David Whitburn

An interesting and long-awaited development in the leaky homes saga occurred earlier today with Housing Minister Maurice Williamson and Prime Minister John Key announcing a massive leaky homes bailout package.  This provides that the leaky home-owner pays 50% of the cost of the repairs, 25% paid by taxpayers (the Government) and 25% paid by ratepayers (the Local Councils).  This is only available to those claiming within the 10 year legal liability limit.  The government will guarantee loans to all leaky home owners taking this compensation plan up, and has informed the major banks of the plan.  Obviously these banks are excited at the prospect of more interest income guaranteed by our Government with the powers to tax NZ’s citizens!

Williamson says the scale of the leaky homes issue is equivalent to a “natural disaster of huge proportions” and it is having a considerable impact on the wealth and health of many thousands of New Zealanders and their families:

Affected homeowners have been stuck in a complex and costly disputes process for too long with little prospect of being able to fix their leaky home”

Affected homeowners will need to make a claim under the Weathertight Homes Resolution Services Act to access the financial assistance package once it is launched.  In the meantime, homeowners can apply to the Department of Building and Housing to make a weathertight claim.  If their claim is accepted, that stops the clock on the 10-year limitation for claims.  Williamson says the financial assistance package will be voluntary and in addition to the current disputes and litigation process.

Forgo right to sue Councils

Since the Crown and their territorial authorities (councils) are contributing, leaky building owners that choose to participate in the package would “forgo the right to sue local authorities or the Crown in exchange for a combined government and local authority direct payment of 50 per cent of agreed repair costs.”  This means that leaky homeowners will still have the option to pursue other liable parties such as builders, developers and manufacturers of defective products – indeed if they are still standing, and if they have the funds to litigate.  Whilst the full details have not been working out just yet, the intention is that homeowners who currently have claims in the weathertight system yet to be resolved will still be able to apply for the financial assistance package.

Williamson’s statement concluded with “owners of leaky homes who would like more information should visit www.dbh.govt.nz or phone 0800 116 926.”

Criticism of this compensation plan

I listened to NewstalkZB yesterday before and after the Auckland Property Investors’ Association Board Meeting and noted concerns on a a few fronts.  The ones I noted were:

1. Why the Government is getting involved when it has no liability?
2. Why wasn’t there a bailout to Blue Chip, Merlot and other investors in failed finance and property development schemes as these investors clearly suffered financial loss?
3. Why wasn’t there a bailout to investors in failed finance companies?
4. Why are we socialising (making the Government responsible) for private sector losses, to increase our debt burden even further?
5. Where has the personal accountability and responsibility in New Zealand gone – why don’t people just accept blame for their mistakes, rather than blame everyone else?
6. Isn’t this an urban problem?  Why should we hard working farmers and rural communities pay for city dwellers fancy housing – we don’t have a problem with our preferred style of housing; so we should we have to pay for their indulgences!

These are mainly political questions and depend on your personal wealth, attitude and own individual circumstances.  I see some real merits in this proposal as the stress involved for many leaky home-owners is immeasurable, the health and wealth impacts are often significant, and the Government itself is only offering 25% compensation, and this is forecast by the Department of Building & Housing to be around $1 billion over the next 5 years.  The leaky home owners will be suffering the most still as they have to pay 50% and in many cases simply will have to borrow this money and pay interest to banks.  This will tidy up this late 90s and early-mid 2000s housing issue, to mean this problem goes away.  The devil is always in the details, but on balance so far, I quite like this initiative.  Lets hope it works out well for leaky building owners and our great country, New Zealand.

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