This report presents and summarises findings from an evaluation of the Financial Assistance Package (FAP) for leaky homes. It has been written by the Infrastructure and Resource Markets Research, Evaluation and Analysis team within the Strategy and Governance group of the Ministry of Business, Innovation and Employment (MBIE).
The purpose of the evaluation is to answer three high level evaluation questions:
- Is the FAP scheme enabling more leaky homes to get repaired?
- Is the FAP scheme helping the sector move forward from a history of dispute and litigation?
- What was the cost to the Crown of administering FAP compared with the cost of the remediation work that has been completed?
A mixed-methods approach was used for the evaluation. This included document analysis, interviews and the analysis of administrative data. In total 27 people were interviewed for this study. These included homeowners, claimant representatives, claims advisors and technical team members from within MBIE. Also interviewed were key informants from across three councils, the Weathertightness Tribunal and mediation services. Given the complexity and sensitivity of the weathertightness issue, an iterative synthesis process was employed whereby the evaluation team referred back to senior MBIE personnel, where relevant, to clarify findings or to check assumptions.
One of the key concerns of the evaluation team was to ensure a balanced approach was taken, which did not privilege any one view point. Also of concern was that FAP was evaluated within the broader context of the leaky homes issue and against its specific purpose. This has been achieved through the inclusion of sections related to the background to the leaky homes crisis, a summary of the relevant legislation and a description of the overall influence of the Weathertightness Homes Resolution Services (WHRS) on the residential building stock.
In 2009, a key report into the leaky homes crisis suggested that up to 42,000 homes could be at risk of failing due to weathertightness issues. FAP is one option for owners of these leaky homes to seek resolution of the problems they face. Its purpose is to enable more homes to be repaired and to support a move away from dispute and litigation. FAP is a construction process with financial support, not a compensation scheme. It is essentially an assisted repair scheme. As such, it has checks and balances within its processes to ensure homes are repaired to the standard necessary for the home to be code compliant and of no lesser standard than it was prior to leaking. These repairs are also to be undertaken at a reasonable cost.
These checks and balances have resulted in what some perceive to be unnecessary bureaucracy in the FAP process. While there was general agreement, amongst those interviewed, that FAP was a good idea there was markedly less agreement with the way in which FAP has been implemented. This was particularly true for the homeowners and claimant representatives interviewed. The key areas of concern appear to be related to the way in which “betterment” is defined and the difference between quotations obtained by homeowners for repairs and what the WHRS technical team and Councils consider to be justifiable or reasonable costs, under the WHRS Act. Homeowners and claimant representatives also talked of the difficulties they had in dealing with the large amounts of paper work required throughout the FAP process.
The data reported here suggest that FAP has been successful in getting more houses repaired but that the overall number of people taking up FAP is limited. For those people who can afford their contribution to the overall repair costs and cannot, or do not want to, enter dispute or litigation, FAP appears to be a welcome alternative. In some cases it makes the difference between being able to afford undertaking the repairs and not. It also appears to be moving a few people away from dispute, particularly those who are already within the WHRS options.
However, the overall number of claims within FAP is low. If one accepts the 42,000 dwellings estimate, those within FAP as of February 2013 (n= 656) account for only 1.6% of these. Further, FAP accounts for only 6.4% of all WHRS claims (10, 303 dwellings as at February 2013) with a number still in dispute resolution through the Tribunal and/or mediation, or inactive.
Reasons suggested by participants for the relatively low uptake of FAP include both the extent to which some law firms have promoted litigation and dispute as better alternatives for those with leaky homes and some negative publicity about FAP. It was suggested by one participant that FAP was implemented too late and that insufficient attention was given to ensuring those within the building industry supported it. Others have also suggested that the contributions from the Crown and/or Council are insufficient for some to be able to afford any remediation. It also appears that FAP was implemented before the processes had been tested and as such the WHRS staff have been on a steep learning curve since its initial implementation. Over time, processes and documentation have been modified to reflect learnings. However, these changes are staged and learning is dependent on sufficient numbers of claims moving through each phase of the FAP process.
Trend data suggest the proportion of claims within FAP could increase. FAP has only been operational since 2011 and as such has had a limited timeframe to impact on the overall leaky home situation compared with other WHRS options. Further, options for litigation or dispute are likely to be increasingly limited as more parties become unable to pay. Increasingly, the Councils are likely to be the ‘last man standing’ in any dispute.
Given the increasing focus on the affordability and quality of the residential building stock in New Zealand, it is important for both the Crown and councils to continue to focus on supporting the repair of leaky homes. There could be value in promoting FAP and reminding homeowners that the 10-year limit is fast approaching for many homes.
There is benefit in better understanding the current situation regarding leaky homes. We do not know how many have been repaired or are simply being left to deteriorate. Nor is it known, for sure, whether the problem really is as widespread as the Price Waterhouse Cooper report, completed in 2009, suggested. There may be value in completing another large scale study as part of any overall consideration of the affordability and quality of New Zealand homes