Leaky homes—our multi-billion dollar shame

The shameful saga of New Zealand’s leaky homes keeps dragging on—while more than 40,000 people sit in homes that are rotting away because of flawed law, lax regulation, and shoddy design and building practices in the 1990s

Labour, National, local government, and the building industry share the blame for the country’s shameful leaky homes saga. It is time they shared the cost.

They have played pass the parcel with the leaky homes problem for years while the innocent victims of their joint incompetence have been forced to pursue the risky, costly and time-consuming process of litigating to achieve what they thought they had purchased in the first place—a weathertight home.

Currently, Minister for Building and Construction Maurice Williamson is locked in heated backroom discussions with mayors of the six worst affected cities, trying to hammer out a cost-sharing arrangement to provide a cut-price alternative to litigation for the home-owners that central government, local authorities, and industry organisations have failed to protect.

There are a number of problems about the process that the government and the councils have set in train to find an alternative to litigation. It does not involve the party most affected—the leaky home owner—and it seems to relieve the building industry of any responsibility for contributing to the cost of rectifying a problem which it helped to create.

There are also widely varying estimates of the scale of the leaky homes problem—and the cost of fixing it. Some say 20,000 homes are affected. Others, up to 80,000. Estimates of repair costs range from $3.6 billion to $20 billion.

Last March, Minister Williamson set up a think tank of officials and representatives from local bodies and affected homeowners to quantify the scope and cost of the problem with more precision. If he has received the report he was expecting by May, it still has not seen the light of day. We can only speculate about the reason for this, but it may be that no-one wants to frighten the horses, or put New Zealand’s credit rating at risk with a suggestion that there is a huge, hidden potential liability about to be dumped on the country.

Confidentiality is also supposed to apply to the discussions taking place between Minister Williamson and the local councils. However, the New Zealand Herald appears to have found a leak of its own and published an account of what is on the table as well as the action around it.

According to the Herald, the minister and the mayors are wrangling over a package to be offered to leaky home owners who want to cut their losses, abandon their legal claims, and get on with fixing their houses or apartments.

It seems that Williamson has tabled a proposal that would see local councils meet 26% of the home repair cost, the government meeting 10% and providing an interest-free loan to homeowners who would use it to meet 64% of the cost. Elderly home owners who could not afford repayments could leave the debt to be repaid from their estate.

This unbalanced proposal has not gone down well with the mayors, who want the government to match the contribution that their councils and ratepayers are being asked to make and to reduce the burden on the leaky homeowners.

The government counters that if agreement is not reached on a joint proposal, the councils will find themselves liable for most of the repair and legal costs in any settlement achieved through court action or the special processes provided by the Weathertight Homes Resolution Service and Tribunal.

Williamson’s message about the higher risks run by councils if they do not accept the government’s proposal was reinforced this week by news of a High Court decision that doubled the size of a compensation payment awarded by the Weathertight Homes Tribunal to $367,000.

Justice Peter Woodhouse found that the Tribunal had been wrong in concluding that the claimants knew their house was a potential leaky building when they bought it, or soon after, and had failed to take prompt action. It is noteworthy that the claimants in this case had spent eight years fighting for this result, and will meet legal costs now compensation has been won.

However, Williamson’s leverage with this argument is being eroded by another piece of protection that successive governments have put in place to diminish prospects for liability by the Crown. Legal claims by leaky homeowners must be filed within 10 years of construction or renovation. As the bulk of leaky homes were built prior 2000, many owners have lost or are about to lose their right to lodge a claim.

Thousands of leaky home owners are being denied any chance of compensation by a stroke of the lawmaker’s pen, according to their long-term advocate John Gray, president of the Homeowners and Buyers Association. “They’ve fallen off the 10 year cliff and there’s no hope for them.”

Gray argues, with real merit, that the clock counting down to the 10 year deadline for claims should be stopped temporarily while central and local government develop their alternative proposition.

He does not accept the position taken by both Labour and National led governments that there is no legal liability for the Crown in the leaky buildings saga. He thinks claimants have been deterred from appealing an adverse decision on this matter by former Finance Minister Michael Cullen’s warning that the Crown’s insurers would require the government to seek the recovery of costs. In his view, the issue of Crown liability has not been thoroughly tested. 

Gray’s view will ring a bell with North Shore City mayor Andrew Williams, who is pressing the government to lift its contribution to leaky home repair costs.

"Their 10 per cent is not sufficient to cover both the moral responsibility of central government for the failings of deregulating the building code and also to cover the socialised debt to leaky-home owners of the building and construction industry," Williams says. Hear, hear.