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New Zealand to spend $1B over five years to meet 25% of leaky home repair bill

Monday 17th May 2010

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The New Zealand government will spend $1 billion over five years to cover a quarter of the cost of repairing leaky homes and has proposed that local authorities meet a further 25% of the cost. 

Between 22,000 and 89,000 homes in New Zealand are leaking, damp, mouldy and “rotting over time,” based on an assessment by PricewaterhouseCoopers last July.

To date, just 3,500 have been repaired.  The package leaves homeowners to find the remaining 50% of the cost but the government will provide a loan guarantee for the work, provided the owners meet bank lending criteria.

The government will meet the administration costs of the package, lifting its contribution to 29% of the total cost.

Around three-quarters of the affected buildings are in Auckland, and the government package envisages contributing to the repair of 23,500 homes.  Another approximately 15,000 homes will be unassisted because they fall outside the 10 year statute of limitations on leaking building claims.

The leaky homes syndrome, which largely stems from ‘modern’ building techniques used by builders and architects between 1992 and 2005, has been disastrous for property owners, who have been left to flounder through complex legal challenges.

Some building firms have since gone out of business, making it even harder to sheet home liability.“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,” said Building and Construction Minister Maurice Williamson.

The scale of the leaky homes issue is equivalent to “a natural disaster of huge proportions and is having a considerable impact on the wealth and health of many thousands of New Zealanders and their families,” he said.

The$1 billion over five years will come from the government’s capital expenditure budget rather than the $1.1 billion available for new spending in this year’s budget, Prime Minister John Key told journalists at his post-Cabinet media conference today.

The government presented the package to Auckland Transition Agency executive chairman Mark Ford, Wellington mayor Kerry Prendergast and Auckland mayor John Banks, as representatives of the local authorities most affected by leaky homes. They have been asked to respond by May 31.

Banks said he was "confident of buy-in" from Auckland mayors.

Williamson said the nation’s eight major retail banks have also been briefed about the financial assistance package and have indicated their support.

The $1 billion price tag assumes 70% of affected homeowners. The target for getting the package up and running is early next year.

If the uptake is as expected, some 16,450 leaky homes will be fixed.

Wellington has 9% and Tauranga and Christchurch each have 4%.

Williamson said the government isn’t legally liable for the faulty homes but the problem is too large to resolve without state involvement.

Homeowners will have the choice of not accepting the package and continuing to pursue their claims through the Weathertight Homes Resolution Service or the courts, if they prefer.

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