Rural communities face uncertain future

Buildings built before 1976 -- many of which are found in our provincial centres -- are likely to be assessed as unsafe with building owners saddled with costs for replacement, repair or demolition.

The earthquake-prone buildings Bill is still being considered, but there are already concerns about its implications. For rural communities it could have detrimental consequences as business owners and farmers grapple with compliance and demolition or strengthening costs, John Donnachie writes.

It's almost four years since the first Canterbury earthquake struck in the rural setting of Darfield, triggering a chain of devastating events which still reverberate today.

The aftermath and impact has been equally distressing, with lives lost and many Cantabrians losing their homes and livelihoods as buildings are declared unsafe or earmarked for demolition.

For rural Canterbury the consequences have been less harsh and some have even prospered as urbanites have relocated, bringing money into dormant local economies while revitalising dwindling school rolls.

Still, that same predicament which caused townies to up sticks and move to the country could be about to surface in rural settlements across the nation.

The Government has identified between 15,000 and 25,000 buildings as being "earthquake prone", the variance in estimated numbers attributed to the lack of records kept by local authorities.

To ensure there is no complacency around earthquake strengthening, the Government plans to adopt a national approach to earthquake-prone buildings.

Under proposed new guidelines all buildings will have to meet the criteria of 34 per cent of the new building standard (NBS) regardless of their location, urban or rural.

City and district councils will have to assess all non-residential buildings and all multi-storey, multi-unit residential buildings within five years of the new legislation coming into force. It's estimated there are 193,000 of these buildings.

The councils will be required to record on a national register the seismic capacity of all these buildings. The Ministry of Buildings, Innovation and Employment (MBIE) would administer the system and data would be available to the public.

Owners of earthquake-prone buildings will then have a further 15 years to either strengthen them to the 34 per cent NBS or demolish them, although some heritage buildings will be able to get extensions of time.

The majority of buildings constructed after 1976 are not considered earthquake prone and are expected to meet compliance.

However, buildings built before 1976 -- many of which found in our rural and provincial towns and cities -- are likely to fail and the Government proposes that building owners will have to meet the subsequent costs of strengthening or demolition.

Moreover, with around 50 per cent of the nation's pre-1976 building stock located in rural and provincial towns, the impact on farming communities is likely to be significant.

Federated Farmers' buildings spokesperson, Anders Crofoot, described proposals as akin to "trying to crack an acorn with a sledgehammer".

He said "While seismic strengthening in high-rise Wellington and Auckland makes sense, that urban profile isn't Masterton or Gore or Oamaru. While there are earthquake risks they're not exactly the same."

Business NZ also warns of dire consequences for rural centres: "Smaller communities with older buildings could struggle to pay for extensive upgrading and might be forced to pull them down.

"The policy could lead to many buildings across the country being demolished needlessly."

Consultancy Martin Jenkins and Associates, whose economics model was endorsed by the Royal Commission and used by the Government, posits modest benefits, leading to one experienced economist, Ian Harrison, concluding "The benefits are low because very few lives will be saved by the Ministry's proposals."

Federated Farmers agrees with this conclusion in regard to projected costs of $1.7 billion, well exceeding benefits of $37 million, with actual costs likely to be substantially more -- some reports suggesting closer to $10 billion once insurance, financing and depreciation in market value are considered.

However, the Government believes it has the right balance between managing the risk posed by buildings in an earthquake and the costs of strengthening or removing them.

The National Farming Review recently interviewed the former Minister for Building and Construction, Maurice Williamson.

Mr Williamson described reaction to the Bill as bordering on "poorly founded hysteria" with proposed strengthening requirements being to a "minimum standard".
He said there were many false perceptions around the proposals.

"Our decisions are based on findings by a Royal Commission. MBIE has contacted all 69 councils. It has been an extensive consultancy with over 530 public submissions."
Those who complained about meeting compliance and costs couldn't possibly substantiate those concerns as no one including the Government had any idea of the costs involved at this stage.

The proposals were not, contrary to media reports, a 'one size fits all'. Depending on location and seismic risk, 34 per cent of NBS varies.

For example, buildings constructed at 34 per cent NBS in Auckland would have less tolerance than a building in Greater Wellington region with the same capacity, due to the region's buildings having been designed for higher seismic occurrences.

Mr Williamson said from his experience of attending meetings throughout the country the vast majority were in favour of the Bill.

"A lot of people have insisted that the building code be actually increased to 67 per cent. [Besides] I know of many building owners who are already strengthening their buildings," he said.

When pressed on whether all farm buildings would be exempt, Mr Williamson said the majority should and there would be no need to apply for it "but dairy sheds which employed four or more people for eight hours a day" might need closer scrutiny. This implies it would affect shearers also.

It's unclear if farm owners will be granted exemption from undertaking a potentially costly and time-consuming application process. The Federation believes exempting farm buildings unconditionally would be cost-saving and provide greater certainty for councils and building owners.

Overall, Federated Farmers agrees in principle with the Government's recommendations around identifying and addressing dangerous buildings in a timely and cost-effective way.

Still, there is disappointment that the consultancy process omits a draft of regulations. Without disclosure of the regulations the Federation believes proposals lack clarity and foster uncertainty.

Mr Williamson however, was adamant that the Government would not usher them in by default.

"Regulations are so important. There will be time for people to consult on them. I can assure you we will not be rushing that through like we would perhaps with other legalisation," he said.

When informed that a number of authorities including Local Government NZ (LGNZ) were concerned around aspects of the Bill, the former minister expressed surprise.
LGNZ is particularly concerned that rural-based councils will be exposed and left to fill the void in carrying out remedial work and demolitions.

President, Lawrence Yule, predicted the imposing of stringent standards and time frames on old buildings "will destroy rural New Zealand".

The shift in demography and population, coupled with lack of investment and growth in provincial centres had not been factored in, and, with proposed legislation, this would place too great a burden on communities already in terminal decline.

Mr Williamson, though, was unfazed: "If LGNZ say it's unacceptable and too expensive then we will have to agree to disagree," he said. He also poured scorn on "quick-fire" conclusions that rural communities could be at risk and decimated by the Bill.

"It would be crazy if people think that as a National MP I would bring hardship on rural families who are constituents. That is simply not going to happen," he said.

There were plans to adopt a tiered system "to ensure a pragmatic and workable approach to undertaking [all] assessments".

Federated Farmers recommends that this includes flexibility around prioritising buildings least likely to perform well in a large earthquake and areas more earthquake-prone and vulnerable to the consequences.

However, Mr Yule is not convinced that the Government will be flexible. He was happy to be advised otherwise but there wasn "nothing in the proposals" advocating a tiered approach towards addressing regional variability.

LGNZ is also calling for more focus on older buildings with parapets and verandas. Rather than concentrating on the whole building, the priority should be on securing parts of the building which pose the greatest risk. Federated Farmers agrees that this is sensible and provides best bang for the buck.

The Property Council New Zealand is also uneasy. While it supports the rudiments of the Bill, it fears the Bill's aims are unachievable.

Chief executive, Connal Townsend, said any building below 30 per cent NBS was unacceptable for tenants and insurers and many would understandably walk away, so there would be motivation for landlords to address this.

The Property Council also agreed with the Government that territorial authorities had too many wide-ranging differences for addressing quake strengthening requirements.
However, while the proposals were necessary, burdening building owners with the costs was unrealistic.

"The economic impact is going to be huge. Tenants and insurers are going to make demands on building and business owners which are going to be difficult to meet," said Mr Townsend.

For landlords with older rural buildings, the situation was looking grim. There were no incentives to improve buildings. Not being able to claim building strengthening expenses against their tax means many would be financially hamstrung or driven away.

"We need a change to the current tax regime. No one can honestly afford the costs. There is not a snowball's chance in hell, unless all repairs can be written off as tax deductible. It [the Bill] won't work in its current form, the tax field is too heavily stacked," he said.

The situation resembled what economists call 'blackhole expenditure'. Building owners who made improvements would struggle to attract tenants after an inevitable rise in rental rates to recoup costs and losses incurred.

Those unable to undertake repairs would face higher insurance premiums, plus a likely loss in rental returns and tenants.

Mr Townsend believed the Government should use revenue derived from GST, taxes and other subsidies to help those affected with costs. Otherwise, costs would ultimately fall on already cash-strapped councils.

A Federated Farmers provincial president has grave fears for his local community.
The president, who requested anonymity, believed 90 per cent of buildings in his nearby town would not meet compliance.

The likelihood was many building owners would leave as it was not economically viable to do remedial work.

He had viewed an engineer's report advising a local building owner that to meet basic compliance it would cost around $150,000.

"You could sell up, but to whom, and what price are they going to offer? Maybe if you are quick or rich enough you could buy the whole street up," he said.

Even demolishing a building could run into tens of thousands dollars and there was no guarantee the building owner would be willing or able to pay.

Structural engineer Warrick Weber told the The National Farming Review that Government proposals to get buildings up to 34 per cent were "fair and reasonable" but there needs to be a pragmatic approach to the process.

He envisioned a preliminary scheme which prioritised the strengthening of vulnerable parts of a building.

Mr Weber, who has been assessing buildings in Christchurch, said the short-term focus should be on securing parapets and verandas and other low-lying frontages.

"Many parapets which fell in Christchurch caused a domino effect, crashing onto verandas fixed on to the front of the building, causing the whole frontage to collapse.
"It is critical to address this and get it right. It's a relatively cost-effective measure and the work can be done quickly," he said.

Meanwhile, the Bill is before the Select Committee and the Prime Minister has chosen Nick Smith as Mr Williamson's replacement.

In its submission, Federated Farmers urges the Government to delay the Bill until draft regulations are disclosed.

The costs around administration and implementation of the proposed system should be reviewed - this includes assistance for councils and compensation for building owners.