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Affording the cost

quake-buildings

by Lindsay Shelton
When Mayor Lester explained this week that an insurance claim could not be used to pay for strengthening or replacing the Central Library, he was raising an issue that also concerns many inner city residents.

The mayor said that because the library has been closed as …

…a result of how it was built and designed, rather than of damage, insurers would not be liable. “There is no insurance claim on this building. There’s been no structural damage to the building, any damage that occurred after 2016 was superficial and that was all fixed.”

So the council will have to find the cash to strengthen the popular and well-used Athfield building, or – worse – to demolish it and replace it with something new.

The challenge of paying for strengthening is also being faced by inner city residents whose apartment buildings have – like the library – fallen below tougher minimum earthquake resilience codes. Some are finding it unaffordable.

As a consequence, the inner city residents’ association is calling “an important and urgent meeting” next Thursday where the results of a survey are to be presented describing the effect on apartment owners and buildings, and setting out the actual costs of strengthening central city residential buildings.

The residents say the survey results are shocking.

They have been lobbying the Government and the City Council about what they see as unfair treatment of residential apartment owners. And today they said they’ve found a scheme in yesterday’s Budget which could be a starting point of support for owners, specially those unable to pay for the cost of strengthening.

Leviathan of eyeofthefish dealt with the problem last month. He focused mainly on rapidly increasing insurance premiums, but he also touched on the subject of strengthening buildings. He wrote:

We need a system where building owners can afford to sleep safe at night, without going bankrupt in their beds.

A challenge which will no doubt be discussed at the meeting of apartment owners next Thursday evening.

13 comments:

  1. Will, 31. May 2019, 18:44

    In Wellington, apartment yields (rent and capita value) have in many cases performed significantly better than houses. Why should CBD apartment owners be bailed out?

     
  2. steve doole, 31. May 2019, 21:00

    Will is right. Why should property owners be protected from failings? Buying anything has an element of risk that standards will change. Buy a car, and it might be a ‘lemon’ straight off, or after a few years fail pollution tests, and if unfixable become worthless. Property owners don’t pay tax on their capital gains, so why should I pay for their potential capital losses?

     
  3. AJ, 31. May 2019, 22:35

    Will/Steve your comments are fair enough if bought as investment which I suppose many are. But how can it be right for someone to have to abandon their home because they can no longer afford payments, due to no fault of their own. We all have a right to a roof over our heads.

     
  4. Traveller, 1. June 2019, 9:16

    Will/Steve. Your comments show a lack of understanding of the plight of some apartment owners who face strengthening costs which they cannot afford. As AJ says, through no fault of their own.

     
  5. Ian Apperley, 1. June 2019, 9:31

    Apartment prices, according to TradeMe, are heading south. Not much so far, 1.9% down the last year, but when other property types are pumping…This is a massive issue for the city which thinks the answer to population growth is boxes stacked on top of each other in a CBD prone to quakes and susceptible to changes in sea level.

     
  6. KB, 1. June 2019, 11:19

    @Will & Steve: the big issue you may not be seeing is that many residents are content to live in their current buildings as is, when their alternative is losing their home because they can’t afford their share of strengthening/rebuilding. The new regulations are forcing strengthening work to be done as a mandatory requirement. Unlike house owners who might be in a structure that no longer meets modern building code standards, they do not have the option of doing nothing.

    The new funding in the budget for those in the above situation is a good small start, but there needs to be more creativity between central & local government, such as:
    – relaxation of height and/or unit size requirements for apartment rebuilds (let owners have opportunity to sell extra units to compensate for some of the rebuild costs);
    – waiving of council fees for rebuilds and strengthening consents etc;
    – long term low or no interest loans to those in financial hardship;
    – option for council or housing NZ to buy strengthened/rebuilt units from those who are in financial hardship, and let owners reside there at housing NZ style rent level until they choose to move out (at which point the unit can be added to council/housing NZ pool or sold at market rate);
    – finding large developers willing to do strengthening/rebuild work at a discount in return for some great deals from the government and/or council in other unrelated areas (maybe cheap land released in new proposed suburbs, or generous tax rebates on other development projects).

     
  7. Kenny, 1. June 2019, 16:02

    Here’s a scenario; The government passes a law that says all brick houses in NZ built between 1940 and 1990 need to be re-piled to withstand a 6.5 earthquake, re-pointed using a special experimental grout (which hasn’t been developed yet) and have all their insulation redone in new materials which have yet to be tested and approved and released to the market. All windows must have triple glazing and the law requires this to be completed in 3 years. This will be assessed as a ‘steet-collective’ (meaning if your neighbour doesn’t comply you won’t get consent). The process to do this work is unknown and all costs will fall on the owner. You won’t be allowed to live in your house if you don’t comply and the city council can’t advise on the process. Now try and find a trades-person with the skills to do the work if you can afford it and work with your neighbours to come up with a game plan. It’s a bad analogy I know, but perhaps demonstrates the complexity of earth quake strengthening a building. It’s tricky, stressful, expensive, time consuming, stressful, did I mention stressful?…

     
  8. steve doole, 1. June 2019, 19:26

    AJ, KB, Traveller – Confusing owning a residence with having a roof overhead (residing in one) is just muddying the waters. If a residence becomes unaffordable, then renting or bunking with a friend are options I see, although if destitute, Housing NZ will be able to assess for genuine hardship.
    How can it be right for the public to pay for private losses?

     
  9. Local, 1. June 2019, 20:58

    What is anyone trying to achieve by arbitrarily imposing new rules, stress and costs on part of the population?
    The council originally announced 3000 old buildings were EQ “prone” whatever that meant (before the Christchurch EQs,). The owners had to “prove” they were OK by hiring engineers and lawyers to challenge the council. Was that fair? Then the Council discovered some buildings were so “prone” after the Kaikoura EQ that they were demolished. It kept quiet about apartment blocks not EQ “prone” but which had significant internal damage. Now apparently over 100 CBD buildings are affected by the MBIE guidelines of last year.

    All of this is grossly unfair on people just trying to live their lives and their businesses. It is also very unsettling and impacts the Wgtn economy. Where is the Council leadership? This has been a crisis manufactured by changing rules and laws and panic. There is much else that should be done to ensure a safe city.

     
  10. Guy M, 2. June 2019, 9:16

    Some of you are missing the point here – this affects the whole city, not just residents of some apartment blocks. The Wellington City Council has just been consulting on the way the city is going to grow in the future, and there has been a lot of support for growing more in the centre. That means more apartment buildings. But if apartment owners can’t afford to buy there or live there or continue to get insurance cover, then this won’t work. The Unit Titles Act specifically says that Body Corporates MUST insure the building – and yet there is no company out there offering new insurance, and existing insurers have nearly all pulled out of the market.

    Unless Wellington gets this issue sorted with either government or insurers stepping up and facing it, we will get to the stage of having ghost buildings, with derelict abandoned apartment blocks due to lack of insurance / lack of people who can afford to pay exorbitant costs. It is not a question of handouts – it is a fact that currently the system is broken, and we need to make it work again.

     
  11. Heidi P, 3. June 2019, 8:43

    Scrap the new ( flawed) code; no building is safe in a large earthquake.

     
  12. Ms Green, 4. June 2019, 21:54

    Heidi, I would agree with you, but there is not just one code to scrap. There are parts of the Building Act 2004, various and changing policies of the Wellington City Council, various guidelines from MBIE, various standards engineers seem to have set for themselves, and past rules and regulations that caused for example much of Lambton Quay to be demolished in the late 70s and 80s. There are also strengthened buildings such as the Town Hall (1992, and 1943 significantly altered) which are being re-re-strengthened, and so it goes on.

    In whose interest is all of this? Bureaucrats? Engineers? Mayor and Councillors? Others? Is the city safer? Has the Earthquake that’s apparently coming been stopped? No, not even despite the ever changing rules, the arbitrary standards-like 34%NBS of 67%NBS or 100%NBS when no standard really exists….(and we have been witness to that in the impact of the Kaikoura earthquake on now-demolished non-stickered buildings). What makes a building safer if it has a yellow sticker on it, or a red one? Nothing.

    All it has done has been to make some people somewhat wealthy while others struggle, some in significant stress, to pay the fees and salaries of the bureaucrats, the engineers, the developers, the insurance companies, the mayor and councillors, the MPs, and all others of this very imprecise “earthquake industry”.

    How different it would all be if every resident in Wellington had to upgrade their safe and sound homes to an arbitrary level simply because some law or code or guideline said they had to find millions to do so, and if they could not, then be uninsured and be forced into a mortgagee sale of homes with little to no value left or demolition.That is what some apartment and CBD (mostly) owners have faced for years and are still facing.

     
  13. Kenny, 6. June 2019, 11:34

    All of the EQ remediation work is arbitrary, as no-one can predict how an earthquake will effect any city. Let alone one built on multiple fault lines and largely on reclaimed land or hills. Throwing steel at it reeks of ‘Let’s build an unsinkable ship’. Good for some businesses perhaps? But not mine. I’m personally looking at $630,000 to ‘fix’ our apartment. This perhaps represents my and my partner’s life savings and retirement funds outside of KS. It’s destroying us financially and has impacted on our relationship and ability to enjoy life. But no need to worry as we are rich, apartment owners, right?

    Now, what about the cost to fix City Council property? Civic Square appears to be a major problem and potentially a very deep hole for Council (ratepayer and borrowed) money. I understand the sea bridge will have to come down to access the old Capital E building, if work is to be done to strengthen it. If it’s economically viable. No-one has mentioned the Michael Fowler Centre yet and the land it sits on. The Library and WCC building may need to come down. The Town Hall is costing at least $135m+ to strengthen. At least.

    The ‘land’ under these buildings was seriously impacting from the last earthquake and no-one wants to talk about it yet. I believe the WCC is attempting to keep quiet about these realities so as to not effect business confidence and property values. It feels that the last earthquake did more damage to Wellington than just the buildings it broke. Lucky no-one died but that’s not the only consideration when measuring impact on humans. I’m normally a pretty optimistic person but in this scenario I can’t really see a positive way forward personally or for the city.