Leaky homes crisis

The leaky homes crisis is an ongoing construction and legal crisis in New Zealand, in which many thousands of newly constructed houses and apartment buildings built in the 1990s and early 2000s suffered from severe weathertightness problems. Due to the very wet climate of most parts of the country, this has led to many houses becoming unhealthy to live in, or in extreme cases, beginning to decay at dangerous rates. The repairs and replacement cost that could have been avoided were estimated in 2009 to be approximately $11.3 billion.

The culpability for the crisis, and for its extent, is considered to lie with a number of factors:

• The Building Act 1991, passed by Jim Bolger's Fourth National Government, which came into effect about 1994, reduced controls and standards (such as allowing the use of untreated timber and monolithic claddings) under the assumption that building quality would be mostly assured by market-driven forces.
• Many developers, builders and architects involved knowingly or carelessly constructed buildings with numerous faults and short-cuts. The changes also coincided with architectural design trends towards Mediterranean-style flat roofs (a traditional dry-climate design), low-angle monopitch roofs and buildings without eaves.
• Numerous local authorities are implicated as having failed in their inspection duties, and now share significant financial responsibilities with the builders (which in many cases have closed or otherwise removed themselves from liability) and the owners. Court cases have generally assigned around one third of the financial responsibility to local authorities.

Causes

Many reasons are behind why buildings leaked from the 1990s period. One factor often cited was that in 1998 the New Zealand Standard for Timber Treatment was changed to allow untreated timber for wall framing. As this timber gets wet it starts to rot, also due to increased insulation being used over this time any moisture that came into contact with the timber was slower to evaporate.

Two government funded agencies (including the Building Research Association of New Zealand) also approved the use of cheap monolithic claddings over this time. These claddings are a textured plaster finish over the top of fibre cement or polystyrene material. There were cases where these claddings were not used within their specifications or not installed correctly. Many buildings built in the "Mediterranean" style used these types of cladding. Not only that, they had features such as recessed windows, flat roofs, minimal eaves, multiple stories, complex roofs, solid balustrades, balconies and penetrations of the exterior cladding. These features increased the likelihood of water infiltrating the structure.

Lack of detailed drawings for buildings was a contributing factor. Architects and building designers were allowed to specify weathertightness without drawing how it would be made so. Some builders were unable to make a weathertight structure without these details. This has partially been blamed on the breakdown of the apprenticeship system and unqualified builders. Council staff carrying out building inspections did not have the required building knowledge to ensure weathertightness. Even if they did they didn't know if they should be checking the issue.

Aftermath

Housing affected

The crisis is ongoing insofar as while the building standards have since been substantially tightened, several thousands of such homes throughout the country are still awaiting renovation, with a total cost that has been estimated by a PricewaterhouseCoopers report to the Government as being around NZ$11.5 billion. Other building experts estimate the true cost at $23 billion for 89,000 buildings, and accused government of reducing the figure of affected buildings to 42,000 buildings because they were allegedly "unhappy" with the expert prediction.

Other buildings

The majority of affected buildings are homes or apartments, but the Minister of Education said in 2009 that at least 73 schools were affected, and in 2011 that 157 schools still needed repairs, at an estimated cost of at least $1.5 billion In 2011 the twenty-year old Ronald McDonald House for children with cancer and their families at Wellington Hospital was demolished as leaky and is to be replaced.

Financial liabilities

As of mid 2009, plans for an up to NZ$6 billion bailout package shared between government and local authorities are in doubt because the amount could affect New Zealand's international credit rating. In November 2009, national government decided not to offer a more substantial sharing of costs, and it is now estimated that in most cases, around 64% would have to be borne by the owners, 26% by Councils, and only 10% by national government funds, while also forcing homeowners to sign away their rights to sue for more.

Prime Minister John Key noted that while claimants did not have to accept the settlement, legal costs for bringing suit could eat up any further money awarded to them. There have also been accusations that parts of the legal and inspection professions are profiting substantially from disputes around the cases, and that significant money was diverted into these channels rather than into fixing the buildings. The governments position was assailed by mayors of affected Councils and by pundits, who noted that paying only 10%, and then receiving 12.5% back in goods and services tax, the government was actually making money from the crisis. Another report commissioned by North Shore City Council estimated a potential gain by government of up to $2 billion. Further, National was also criticised that as an opposition party, they had constantly asked for the then Labour-led government to assist homeowners financially.

The government has also imposed a 10 year limit (after construction) on claims, even though some building experts believe many cases will only be found out about during coming years, as building rot becomes advanced enough. They also warned that houses in drier parts of New Zealand were now starting to show problems, which had simply developed at a slower pace – and that despite Building Act reforms in 2004, there were still houses being built that leaked badly due to shoddy workmanship.

In February 2010, New Zealand's Building and Construction Minister Maurice Williamson, National, warned that the size of the issue at at least $11 billion was so gianormous [sic] that even a government with budget surpluses would struggle. He noted that:

"But a Government who's running deficits – and has a forecast track of deficits for many years out – has to just sit there with its head in its hands, saying, 'Well, I just don't how to do this'."

He also warned that it was necessary to come up with a solution so money could be spent on fixing houses, rather than paying lawyers, and that there was a risk of significant rates rises in the major centres like Auckland, Tauranga, Wellington and Christchurch, of a scale that would "make eyes water".

Rates impact

Various Councils and politicians have warned that the leaky homes crisis could impact on the rates bill. Further, in mid 2011, the Valuer-General of the country instructed Council that in the re-evaluation of property values (which are used to set local body rates), auditors had to take into account the loss of value incurred by practices likely to cause leaky home syndrome – even if the home had not, or not yet, experienced any damage from it. This was to take into account that such homes faced widespread stigma, and thus, were harder to sell. While this was expected to reduce not only the valued worth but also the rates bill of the relevant owners (by between 5 and 20%, or even more if the house is already confirmed as leaking), it was noted that other ratepayers would have to make up the difference via higher rates.

Similarities to British Columbia

British Columbia had a very similar issue from 1983 through 1998, Gerry Fanaken, an official of Vancouver Condominium Services remarked that: "It turns out that our world class city is, in fact a world class disaster when it comes to the design and construction of condominium strata corporations. With shame, we must all admit it is a world class disgrace." .

External links

• Weathertight Homes Resolution Service
• Leaky Home Forum – resource website for people affected by the crisis
• Weathertight Homes Resolution Services Act 2006 – the Act covering assessment and claims resolution