Leaky homes: A crisis that just won't go away

BY JOHN HARTEVELT

Helen Clark is a wise woman, but she has not always got it right. In November 2002, she infamously complained about the media "banging on" about leaky homes, insisting the subject was a beat-up and that it was not something to which she had given a great deal of attention.

Meanwhile, more faulty houses were being built. Now, finally, the true extent of the crisis has become clear. It's not pretty.

More than 80,000 homes could be affected, the estimated repair bill stands at $11.3 billion and 9000 victims have fallen off the "10-year cliff" for legal redress.

"The damage is much larger than anyone had previously wanted to acknowledge," Building and Construction Minister Maurice Williamson said when he issued the PricewaterhouseCoopers report on the crisis just before Christmas.

It was not the first investigation into New Zealand's leaky homes nightmare. Former State Services Commissioner Don Hunn wrote a report in 2002.

A select committee inquiry followed and a government review separately determined there were significant problems. It is now well understood that untested building materials and designs combined with a loosening of labour market controls to create the crisis.

"It was a National government of the early 1990s that enabled people to build with untreated timber, no wool voids, chicken wire and concrete," Auckland Mayor John Banks says.

"It was always a hiding to nothing as far as weathertightness was concerned."

The problems started in July 1992, when a new Building Act and national Building Code came into force. Under the code, monolithic cladding (without a cavity) could be used. Then, in 1995, more changes allowed the use of untreated timber in certain circumstances.

Thousands of homes were shooting up, often with unconventional designs – notably flat roofs – which would prove faulty.

"In the parts of New Zealand where there has been significant population growth and there has been pressure for homes, we have got a major leaky homes problem," Wellington Mayor Kerry Prendergast says. "It's of crisis proportions."

By the early 2000s, legislation was passed establishing the Weathertight Homes Resolution Service. It has taken on steadily more claims from victims since – nearly one a day, adding up to more than 5900 by the end of last year.

The 2002 legislation promised access to "speedy, flexible, and cost-effective" assessment and resolution for victims. However, only about 3500 have come out the other end of the service.

The costs are large, and mounting. In 2003, the resolution service estimated the cost of a single unit repair at $55,000. In each of the following years it has continued to grow, topping more than $160,000 last year.

The PricewaterhouseCoopers report calculates that, for a full reclad, a leaky home owner faces a $75,000 legal bill, $15,000 design bill, and $10,000 each on experts and consequential costs – a total of $110,000.

In a growing number of cases, it has proven cheaper for victims to knock their leaky homes down and start again, rather than try torepair the damage.

HOME Owners and Buyers Association president John Gray says the costs can and must be brought back under control.

The association is lobbying for a clear set of standards for building repairs, which would cut out the need for the costly oversight of an "expert".

"We're not saying it's going to be affordable, but we're saying it's going to be more affordable for people to remediate their homes if we get a good standard set in stone."

However, recouping the money from those responsible is the next problem, and an overwhelming one.

Mr Williamson has encouraged victims to continue pursuing legal action. But lawyers have already earned millions from clients who have no option but to valiantly pursue the wrong-doers through the courts.

In Auckland, the city council paid one set of lawyers $4.5m in legal fees over the issue. According to the PricewaterhouseCoopers report, legal costs remain "the key driver of costs" for repair.

"Over time it gets worse, because more and more people are dead or departed," Mr Gray says.

Some of the companies responsible for building leaky homes have been liquidated but the people behind them re-form under a new banner. Pinning a claim on to an individual is no guarantee of success either.

"Most of these people have got multiple claims against them, so inevitably the money will just dry up," Mr Gray says.

Everybody (except perhaps the lawyers) wants a less litigious solution to the problem. The plan going before the Cabinet for consideration soon is likely to include taxpayers underwriting bank loans to homeowners needing to borrow more to make good or rebuild their houses.

But many can ill afford to take on any more debt. And in any solution that involves a surge in building, the Government can count on a significant tax windfall. Mr Banks reckons this to be so significant that the cost to the Government would in fact be nothing at all.

The message from victims is that a solution is badly needed – and fast.

Otago University's Philippa Howden-Chapman issued a book on the matter last month that calculates the health cost of the crisis conservatively at $26m. Leaky homes are associated with asthma and serious mental health problems, including suicide, her book says.

"This whole thing for people is like being in Kafka's The Castle and not knowing how the hell you get out of it. This is something that should have been fixed a decade ago."

But Philip O'Sullivan, the director of Prendos, a property remediation designer, urges caution.

A rush to repairs could lead the country back down the same path, he says.

"It's like going to war. You've got to plan it. If you get a whole of people going for it who are not organised and educated, it's mayhem and there will be a lot of money wasted."

LEAKY HOMES AND THE LAW

Key legislative events in the leaky home saga:

July 1992: Building Act 1991 and new Building Code come into force. Under the code, monolithic cladding can be used.

January 1993: All new building work requires a building consent under the 1991 act from this date.

1995: Law revised to allow use of untreated timber in certain circumstances. The use of untreated timber was an alternative solution for code compliance.

February 1998: Plaster cladding on a rigid backing without a cavity becomes an acceptable solution to code requirements for external moisture protection.

August 2002: Hunn Report on weathertightness published.

November 2002: Weathertight Homes Resolution Services Act 2002 comes into force.

December 2003: Law revised to ban use of untreated timber in framing for exterior walls.

March 2005: Building Act 2004 comes into force. Schedule 1 inadvertently omits the 1993 provision requiring durability failures to be repaired under a building consent.

May 2007: Weathertight Homes Resolution Services Act 2006 comes into force. New provisions include future damage and general damages able to be claimed; easier for owners of multi-unit buildings to make claims and Weathertight Homes Tribunal established to adjudicate claims.

March 2008: Building Act 2004 amended to reinstate 1993 provision requiring durability failures to be repaired under a building consent.