By Gareth Vaughan
A government commissioned report may have estimated there were up to 89,000 leaky homes in New Zealand three years ago, but the much publicised financial assistance package stitched together by the Government for leaky home owners last year is now expected to cough up just NZ$186.5 million for a mere 3,544 homes.
This is good news for taxpayers, but bad news for leaky home owners, with the Government's financial statements for the year to June, released yesterday, showing the Crown (read taxpayers') leaky home provision slashed by NZ$378 million, from NZ$567 million at June 30, 2011, to just NZ$189 million at June 30 this year.
Megan Martin, the acting deputy chief executive for service delivery at the Ministry of Business, Innovation and Employment's Building and Housing Group, told interest.co.nz - via a spokeswoman - that so far the financial assistance package has helped with repairs to just 30 households at a cost to taxpayers of NZ$1.3 million. Overall, 1,104 claims have been assessed with 885 claims, or 2,542 properties, deemed to qualify for the Government portion of the assistance package.
Martin says all up, the financial assistance package is expected to cost the Government NZ$186.5 million.
Treasury says the provision in the Crown accounts represents the Government's obligation to contribute 25% of agreed repair costs to eligible owners of leaky homes under the Weathertight services financial assistance package.
"The valuation of the provision takes into account claim experience which was previously not available, which is the main reason for the decrease in the provision since last year," Treasury says.
The scheme became available to homeowners from July 29 last year and eligible homeowners must lodge claims before July 29, 2016. On top of this, 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 have been able to “stop the clock” by lodging a correctly completed claim.
Leaky homes built in the 1990s excluded
However, to be eligible to lodge a claim the building work behind the leaking problem would have to have been done since July 29, 2001 when many leaky homes were actually built in the 1990s.
Treasury says the most critical assumption in estimating the Government's obligations under the financial assistance package is the number of eligible claims.
"As at June 30, 2012, after the first 11 months of the scheme, the actuary has estimated the number of eligible claims based on actual claim information and knowledge across the sector. This calculation projected that 14,721 dwellings would be eligible for the scheme (down 218 from 14,939 a year earlier)," says Treasury.
The second most critical assumption is the take-up rate for the scheme.
"It is assumed take up of dwellings will be 3,544," Treasury says, which is down 7,496 from the assumed take up of 11,040 a year earlier.
Treasury's third critical assumption is the assumed cost of repair per eligible home. The June 30, 2012 single dwelling estimate is NZ$336,741 and multi-unit dwelling is NZ$134,696. Prior to Parliament passing the Weathertight Homes Resolution Service (Financial Assistance Package) Amendment Bill in July last year, the Government had a wide ranging estimate for the average cost of repair, which ranged from NZ$27,500 to NZ$410,000 for stand alone houses depending on the level of repair needed, and NZ$16,250 to NZ$156,250 per unit for multi unit dwellings.
Up to 89,000 homes leaky, govt report said & an NZ$11.3 billion problem
A report by PwC, commissioned by the Government in 2009, suggested 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 the 10-year liability limit. The 42,000 figure was a consensus forecast, with the PwC report estimating between 22,000 and 89,000 homes were leaky. 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 financial assistance package envisages the Government/taxpayers paying for 25% of the repair costs of fixing or rebuilding a leaky home, with local government ratepayers chipping in 25%, and the homeowner finding 50% of the cost with bank loans only possible for those who can meet standard lending criteria.
Homeowners signing up for the financial assistance package must agree not to sue their council or the government, although they're still allowed to chase compensation from other potentially liable parties such as builders, developers and makers of defective building materials.
Building and Construction Minister Maurice Williamson said last year the Government may cover between 15% and 35% of losses on loans banks make to leaky home owners under the financial assistance package, - if those loans go sour. The Government has also been running a leaky homes dispute resolution programme through the Weathertight Homes Tribunal since April 2007.
'More payments expected in 2nd & 3rd years of scheme'
Meanwhile, Martin says in its first year, the focus of the financial assistance scheme has been to help claimants "move through the process" to the repair stage.
"We expect to see more payments being made to claimants in the second and third year of the scheme as properties are physically repaired. Most homeowners who have existing claims prior to July 2011 have indicated they would like to be considered for the financial assistance package so they can, if eligible, have the weathertight issues with their properties addressed and fixed under the scheme," Martin says.
"To date, the Building and Housing Group and local councils have assessed 1,104 claims against the financial assistance package contribution criteria and found 885 claims, or 2,542 properties, have qualified for the Government portion of the assistance package. We are expecting more homeowners with weathertight issues to opt into the financial assistance scheme and in June of this year we completed an independent actuary review which estimated that 3,544 property owners will use it at some point in the future, costing the crown NZ$186.5 million," adds Martin.
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