Why the leaky homes bailout is unfair

Photo / Richard Robinson

The government's description of the leaky building issue as a "natural disaster of huge proportions" is both a clever device and a dangerous precedent.

The natural disaster terminology suggests it was no one's fault and that it's legitimate to ask all taxpayers help pay for the repair bill because almost everyone was affected.

But this was no natural disaster and only a relatively few were affected. The National government estimates it will spend around NZ$1 billion over the next 5 years paying for 25 per cent of the rebuilding costs for 16,450 houses.

Local councils will also pay a further NZ$1 billion over the next 5 years and will no doubt pass on that cost in the form of higher rates. 75 per cent of the costs will fall on ratepayers in the Auckland Super City.

So around 1 million Aucklanders will be paying more than NZ$1.3 billion to around 12,335 home owners. Many of the home owners will own more than one house. Investors are covered under the scheme.

I could understand the spreading of the cost if public buildings or public infrastructure was damaged in the 'natural disaster'. But the benefits will be received by less than 1.2 per cent of the population.

So why have governments both central and local authorities and from both the left and the right decided that this group of people owning 16,450 properties is worthy of such special treatment?

What about the more than 188,652 account holders in finance companies who have lost as much NZ$3 billion? See our Finance Company Deep Freeze list. It could be argued their loss was just as much a 'natural disaster' as the leaky building issue.

Government regulators failed to spot or police the property developing finance kings when they raised so much from Mums and Dads and then failed to repay. The official protections did not work. Why shouldn't they receive a payout too? What about the Northland Dairy farmers facing big losses from the drought?

Why are mostly Auckland property owners so different?

Why should renters and owners of non-leaky home owners, particularly in Auckland, pay to rebuild these properties? Why should taxpayers all around New Zealand subsidise leaky building owners and investors to the tune of NZ$2 billion and take on the risk that a further NZ$2 billion may not be repaid?

Why are taxpayers being asked to help reduce the risk for the banks? Many of these banks are exposed to the risk that the building assets underneath their loans are worth less than the loans. Now both the risk and the cost will be transferred to taxpayers.

I keep coming back to this question. Why is this group receiving such special treatment?

The National government is clearly exposing itself as the party of property owners, particularly property owners in Auckland. This issue is white-hot among the strongest National Party supporters in the blue rinse seats of Eastern Auckland and the North Shore.

This the issue that MPs, Ministers and the Prime Minister will have been harangued about at every party meeting and dinner party for months. What the tragedy of a lack of affordable housing in South Auckland? What about the thousands of young New Zealanders who leave New Zealand because they can't afford to buy a house on their salaries here?

Now the pressure from the Eastern Suburbs and the North Shore has told. But who is speaking up for the millions of renters or the millions of taxpayers outside of Auckland or who live in non-leaky houses? When will the finance company investors ask for a bailout too?

This is New Zealand's own version of the debt shuffle that governments in Britain, Europe and the United States have been criticised for.

Private risk and losses have been socialised. This didn't stop the capital gains from the property boom being privatised from 2002 to 2007, some of which was against the very houses that will now incur costs for taxpayers.

Debt is shuffled off the books of the banks and the home owners and shuffled onto the taxpayers, both now and in the future. This is no better than the bank bailouts in Britain or the United States or Ireland, or the sovereign debt bailout just unveiled in Europe.

This is simply not fair on most New Zealanders and it sets a dangerous precedent.

What happens if house prices were to collapse 20-30 per cent in the next four to five years because of government policies announced in the budget? Would the banks and the rest of New Zealand's homeowners nursing big capital losses come asking for a bailout?

I feel another natural disaster in the wind.

Bernard Hickey