Budget deal for leaky homes

Clayton Cosgrove

The Government is to offer a rescue package to owners of leaky homes in the form of loans that do not have to be repaid until the dwellings are resold.

It is preparing to announce measures before next week's Budget to deal with the estimated 15,000 leaky homes needing repairs costing a total of $1 billion.

But some details of the package were revealed yesterday by National MP Nick Smith, who claimed it was a second Budget leak after the rushed release of the Telecom unbundling announcement last week.

Prime Minister Helen Clark confirmed the Cabinet had made a decision about weathertightness issues and a way forward, but said what Dr Smith had released was incorrect.

Building Issues Minister Clayton Cosgrove said leaky-home owners would have to wait for the details "shortly" before next week's Budget.

Dr Smith, who is National's building and construction spokesman, said leaky-home owners would be able to apply to Housing New Zealand for a 4 per cent loan to fix their homes.

The loan and interest would not have to be repaid until the homes were resold. The loan scheme would be limited to homeowners who qualified under the Weathertight Homes Resolution Service legislation.

The Government was also set to provide a guarantee for private banks to help leaky-home owners who did not qualify under the legislation, Dr Smith said.

Last night, leaky-home owner Bruce Walton welcomed the proposed loans package, saying it would allow people to fix their homes before seeking a settlement that could drag on and lead to further damage. It would also identify the full extent and cost of the problem and make it easier once a claim got to the Weathertight Homes Resolution Service.

Mr Walton said that after he noticed a problem with his three-bedroom townhouse in Ellerslie it took 2 1/2 years to get a $75,000 settlement through the resolution service. The repairs cost $150,000.

"If we had fixed our house first, there would have been less damage and we would have known the cost of repairs and that would have been the extent of our claim. We got 100 per cent of our claim but we didn't claim enough."

West Auckland leaky-home owner Jan Cowan said an interest-bearing loan was not appealing. She has forked out close to $100,000 from an inheritance to have her Laingholm house repaired, but the Waitakere City Council stopped the work because she did not have a building consent.

"If you [took on] the burden of interest - and I'm nine years off retiring - I'd be best advised to take the money, repair my home and sell it immediately to pay the money back."

A loans system comes as no surprise. Interest-free or suspensory loans were flagged as a way of helping homeowners in 2002 when the Herald exposed the extent of the leaky-homes crisis. But the Government opted for a disputes resolution service to provide homeowners with an alternative to expensive and lengthy court action.

At the time the Prime Minister accused the Herald of "banging on" about matters of little substance, such as the leaky-homes crisis.

But the Weathertight Homes Resolution Service was soon overwhelmed by the volume of claims, and the rushed legislation which created the service proved badly flawed.

Former Building Minister Chris Carter signalled last June that a loan system was an option to be explored.

The service has 2810 active claims and has resolved 529 claims.

The Department of Building and Housing has estimated 15,000 homes could suffer damage from leaks and a total repair bill of up to $1 billion.

Helen Clark said there had been consultation with the industry about changes to weathertightness issues and it could be that someone had fed Dr Smith information from this area.

She would not comment on Dr Smith's claim that the package included loans at 4 per cent interest.



HOME AND DRY?

Pros
* Means owners can fix their homes and not face lengthy battles to prove their claim in Weathertight Homes Resolution Service adjudication or mediation while living in buildings that continue to rot.

* Removes pressure to settle in confidential mediation only to find repairs cost much more.

* Identifies and remedies full extent of weathertightness problems.

Cons
* Councils expected to oppose because they are the ones most likely to foot the bill in the end. [Due to problem of developers, builders, architects and subcontractors winding up companies and because councils are the ones with the money behind them]

* Can put pressure on homeowners to sell once their homes are repaired.