Capital Opts in to Speed Leaky-home Repairs

"We want to give home owners certainty - and we want home owners back in dry and healthy houses as soon as possible," Wellington's Deputy Mayor, Ian McKinnon, said after last night's meeting. Further, we want home owners to have another option to litigation to restoring their homes."

The financial assistance package (FAP) will share - 25 percent on councils and 25 percent on the Government - half the overall cost of the repair of affected homes if the owners of the properties decide to join in.

Cr McKinnon says the "very difficult issue" of how Wellington City Council will fund its projected $70 million liability under the FAP will be considered further by the new Council in the New Year as part of the 2011/12 Annual Plan and the 2012/22 long-term council community plan.

"There will be no easy choices for the next Mayor and council - they will have to make some tough decisions over whether the costs are met through, for example, rates rises, borrowings - cuts in services or even the sale of council assets."

He says the prime focus of the Government's FAP proposal to councils, which this Council supports, is to maximise the number of leaky homes getting fixed speedily and at an affordable price.

"The FAP scheme aims to achieve this through a combination of assured contributions from local and central government, and by using the money that homeowners would otherwise spend on legal and expert costs on repairs to their homes.

"It is also a package that recognises that a number of parties - central and local government included - have to step up to help sort out what would many would call a disastrous chapter in our recent history."
The Council met in May and agreed unanimously to support and assist in the development of the proposed FAP. The Council delegated Chief Executive Garry Poole to work with government officials and the local government sector to agree the details of the FAP.

Cr McKinnon says the scheme, as approved last night, is substantially the same as that advised to the Council in May.

Since May, work on the FAP scheme has centred on clarifying eligibility criteria, scheme administration and liability minimisation.

Cr McKinnon says the FAP proposal strikes a better balance between financial exposure and financial certainty, and is likely to achieve better social outcomes by getting more leaky homes fixed and fixed faster.
"Everyone - home owners, the Government and councils - will be better served by accepting the proposal than continuing with the existing litigation-only route. It gives home owners a choice and a chance to get their homes fixed quickly."

The Minister of Building and Housing, Hon Maurice Williamson, wrote to councils earlier this month and asked for an opt-in or opt-out decision before the local authority elections on 9 October to facilitate timely implementation of the FAP and to provide certainty to homeowners.

Councils have an increasing exposure to weathertightness claims due to insurance no longer being available for claims lodged after 31 August 2009, the likely increasing proportion of council contributions and the increasing cost of repairs and level of damage to the properties, due to the time lag of water ingress.

Cr McKinnon adds that, based on joint and several liability, councils are also often the "last man standing".
Some adjudication decisions have recently seen councils found joint and severally liable for more than 90% of the amount claimed. These costs continue to rise each year with a significant number of affected dwellings still yet to make a claim.

Indicative but best estimates of the expected cost to Wellington City Council of weathertightness claims over the duration of the FAP are about $88 million - $70 million from new claims plus $18 million the Council has already provided for existing claims.

This is based on 8400 dwellings identified from the 'high risk' construction period in the 1990s and the early part of the last decade - resulting in a projected litigation or FAP claims for 1260 dwellings.
As a comparison, if only litigation was available (if the Council did not opt in to the FAP) officers have estimated the cost to the Council for the same number of dwellings would be at least $113 million.