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Government And Councils At Odds Over Leaky Home Bail Out

Fuseworks Media
Fuseworks Media
John Banks
John Banks

Wellington, Sept 13 NZPA - The Government is concerned a multi-billion dollar leaky home bail out plan could jeopardise the country's credit rating.

The leaky homes crisis followed deregulation of the building industry, where a resulting lack of rules meant problems with design and products left thousands of homeowners with ongoing problems. Issues included flaws in design, product, cladding, workmanship, rules and checks.

How to pay for repairs has been a bone of contention and The Weekend Herald reported that talks between mayors and the Government had hit problems over costs.

North Shore, Auckland, Waitakere, Tauranga, Wellington and Christchurch mayors have been negotiating with Building and Construction Minister Maurice Williamson on the $6 billion deal, which aims to repair all houses covered by council liability in the next 10 years.

The $6b figure is also in question after a leaked report prepared for the Government put the cost over $11b.

Under the mayors' proposal, costs would be split between councils, central government and home owners.

If homeowners could not pay, the Crown would offer interest-free loans which for some elderly homeowners would be repaid by estates.

The Weekend Herald reported the Government was uncomfortable with taking on a $2b to $4b burden -- the figure depending on the uptake of loans.

Ministers were worried the borrowing, plus a $40b recession-related increase in Government debt over the next four years, could force a credit-rating downgrade from international agencies. A downgrade would see interest rate hikes and could stifle the recovery.

The newspaper understood mayors considered an alternative proposal put up by the Government as unaffordable for them.

Auckland City Mayor John Banks said the region faced a $1b liability over 10 years, based on the proposal. The city would have to take out a 30-year-loan to pay it back, which would mean increasing rates by 4.8 percent to get $55 million in the first year.

Wellington Mayor Kerry Prendergast hoped Prime Minister John Key would move on the issue.

"He said, `Leave it with me' ... I understand that they're going to do some more work."

Without a deal, the councils would be liable for most of the cost for cases settled in court or through the Weathertight Homes Resolution.

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