Leaky homeowners $1 billion relief

Tahatai Coast School had to make extensive repairs due to leaky building syndrome. Photo / file

Relief for leaky home owners will be available from tomorrow after the Government today announced a rescue package worth more than $1 billion today.

Building and Construction Minister Maurice Williamson said the Government had reached a deal with banks over the loss-sharing arrangements, which allowed the Financial Assistance Package to move forward.

The leaky homes crisis followed deregulation of the building industry, where a resulting lack of rules meant problems with design and products left thousands of homeowners with ongoing problems.

Issues included flaws in design, product, cladding, workmanship, rules and checks.

Legislation was passed this month for the rescue package, under which the Government and local authorities would each contribute 25 percent of agreed repair costs, with affected homeowners funding the remaining 50 percent backed by a government loan guarantee.

The package is only available to people whose homes were built within the past 10 years.

Mr Williamson said how much the Government contributed to repaying defaulted loans under the deal with the banks would vary between properties, and would depend on the cost of the repair job and the current mortgage on the house.

"We've made our own internal estimates of what we think the risk, based on advice about the possibility of default, and it's quite a small amount,'' he told NZPA.

The New Zealand Bankers' Association (NZBA) today welcomed the package, and Mr Williamson said both sides were happy with the compromise that had been reached after the months of negotiations.

"Both parties came at it from a polarised position,'' he said.

"We didn't want the taxpayer to be funding very much of any default loans, and the banks were saying 'well if we can't get some form of a loss-sharing arrangement, we just won't get involved in lending'.''

If 70 percent of the known cases picked up the deal in the next five years, Mr Williamson said it was expected to cost the Crown a little more than $1 billion.

Mr Williamson said it was possible home owners in drier areas might not be aware that their property was leaky, and that the full extent of the problem might not be known.

"Price Waterhouse (accountancy firm PricewaterhouseCoopers) said there's $11.3b of damage that they know of, and suggest it could be as much as twice that in the final wash-up,'' he said.

"It could be $23b, which is way, way bigger than the entire damage caused by the Canterbury earthquakes.''

NZBA chief executive Sarah Mehrtens said it was important for owners to understand lending criteria conditions would still need to be met for them to access repair loans.

"Banks have for a long time been working to assist customers who own leaky homes, and what is pleasing about this package is that it does provide some property owners with a further option,'' Ms Mehrtens said.

Local Government New Zealand said the package offered an alternative to a mediated, litigated settlement depleted by process costs and negotiation, and would give councils a fixed liability they could plan for.

- NZPA