses – the loss-sharing arrangement - was, Williamson replied:
“The state of everything is tidy. We haven’t yet announced the final of the details, and when the legislation is done, we’ll make a full announcement on that.”
“The Bankers Association are fully onside with the package we’ve got right now,” Williamson said.
NZ$11.3 billion problem
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 last week the government would not budge on its NZ$1 billion Budget 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.
(Updates to clarify that initial version of package looked at 100% govt guarantee for bank loans - ie, wasn't pushed for by the banks; with background on cost, number affected, Williamson comments from last week saying the banks were onside).