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Unlikely deadline for ‘quake-prone’ buildings

by Geraldine Murphy for ICW
With seismic strengthening deadlines for ‘earthquake prone’ buildings looming for many owners, including apartment owners, has anyone given any thought to the availability of construction resources to complete the work within the timeframes?

Figures published last month said 563 buildings in Wellington need to be remediated (ie, strengthened or demolished), which includes approximately 120 that are primarily or partially residential. Of the total, 372, including at least 27 residential buildings, have a deadline of the end of 2027 – seven years away. Our analysis suggests that this seven year deadline is unlikely to be achieved.

Seven years is 77 months of construction time (11 months per year). Assuming an average construction time of six months per building of on-site building work, five buildings must be completed per month from January 2021.

This means there should be 5 projects completing this month and another 25 either underway or ready to start to ensure work is to schedule and ready to start on site.

Seeking building consents follows months,and in many cases years, of work to complete the preparatory investigation work. Once consented, the process of seeking or confirming contractors and finance arrangements begins, and finalising the details of the project.

If the strengthening is to be completed by the December 2027 deadline, five building consents must be issued per month from 01/06/2020 until 30/05/2027 to ensure the deadline is achieved.

These time frames will be tested given there are already delays with the consenting process in the WCC and with access to structural engineers to support the Council’s consenting process stretched.

The seismic strengthening work of ‘earthquake prone’ buildings must be completed in addition to all the other private sector and publicly funded work in the pipeline over the next seven years – for WCC consent team and inspectors, project managers, engineers, architects, fire system service providers, builders for make-good work, and other services as needed such as electricians and plumbers. All construction companies and builders, associated professions and trades of repute will have at least the first six months of 2021 fully booked.

Not all construction companies will want seismic strengthening work as it is high risk in terms of the ‘unknowns’ once the building starts to be pulled apart to be ‘fixed’ – unless the risks are removed. This can only be achieved by time and materials contracts, or fixed price contracts containing large contingencies.This means that capacity will need to be increased from people outside Wellington or potentially from overseas as there won’t be time to train New Zealanders, putting further demands on the already tight rental supply. It may also increase the risks for owners as construction companies outside of Wellington may not have the remediation seismic strengthening experience needed.

Recent media coverage on the likelihood of residential building costs increasing early next year due to a shortage of skilled staff and difficulties sourcing supplies, puts more pressure on completion timeframes if there are delays, as well as project costs.

In amongst the buildings that have to be completed within the seven years are residential apartment buildings, with around 40 multi-owner apartment buildings. This ownership structure makes for complex decision-making processes for home owners compared to single owner multi-unit residential properties and commercial property managers, which have simpler decision-making processes, as well as established relationships among the construction and associated trades.

Inner-City Wellington (ICW) has previously raised concerns about the impacts of the tight construction market due to the collapse of large companies (eg, EbertConstruction, Arrow, Mainzeal, and Fletcher withdrawing from construction market) and demand from government-funded construction projects having a flow on effect onto the capacity and capability available for seismic strengthening projects. These issues were outlined well in an article early last year.

Some may ask why building owners have left it so long to do the work. For multi-owner residential buildings, the answer is that many apartment owners have been working for years to identify viable solutions (technically and economically), often after using multiple engineers, without any effective technical, advisory or financial support from central or local government. For some owners, changing legislation has put investigations on hold while waiting outcomes of Cabinet decisions or changing standards have required rework. Legislation changes following the Kaikoura Earthquake forced other owners to stop the full strengthening project to progress parapet and façade strengthening, at additional costs and time delays.

Finally, for multi-owner apartment buildings, all owners must be able to commit funds for their full share of the costs before a contract can be signed, let alone work can begin. Based on the above, extending the timeframes must be inevitable.

But, this cannot be the only action taken by the Government, particularly for affected residential owners. It will not address the issue of owners being unable to access funds or the impacts of losing substantial savings or taking on new or increased debt to pay for strengthening. It will not address the risks being imposed on apartment owners of having to manage complex, expensive, technical construction projects, on behalf of other owners, without any effective assistance. It will not address whether the assumptions that underpin the policy are valid with respect to residential properties. It will not address the fact that the MBIE-commissioned 2012 cost-benefit analysis said costs of the policy significantly exceeded the benefits.

ICW will continue to call for the Government to undertake a review of the legislation, to provide compensation and owner-centric transition measures for residential owners already facing these costs and risks.

Geraldine Murphy is Inner City Wellington’s Spokesperson on Seismic Matters.

7 comments:

  1. Ms Green, 18. January 2021, 9:24

    What a terrible saga especially but not only for those in apartments residential buildings. This is a big stain on the Wellington City Council and central government. What exactly are they trying to achieve other than huge stress and cost for the owners who are faced with a really impossible situation?

    Meanwhile, the buildings haven’t been affected by multiple earthquakes and likely won’t be. It’s all guesswork by bureaucrats and some panicking politicians.

     
  2. Claire, 18. January 2021, 10:10

    Building further high rise apartments in the CBD obviously comes with risk. The latest technology is needed to future proof them. Existing apartments that need strengthening also need a bail out from the Govt, not a loan.

     
  3. Dave O, 18. January 2021, 12:05

    Reply to Ms Green.
    As the physics principles involved are complex (look up the concept of seismic wave resonance if interested) just because certain buildings stood up to recent quakes like Kaikoura doesn’t have much bearing on how they will stand up to future seismic events, particularly local events on the region’s many faults. The reason for the changes is almost all driven by either the advancing science in Seismology and then following on into the Insurance industry’s requirements for building standards. Without updating NZ’s building codes and enforcement, the global reinsurance industry wouldn’t sign on to continue to back the mixed Govt/private quake insurance model we have in the this seismically active country. Without the current process, you aren’t likely to have a working affordable model of insurance cover for quake damage for any structure you own in the country.

     
  4. Ms Green, 18. January 2021, 14:50

    Dave O. This is interesting but should the weight of this fall on the few for the rest of us to keep being insured? That is not fair.

     
  5. Geraldine Murphy, 18. January 2021, 18:43

    Reply to Dave O. The issue with the changing standards is there is no certainty for owners who are progressing strengthening. The regulation is supposed to give certainty, but frequent references to ‘in case the regulations change’ undermines the intent and increases uncertainty.

    The issue with the insurance sector is that it ignores any increase in seismic rating achieved by owners who have completed strengthening of earthquake prone buildings. So increased seismic ratings do not result in decreased insurance and further compounds the financial disaster imposed on owners.

    The Insurance Council NZ has said it wants to see new building standards for property resilience (ie, economic resilience) rather than just life safety which the current building standard is based on.

    A new building standard is great for new buildings, but cannot and must not be applied to existing buildings. It would be an economic disaster.

     
  6. Dave O, 20. January 2021, 17:32

    Regulations are supposed to change. That’s the point of using them over having fixed statutory laws. As building science, seismology and construction engineering are dynamic fields in which we are learning about how quake physics and structures behave, the rules governing structures are by necessity dynamic. It’s the same for example in Medicine. NZ building standards have always used the regulatory framework allowing periodic updating, sometimes quite soon after the previous change. As to issues with the insurance industry, however valid your concerns, the existing international insurance market driven system is what we are stuck with. They call the tune. The only way round it would be for the government to create another massive “Cullen” style fund to be the backstop for earthquake quake insurance payments. Such a fund of course would involve another substantial contribution from taxpayers and taxpayers would be the final back stop if the fund ran out of money.

     
  7. Peter S, 1. February 2021, 23:45

    Thanks Geraldine, for highlighting the impending crisis. This will be a saga of the likes of “leaky homes” and “Christchurch EQ repairs”. Unfortunately, from past experience, it would seem that both central and local government don’t care how many people have their lives destroyed, as long as it’s not enough to influence voting trends. Some bureaucrats in an ivory tower somewhere make a cheap judgement on a cheap solution, and compliant politicians rubber stamp it. WCC needs to show some gumption and push back on the government edict.
    I’m thinking that civil disobedience on a mass scale could be the way to go here, if a large enough proportion of building owners band together and have a strategy. There are the Adelaide Hotel and Toomath buildings as upcoming examples of how much gumption the WCC has with regards to enforcing EQ related rulings. How will they manage when there are dozens or hundreds of such cases by 2027, which there undoubtedly will be.
    With regard to your numbers (of buildings on EQ prone list), I see the MBIE search tool lists those still on the list (epbr.building.govt.nz). Is there a list of those that have come off the list (i.e. been fixed)?
    Also, is there a ballpark figure for fixing ALL the EQ prone buildings in Wellington, including commercial buildings (as someone with an interest in Riddiford St – with 25 on the list)?