Small councils are having to pick up the tab for the leaky home problem even if it is not a major issue in their area.
Many New Zealand councils, including both small and large local authorities, are part of a public liability insurance scheme.
The mutual fund does not have enough cover for the leaky home problem, which is worst in Wellington and Auckland, so all councils in the scheme are being asked to share the cost of a $4 million shortfall.
Local Government New Zealand president and Hastings mayor Lawrence Yule says the insurance scheme had been working well but no one foresaw the leaky home problem.
He says the Goverment, councils and the building and insurance industries must work together to meet the costs.