The 'Rottenomics' of the $47 billion leaky homes market failure
Wednesday, 2 October 2019
The total cost to fix all of New Zealand's leaky homes would be $47 billion, probably.
The estimate comes from a new book, Rottenomics written by journalist Peter Dyer, and dwarfs earlier estimates for fixing the legacy of the era in which the country forgot how to build weathertight homes.
Dyer couldn't be sure his estimate, which included the cost of both past and future leaky home fixes, wasn't out by a few billion.
'It's a conservative estimate,' said Dyer. 'But it's 20 per cent of GDP. It's just staggering.'
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He reckoned his estimate was on the low side because it was based on a price of just under $200,000 to fix each leaker.
'If you talk to any weathertightness remediator, he or she will tell you that's on the low side. It's almost frightening to get more realistic about it,' Dyer said.
The previous estimate of $11.2b-$22.9b to fix all leaky homes was made by PWC in 2009.
Dyer put the blame for the debacle on both Labour and National, both of which governed New Zealand by turns through the 1987 to late 2000s during which a neo-liberal agenda of de-regulation saw untested building products and techniques flood the market.
It also caused a massive de-skilling of builders resulting from the closure of government-run technical training bodies.
That collective political responsibility could be behind the failure to properly account for the leaky building disaster through a royal commission.
'There's great comfort in denial, especially in government,' Dyer said.
The Wellingtonian met dozens of leaky home owners while researching Rottenomics.
Their tales were harrowing.
'If you don't have anywhere else to go, you are trapped inside a house that is making you sick. These homes have made a lot of people sick. You are not just sick, you are demoralised. It's a downward cycle,' he said.
Many lacked the money to fix their homes, and were trapped in decaying buildings.
The loss of skills and money had a profoundly negative impact on the country, Dyer believed.
'I remember one builder who said to me, 'We are hanging onto first world status by our fingertips'. Then he hesitated, and said, 'No, by our fingernails'.
The collective failure to face up to leaky homes meant the country continued to built homes that would one day leak, he said.
'The number of leaky buildings we are putting up is less, but everyone I talk to says we are still building them.'
Building minister Jenny Salesa has developed a plan to reform the construction industry.
Dyer has read her proposals, and believed it contained gaps.
It did not adequately address rebuilding the skills base, or builders being able to 'ring fence' liabilities for shoddy work using multiple companies and legal entities, he said.
Salesa's plan included establishing legal requirements that building products 'be fit for purpose', and require product manufacturers to provide detailed product information, including on performance and testing, and give the Ministry of Building Innovation and Employment power to investigate products and building methods.
Salesa also wants builders to be required to offer a homeowner a guarantee and insurance product before starting work on a new home or significant alteration, which would cover the remediation of faults for 10 years, with the cover transferring to new owners, if a property is sold.
Builders who could not convince insurers their work was sound would not be able to operate.