Loan scheme calls for earthquake-prone apartment owners to repair

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Not a single cent of the government’s $23 million loan scheme has been given to earthquake-prone apartment owners — because no one has applied.

Photo: 123rf

Figures from Kāinga Ora showed that no one had even applied for the loan in 10 months, as applications were open.

This has led to complaints about the “impossibility” of accessing the funds, while one person behind the scheme believes it needs a complete rethink.

The Financial Assistance Scheme for Earthquake-Prone Residential Buildings was first announced in the 2019 budget, and became operational in September 2020.

But it got off to a slow start.

The 2018 estimate found that there was [https://www.mbie.govt.nz/dmsdocument/11083-residential-earthquake-prone-building-financial-assistance-scheme-proactiverelease-pdf

1261 individual apartments in earthquake-prone buildings within areas of high seismic risk] – It is possible that this number has increased since then.

In November, two and a half months after the scheme opened, only 25 expressions of interest (EOIs) were submitted.

Fast forward to today, only 10 more have been submitted since then. None of these expressions of interest have turned into official applications.

Shannon Gatfield, Kāinga Ora Practice Manager and Director of Customer Liaison, said they are “working through informal conditional approval requests with several unit owners.

“The reason Kāinga Ora works through unofficial apps with these unit owners is that they don’t yet have the full information they need to complete an application – including the cost of processing and their share of that cost.”

But with not a single application submitted, the Minister of Construction, Botto Williams, agreed that the initiative was not at the stage he wanted it to be.

“We were hoping there would be some formal requests through the process now.

“At the end of the day, we want to make it useful to people. So if there are things we can do that we’re not currently doing, or if there are some unhelpful parts of the process, we really want to learn about that so we can change that.”

The Minister of Building and Construction, Bhutto Williams, said changes to the plan are likely after the review is complete. Photo: RNZ / Dom Thomas

Submission process “Ispossibility”

Wendy Booth used to live in an earthquake-prone 42-unit apartment building in central Wellington.

It took years and hundreds of thousands of dollars — spent on structural engineering reports, architectural drawings and quantity surveyors — before Body Corporate decided what to do.

“We realized that as the owners of Body Corporate we are not developers,” Booth said. “We’ve taken a good look at ourselves, and just decided the best way forward is to try to sell.”

Owners of earthquake-prone buildings are legally required to repair them.

The financial aid scheme was the government’s way of encouraging owners to strengthen their buildings, rather than selling.

It also sought to do so in a way that would not bring the owners into financial distress, offering a low-interest loan of up to $250,000.

But the eligibility criteria have been a major sticking point, as they only apply to resident owners, and only to those who purchased their unit before July 2017.

The scheme arrived too late to influence the decision of Booth’s Body Corporate as it was sold at the end of last year.

But even if it had been made available on an earlier opportunity, Booth said it would not have made any difference to their decision “because of eligibility requirements.

“I didn’t see that there would be any single owner in our case who would be eligible to apply for the scheme.”

It takes time to get all the relevant information together, Williams said, while also going through the Body Corporate negotiations. The scheme runs until 2027.

But Booth said the level is too high for those who want to advance.

“Even getting to the point of getting what you might need for a financial aid plan, real plans to be able to move forward, is impossible.

“There is a lot of information that no one has.”

Changes may be made after revision

Geraldine Murphy was one of the minds behind this scheme and said it turned out to be unrecognizable and unsustainable.

A spokeswoman for the Inner City Wellington Association for Seismic Issues, Geraldine Murphy, presented the scheme to Grant Robertson in 2017, before he became Treasury Secretary.

“We went to Lender of Last Resort thinking it was a good idea at the time, and that it would help.

“But the investigation and subsequent research we did [shows] This is not the answer. This is just a Band-Aid tool at the top.”

Photo: RNZ/Michael Krupp

She wanted to be useless. Ultimately, it didn’t, and she claims it’s now causing a lot of people to turn away.

For the scheme to be viable, she said, it now needed an overhaul.

“There needs to be a major reconsideration of how fair the cost is to owners.

“It still doesn’t cover a lot of the costs that people will incur: some people have to move out of their apartments, so they will pay rent elsewhere.

“And they need to pay for their own apartment storage. They still have to pay Body Corporate fees and company stock.”

She said the only people who could benefit were those who wanted to get the money, consolidate it, and then sell it.

“They can go in, not assume the element of interest, and hopefully sell the building or their apartment.

“But for other owners who want to stay there for the next 10, 15 or 20 years, the element of interest becomes material.”

The exact purpose of the scheme is to provide a means for residents not to sell.

A review is already underway to see if it fulfills this purpose, by the Ministry of Business, Innovation and Employment.

“Part of the review is to ask the question as to why the formal application has not been made,” Minister Bhutto Williams said.

“We’ll go back to those groups that have expressions of interest in them, try to raise what might be blocking the process for them, and see if there are some other things to put in place.”

Adjustments are likely to be made after the revision, but Williams also wouldn’t rule out giving it up and replacing it.

“It could be all of these things: I hope it’s not because there’s a lot of work out there and we’d like to be able to give people some certainty.

“But there will certainly be some ideas that we can use that will help get to the blueprint I’m sure.”

Murphy wanted to replace the loan plan with a grant, but the minister said that was unlikely.

The results of the review will be released on September 27.

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