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The costs of strengthening, vs the need for buyouts

by Geraldine Murphy
Inner City Wellington (ICW) has launched a second petition on Parliament’s website calling for a review of the earthquake-prone building provisions in the Building Act 2004, in response to the June public meeting.

This petition seeks a review not only to take account the significantly higher strengthening costs compared to those used in the policy process, but also the stretched engineering and construction sectors, and the need to focus scarce resources on public safety priorities. The underpinning legislation has been in place since the Building Act 2004 was introduced, with implementation starting in Wellington in 2008. The core elements of the legislation have been in place for 10 years.

There is sufficient data available to review it to ensure that public and private investment is made where it will have the biggest impact.

The engineering and construction sectors are stretched. Body corporates report not being able to get an engineer to undertake assessments, or if they do find an engineer, it is taking months to produce the required reports. There are challenges in the construction sector, after several high profile collapses, which has led in part to the Construction Accord. Reduced supply leads to increased prices and a market which is challenging for owners, especially those who are not commercial property owners, to engage in.

The recent announcement of closures, or potential closures, following assessments against the ‘voluntary’ guidance for buildings with precast or hollowcore floors, is increasing the pressure on both sectors. Buildings include the Central Library (closed), and the Bowen State Building (under further investigation). Most recently, the Law Society building has been emptied.

These buildings are commercial and public buildings. This is where the resources should be focused given the public safety drivers of the legislation. The identification of priority buildings for emergency and high traffic routes will create further pressure on the sector and prices.

As outlined in my article about our first petition, the costs of strengthening are significantly higher than those used in the Government’s policy process. This brings into question the cost-benefit analysis used to justify the policy. Where strengthening is not economic, particularly for residential owners, central and local government must facilitate a buyout to create redevelopment opportunities for the city.

The role of the seismic rating (%New Building Standard (NBS)) in assessing the seismic strengthen of the building – a core part of the policy – has been undermined by the insurance sector announcing that it ignores the seismic rating of the building when setting the premiums. This is irrespective of whether the building has been strengthened to 45%NBS or over 70%NBS.

Getting cheaper insurance was one of the ‘benefits’ of strengthening in the Government’s policy paper. Now some buildings are without natural disaster insurance as many owners cannot afford it, with one building getting a 234% increase in premiums.

New Zealand has to be sure that the policy is the right one. After 10 years of implementing the core elements of the current policy, there is data available and lessons to be learned. We must review it now and not wait another 10 years. We encourage you to sign the petition.

Geraldine Murphy is Seismic Spokesperson for Inner City Wellington

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