MEDIA RELEASE

From Inner-City Wellington & Body Corporate Chairs’ Group

6th June 2017

More EQ funding assistance is needed

Lender of last resort facility for seismic strengthening required due to market fail

Strengthening of some earthquake prone buildings will stall as some apartment and small business owners are unable to finance their share of the work needed.

Inner-City Wellington (ICW) and the Body Corporate Chairs’ Group (BCCG) are calling for central and local government to establish a lender of last resort scheme for owners unable to access funds through retail channels. Failure of the market to respond to this need means the government and local authorities had to step into the breach, they said.

Both social and public safety issues were at stake, through owners being forced to sell, probably at basement prices, or by public safety being compromised by buildings remaining earthquake-prone, BCCG Wellington branch co-chair, Sue Glyde said.

“If there isn’t a lender of last resort, then there will be significant consequences. Either, strengthening projects will remain stalled until funding is available, or apartment owners will be faced with the possibility of forcing their neighbours to sell, so the work can be completed.”

As well as owners who had been issued with an s124 notice, requiring mandatory strengthening, some owners will face similar issues in buildings between 34%-67% NBS (New Building Standard) where the body corporate is considering discretionary strengthening. This is being driven by community and council pressure for economic and social resilience. These owners should also have access to lender of last resort borrowing and there is a role for local government given the wider public benefits to cities, towns and regions, Ms Glyde said.

ICW deputy chair, Geraldine Murphy said this was a problem hitting Wellington now, as deadlines for strengthening come closer, but it would become more far reaching. “It will increasingly affect owners in other areas of the country, particularly high and medium risk areas.”

In 2013, the Government commissioned a report which looked at financial incentives to encourage the strengthening or demolition of earthquake-prone buildings. As a result, because of public good aspects, a fund was provided for specific heritage buildings of national significance.

“However, in central Wellington, the earthquake-prone buildings meeting those criteria were mainly commercial, rather than residential, so it won’t help many apartment owners in our area,” Ms Murphy said.

A 2013 Cabinet paper, released under the Official Information Act, states that some owner-occupiers of earthquake-prone buildings may ‘hold out’ from agreeing to necessary strengthening because they cannot afford the costs. Ms Murphy said “the residential owners we know of are not holding out. They accept it has to be done for the public safety outcome. They just don’t have the money, can’t get the money and are afraid of losing their homes and any equity they have achieved.”

Eventually Government acknowledged private owners were funding public good outcomes and have made available a small contribution to the strengthening of unreinforced masonry façades and parapets, but this will be nowhere near 50% of the full cost of the work.

“The Government provides assistance to owners and businesses facing financial stress after disasters have already occurred, be it earthquakes, flooding, drought or leaky homes, and this is fantastic. But there is nothing to help owners facing similar financial stress to proactively reduce the impacts of earthquakes on public safety, social and economic resilience,” Ms Murphy said.

Both ICW and BCCG believe the number of owners that will need a lender of last resort facility will be small. ICW had asked Wellington City Council to survey owners in earthquake-prone buildings to ascertain the extent of financial barriers being faced. However, the council refused, citing data quality issues.

“I’m not sure what these are, as the Council has surveyed commercial property owners to ask them about constraints to progress strengthening,” Ms Murphy said.

A copy of the paper “Lender of last resort facility” is on our website (www.innercitywellington.nz)

A copy of the ‘Lender of last resort facility’ paper has been sent to:

• Nick Smith, Minister of Building and Construction

• David Smol, CE of Ministry of Business, Innovation and Employment

• Wellington City Council: Mayor Justin Lester and Kevin Lavery, CEO

• Local Government NZ: Lawrence Yule, Chair of the National Council, and Malcolm Alexander, CEO

• Political parties: Grant Robertson (Labour), Nicola Willis (National Candidate), James Shaw (Wellington Central List for Greens), Peter Dunne (United Futures)

Lender_of_last_resort_facility_Final_June_2017.pdf

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