‘I would never buy a heritage building again’: Owners struggle with costs
Friday, 12 January 2024
New Zealand’s towns and cities feature heritage character crying out to be preserved, but owners investing in making the buildings safe and functional say they are being squeezed by sky high insurance rates and costly regulation.
Geoff Wylde of Lower Hutt owns a retail and residential development in the heart of Petone — a 1926 heritage building he strengthened to 80% of the new building standard (NBS) in 2019.
Below 30% NBS was considered earthquake prone.
Wylde bought the Jackson St building in 2015 to develop as a residential and retail business opportunity, but new earthquake prone building laws introduced in 2016, council heritage constraints, and steep insurance costs have dramatically changed the proposition.
“I would never buy a heritage building again, in fact, the whole property ownership [model] is not viable at the moment.”
The owners were now paying around $70,000 annually in insurance for their share of the building which housed four commercial spaces and four apartments. This worked out to about $8000 per year for each residential tenancy.
Wylde said insurers were asking four times the cost of insurance for a comparable new build.
“This is because reinsurers have a category for pre-1935 buildings, and even though the building is rated at 80% NBS, they will only insure it on the basis of being a pre-1935 building.
“This is particularly frustrating as we pretty much rebuilt the building from the foundations up, only retaining the façade and party walls, and 60% of the floor area was added as a brand-new build.”
Insurance Council of New Zealand chief executive Tim Grafton said insurers have been saying for several years that the NBS was a life safety measure and not a measure of structural resilience.
“There may be additional structural resilience in a renovation to 80% of NBS, but it does not automatically translate into a lower risk from an insurer’s perspective.”
He said Petone was a high-risk area with several hazards which were factored into insurance.
“Liquefaction is one of those hazards and many of the older commercial buildings have shallow foundations which will very likely suffer foundation damage that will be expensive to repair with the high possibility of a total loss.”
The insurance council said pre-1935 “marked close to the end of the unreinforced masonry construction era”.
Dr Jamie Jacobs of Heritage New Zealand Pouhere Taonga said he could not understand why there would be a special insurance category for pre-1935 buildings.
“Insurance premiums are based on risk, and I don’t understand how an entire class of buildings can be signed off as more risky than others, especially because heritage buildings are built with better materials and better maintained.”
“How is a well cared-for, well constructed building that’s pre-1935 be any more of a risk than a badly maintained building built in 1965?”
Jacobs said he was concerned about increased cost falling on heritage building owners and the impact of insurance and earthquake strengthening on the economic viability of these buildings.
Heritage New Zealand recently met with Wellington City Council staff to discuss was could be done to meet the challenges facing owners and councils.
Wylde said Hutt City Council was proposing adding more than 100 buildings to its heritage list in its draft district plan, leading to more owners facing restrictions.
“I find it extraordinary that they can add buildings to their heritage lists, expect the public benefit to be maintained by private individuals, with no assessment or understanding of the cost side of their decisions.”
He estimated it cost their development an extra $30,000 for consents because it was a heritage building.