The government pulled the rug from under the owners of earthquake-prone apartments – a big speech

Inner City Wellington spokeswoman Geraldine Murphy. Photography: Mark Mitchell

opinion

The government's announcement of a long-awaited review of earthquake-prone building codes left out devastating details.

It emerged that Cabinet ministers have also decided to end a scheme offering deferred repayment loans of up to $250,000, providing a lifeline to owners struggling to pay for upgrading their homes.

This has completely pulled the rug out from under the owners who depend on these loans to repair their buildings at risk of earthquakes after years of pain and sleepless nights.

Construction on one of the Wellington buildings was due to start in June with four apartments relying on a government loan scheme to pay for them. These owners now find themselves in limbo.

They were so close to finally seeing the light at the end of a long, dark tunnel, only for it to close on them.

The government should be given credit for introducing a review of earthquake-prone building codes and extending repair deadlines by four years.

Those who live in multi-ownership apartment buildings have long argued that this legislation is being used as a “blunt tool” and that they are funding public safety outcomes even though the public is not using their buildings.

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However, ending the loan system is unfair.

More than 50 owners have conditional eligibility approvals. This confirms that the applicant meets the individual requirements for obtaining a loan under this program.

Approval is subject to a second stage application process to ensure the building has a clear remediation plan. At the time of the government's announcement, there were no current loan approvals or loan applications pending evaluation.

The government should reconsider its decision and give those given conditional eligibility approvals the option of applying for loan withdrawal or waiting for the outcome of the review if their circumstances change.

The owners have already spent hundreds of thousands of dollars on engineers and getting the planned work approved. They had every right to do so on the basis that they could trust the government's loan scheme.

Buildings in central Wellington, including Wellington St Paul's Cathedral and the Parliament Buildings. Photography: Mark Mitchell

Uncertainty is the worst thing.

As one company president so eloquently put it: “If, after review, we still need to consolidate our business, we will need something like this scheme to help convince owners to go beyond their limits.”

Building and Construction Minister Chris Pink said the review would take into account the role of these schemes in the future.

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When he announced the review, he encouraged building owners to “use this time to continue making improvements to their buildings, particularly because of the positive impacts the remediation has on insurance and their ability to obtain tenants.”

Commenting on the end of the loan plan, Pink said: “Because the review may lead to changes in the liabilities and timeframes faced by owners of earthquake-prone buildings, the government will not be responsible for continuing to fund treatments that may not be needed.” “

The minister cannot have it both ways.

What is the loan system?

The program opened for applications in September 2020 and recognized that obtaining funding to undertake strengthening works was difficult, if not nearly impossible, for some owners.

It is designed to help those most in need so that people are not put in a position where they have to sell their homes or are burdened by the stress of significant financial hardship.

The Cabinet paper on the scheme, released proactively, shows that the previous government was keenly aware of the need to balance taxpayer fairness by reducing wealth transfers to homeowners.

They settled on a loan system as the best way to do this and decided that it should only be available to owner-occupiers to limit this transfer of wealth.

However, a review found that some previous owners were classified as investors after exiting their units due to a change in circumstances such as a job, divorce, or mental stress caused by the earthquake strengthening process.

“They are not traditional investors because they do not own another property, and it is not possible to sell the earthquake-prone residential building unit with outstanding repair obligations,” the review said.

“They receive rental income from their apartments, as the rental market for earthquake-prone units has been less affected than the sales market.”

The review also noted that while many wanted to sell their units, some real estate agents refused to accept the listing or were only able to sell at a price that could result in significant financial hardship.

The previous government expanded the eligibility criteria to allow some people who were no longer living in their earthquake-prone units to benefit from loans, on the condition that they either sell or return their property within two years of the building being removed from the earthquake-prone building register.

The 'A Capital Letter' column by senior journalist Georgina Campbell takes a deeper look at the issues in Wellington, where she is based. Georgina has a special interest in local government, transportation and earthquake issues. She joined the Herald in 2019 after working as a broadcast journalist.

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