Brian Rudman: Leaky homes: Use big gun to call shots

Cartoon / Peter Bromhead

When big business persuaded the politicians that Auckland had broken down, the answer was a royal commission of inquiry into governance.

The Tongans did the same when their rust bucket ferry, Princess Ashika, sank with the loss of 74 lives. They ordered a no-holds barred review into the calamity.

It's time we followed these precedents and put the biggest and most expensive man-made disaster in New Zealand history under the same spotlight.

I was brought up to believe the 1931 Napier Earthquake was the biggest New Zealand civil calamity.

But the just-released Covec Report into leaky buildings highlights how puny that earthquake was, in economic terms at least, compared to the on-going crisis that is the leaky building scandal.

The 1931 earthquake caused $648 million (converted to 2008 dollars) of damage to the cities of Napier and Hastings.

There is a growing consensus that the economic cost of the leaky homes crisis is in the vicinity of $11.3 billion and involves about 42,000 dwellings.

It is a calamity of huge proportions, but because politicians and bureaucrats rather than God are to blame, no one wants to accept responsibility.

The latest report was commissioned by the North Shore City Council to back its case that the Government should be shouldering more of the responsibility for, and the cost of, the problem.

It shows that for every dollar spent on repairing a leaky home, the Government will pocket 25c from GST and other taxes.

This, says North Shore Mayor Andrew Williams, does not include the additional benefits to the Government of any reduction in unemployment benefit payments that might result because of increased building activity, or any savings in public health costs linked to living in leaky homes.

The report calculates the Government stands to pocket at least $2 billion out of a misery, which is, at least in part, of its making.

Mr Williams and Auckland's other mayors have battled unsuccessfully with the previous Labour Government and the present National administration to force Wellington to shoulder some responsibility.

"It was the central government in the 1990s that inflicted deregulation of the building on home owners and the public," says Mr Williams.

This, he says, was "the root cause of the leaky homes disaster".

He says that: "Despite escaping legal liability on a legal technicality, their moral and political obligation to these victims is overwhelming."

Just before Christmas, talks between Building and Construction Minister Maurice Williamson and Auckland's big city mayors over any Government contribution towards repairs broke down.

At that stage, Mr Williamson was offering to pay a miserable 10 per cent of repair costs and was proposing home owners paid 64 per cent and local authorities, 26 per cent.

This was in response to a proposal from the bigger affected cities, with the backing of Local Government New Zealand, that homeowners and local councils pay 25 per cent each and the Government pay the other 50 per cent, less anything recouped from builders and architects.

The courts have fingered local councils to shoulder the "official" share of the blame, ruling that building inspectors should have foreseen the crisis.

As many builders and architects are hiding behind limited liability structures, their share of any compensation is also being added to local council bills.

But the government, which enacted the permissive Building Act 1991, and later authorised mistakes like kiln-dried timber and windows without flashings, has escaped scot-free.

There's a touch of natural justice in former Prime Minister Jenny Shipley becoming a victim of the permissive building practices that were approved in 1998 when she was in charge.

The Newmarket block of apartments she lives in requires up to $5 million in repairs. Auckland Mayor John Banks, a Cabinet minister when these reforms took place, was also stung with leaky home repairs of $1 million.

But this is little comfort for the tens of thousands of other victims. A royal commission might finally start to deliver that.

Not only would it bring out what vested interests in both the political and building spheres want to hide, it could also be required to come up with a more equitable spread of compensation which acknowledges central government culpability.

It would also highlight the dangers of embracing change for ideological reasons, and underline that the market is not always the best of guides.