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In an ambulance rushing her sick baby son to hospital, Katherine Cosgrove realised for certain the false economy of saving money by buying a home without insulation.

Earache, throat infection, bronchitis, flu - it reads like a litany of illnesses you might expect to find

in a public works camp during the Great Depression.

But for thousands of New Zealanders, like Katherine and Neill Cosgrove and their two small children, chronic sickness, sleepless nights and hospital visits are an everyday consequence of living in cold and damp homes.

"The house gets very cold in winter," says the Morrinsville mum, the faint rasp of asthma clearly audible in her breath.

"It's very old, 1930s, concrete, no insulation. It's three bedrooms but we don't live down one end of the house. We're constantly attacking the mould on the walls and windows. We have to have the fire going 24/7 in the winter and we get a lot of colds."

Two-year-old daughter Brooke suffers from "continuous" ear and throat infections. Son Mitchell, 5 months, has bronchiolitis and has been in and out of hospital for the past three months.

"We wanted to buy a house," says Katherine, her voice loaded with resignation. "This was the cheapest option for us - but probably not the healthiest.

"If we had known about the lack of insulation in the house and the effect it can have on the kids, we probably would have looked around longer and saved a bit more money to buy a better home."

If you think this sounds unusually grim, think again.

A major survey published today indicates this level of ill health is routinely experienced by thousands of people around the country.

More than one million homes are thought to be inadequately insulated, and more than a quarter of homes could be making their occupants as sick as the Cosgroves.

As many as 50 people a day are believed to be seeking hospital treatment due to respiratory problems caused by poor housing conditions.

And the country's top specialist in housing-related ill health, Professor Philippa Howden-Chapman, says "excessive" numbers of people are dying every winter, because of problems with their homes.

This reaches far beyond the election campaign debate about how much money the major parties would spend on retrofitting insulation to people's homes.

While old homes without insulation are the biggest problem, property surveyors and homeowners' interest groups say new houses are still being fitted with insufficient insulation, and there is no legal requirement to install heating or ensure adequate ventilation.

Our understandable fascination with New Zealand's beautiful views means we build houses with lots of glass - but rarely double-glazed.

The survey of more than 3500 people was commissioned by the New Zealand Business Council for Sustainable Development.

The council's chief executive, Peter Neilson, says the scale of needless suffering and lost opportunity revealed is "immense". "Most people will be staggered to learn of the poorly performing state of the nation's housing stock."

But the total bill to properly insulate the country's homes could top $20 billion. Critically, Neilson says, we need to persuade landlords they can increase the value of their rental properties by building in proper insulation, double-glazing, energy-efficient heating and ventilation.

Reading between the lines? Landlords are too willing to invest money in superficial improvements such as nice paint jobs, rather than in insulation that is hidden away in walls and roof cavities.

Last year, Victoria University professor Robert Vale described the average New Zealand house as "scarily cold, badly insulated, has huge expanses of single-glazed glass and is a nightmare to heat".

Respondents to the Business Council survey appear to share that view. Only 31 per cent said their home was warmer and more comfortable than their workplace. More seriously, 26 per cent said their home had caused a health problem - with half of Pacific Islanders and Maori falling into this category.

A staggering four-fifths of respondents in Opotiki said their homes were causing them illness, followed closely by Otorohanga. Even in the well-heeled Queenstown-Lakes district, three-fifths of people believed their homes were making them sick.

But respondents' accompanying comments paint a sadder and more desperate picture than the statistics.

"Black mould in back bedrooms is causing respiratory problems in younger children," says one.

One speaks of a child sleeping in a room so damp that a dehumidifier extracts six litres of water from the air every day: "She has the flu a lot."

One person simply made this stark observation: "Two relatives died here."

These may sound like tales from the Depression, but Howden-Chapman, of the University of Otago in Wellington, has no doubt about their veracity.

"There is an increasing awareness this is a major problem. We have an excessive winter mortality rate, which we think is related to the housing stock. It's a classic public policy issue - we all pick up the tab when people get ill and have to go to hospital."

Howden-Chapman says Kiwi homes are now notorious among immigrants for being cold and badly insulated. "It's a lifestyle risk factor - Australia has snakes, we have cold and damp homes."

She points to demographic reasons for this previously invisible problem is emerging now. The population is ageing, with many older people more susceptible to the cold and unable to afford to upgrade their homes. Also, with higher electricity prices and busier lives, especially for women, the old ideal of "keeping the home fires burning" has fallen by the wayside.

Homes are erratically heated, with temperatures often plummeting overnight. "When mums were at home most of the time during the day, houses were kept warm. Now people are out of the house more."

So, does she blame anyone for the crisis? "I would point the finger at the fact we are inclined to short-term thinking. It's a no-brainer that it's nicer to be living in a warm house. Those of us who have brought up babies in cold, mouldy houses know that."

Why then, she asks, are some old people still using all their hot water and electricity they can't afford on hot baths in the morning just to recover from a night sleeping in damp, freezing bedrooms?

MEI FOSTER is no academic, but she has first-hand experience of what it's like to live in a sick house. With husband Erueti, she had been raising their four children in a cold, uninsulated weatherboard home in Rotorua.

In winter the family would move their mattresses into the lounge to sleep by the fire. Even so, the children were continually ill with respiratory problems, including bronchitis and asthma.

Eventually Foster had to give up work to care for her two youngest children, who were constantly in and out of hospital. During one of those hospital visits she heard about the government-funded Energywise home insulation scheme.

"When the first lot of insulation went in, within a week the house was warmer," Foster says. "We weren't getting as sick as we were before."

Foster says the difference in her children is remarkable. "Even their education has improved. They're more settled at school, they're not getting left behind any more by having time off. Socially and physically they are just much better."

The Energy Efficiency and Conservation Authority (EECA) has insulated 50,000 homes since 1996.

Funding comes from the Government, local businesses, energy trusts, district health boards and Maori groups. Free insulation retrofitting is often available for low-income families. About 2,500 Auckland homes have been retrofitted in the past year.

But there are thousands more people, like the Cosgroves, who either don't qualify for the schemes or don't know about them, and who endure Third World living conditions.

The reason for the state of our housing stock is mostly historical - before 1978 it was not mandatory for homes to be insulated, so most people didn't bother, preferring to profligately heat their houses using free firewood or cheap electricity, and allowing most of that heat to escape through windows.

"One problem in New Zealand is we have a lot of glass," says Greg O'Sullivan from property surveyors Prendos. "This is not a silly statement... New Zealand is a country of views.

"Through to the late 80s the insulation was incorrect, using things such as gib foil which we now know not to use. Even now the level of Batts put into walls is probably at a level down from what they should have."

Neilson agrees the problem has an historical legacy. "You might say it's bad design. Building materials were relatively cheap. You had cavities in walls and people didn't worry about filling them. Wood and other fuel was also relatively cheap. It's what we have been used to. People didn't understand the health effects."

John Gray, president of the Homeowners and Buyers Association, says there is a growing awareness of the effect poor housing conditions can have. "We're living in potentially toxic environments. It's a serious health risk and an energy risk as well."

Gray says the problem is placing a huge burden on the health system. Stachybotrys, or black mould, is prevalent in many damp homes and has been linked overseas to ill health and infant deaths.

People should look at the insulation levels and energy efficiency of prospective new homes, he says. And there is no requirement to install a means of heating - Gray says the Government should grit its teeth against an inevitable backlash, and make adequate heating and ventilation compulsory.

At the Business Council, Peter Neilson wants to tackle failings and barriers in governance and the building sector. "It's easy to play the blame game. Anybody can do a bit of the solution, but it's going to take central government and local government, the private sector and building sector, and the consumer."

The lack of involvement of landlords is a "major concern" and Neilson believes the council's proposals will bring them on board by showing there is added property value to be achieved through insulation.

ENVIRONMENT MINISTER Nick Smith says work is under way to launch a home performance rating mark, and he offers an assurance EECA insulation programmes will continue - although the new Government has made clear it does not support Labour's pre-election pledge to spend $1 billion on home insulation in the next 15 years.

Smith says: "There is no provision for it from the previous Government."

The new Government plans to spend $15 million a year insulating state houses (Housing NZ manages nearly one-in-20 of the country's rental properties) but private homeowners are on their own.

Housing Minister Phil Heatley says he plans Residential Tenancies Act changes to ensure lodging houses are of a decent standard but won't be introducing a warrant of fitness for rental properties, and won't fund the upgrade of private property.

"I'm not going to ask a struggling taxpayer to do up their neighbour's private house," he states.

For Katherine and Neill Cosgrove, a solution can't come quick enough.

Their dream of home ownership has been blighted by illness and they have considered selling their house and starting again, although they know they can't afford it.

The next step will be to see if they are eligible for free insulation. Until then, they are praying for an end to this cold and damp Waikato winter. "Roll on summer," Katherine sighs.