Low take-up of leaky homes package boosts government accounts

Friday 12th October 2012

The government's helping hand to owners of leaky homes is being shunned which helped improve the government's accounts to the tune of $408 million in the latest financial year.

Under a financial assistance package the government pays 25 percent of the repair costs of a leaky home, local government pays 25 percent, and the homeowner pays 50 percent.

Paul Grimshaw, a partner at Grimshaw & Co, questioned why anyone would go for that when they could get 100 percent of remediation and other costs through the courts.

"People aren't going for the package," he said.

Only 30 households have so far taken up the package and the cost to taxpayers has been $1.3 million, according to the Ministry of Business Innovation & Employment.

That made a $567 million provision in the government's accounts appear over the top and the accounts for the year to June 30, 2012 released on Wednesday slashed the provision by $408 million.

"In the first year of operation, the focus of the scheme has been to assist claimants through the process to the repair stage," Megan Martin, acting deputy chief executive of service delivery for the building and housing group said.

"We expect to see more payments being made to claimants in the second and third year of the scheme as properties are physically repaired," she said.

The scheme became available to homeowners on 29 July 2011 and claims must be lodged by 29 July, 2016.

An actuarial valuation for the government by Melville Jessup Weaver as at June 30, 2012 assumes only 3,544 claims even though 14,721 dwellings are eligible. This take-up assumption is slashed from the 11,040 previously.

The actuary assumes it will cost $336,741 to fix a single dwelling and $134,696 to fix a unit in a multi dwelling.

The ministry says that 1,104 claims against the financial assistance package have been assessed and 885 claims representing 2,542 properties have qualified for the government portion of the package.

In 2009 PricewaterhouseCoopers estimated that between 22,000 and 89,000 homes were leaky and the total cost of fixing 42,000 homes was $11.3 billion.

The package does not cover commercial properties so a Supreme Court decision this week that is expect to trigger a deluge of claims on leaky commercial buildings does not increase government liabilities under the assistance package.

The Supreme Court ruled on Thursday that the Court of Appeal shouldn't have struck out a claim by the owners of the building Spencer on Byron in Takapuna, that the-then North Shore District Council only had a duty of care to residential buildings.

Grimshaw said the decision was limited to buildings constructed in the last 10 years but there would be claims on commercial buildings worth hundreds of millions of dollars.

He said any decision to extend the financial assistance package to commercial buildings was a "political decision".

BusinessDesk.co.nz

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