Green light to repair quake-damaged state homes

11:12 am on 13 April 2013

Housing New Zealand says it has successfully settled the largest insurance claim in New Zealand history, but it is over $100 million less than the Government asked for.

Housing Minister Nick Smith announced the settlement to fund the repair of state homes damaged in earthquakes in Canterbury in 2010 and 2011 on Friday afternoon.

Housing New Zealand reached the $320 million settlement to repair 5559 state houses with insurer Vero. The original claim was for $460 million, which included a $30 million excess.

The minister said the Government's negotiations leading to the agreement were complicated and involved Vero, other New Zealand co-insurers, British-based Lloyds of London and insurance broker Aon.

All but about 570 of the state housing stock in Christchurch was damaged in the quakes. Dr Smith said Housing New Zealand could now demolish, repair or redevelop its housing without having to check off each individual property with the insurer.

"At the moment, each individual one of those 5000 houses has to be assessed, has to be cleared by the insurer, before any work can be done for the repairs. This comprehensive settlement enables Housing New Zealand simply to receive the cash and get on with the job."

Dr Smith said he wants the five-year job completed in three years, so that escalating building costs can still be covered by the final settlement figure, and while the settlement is less than the original claim, it will ensure the job is done quickly.

"As a consequence of the settlement very importantly, we're going to be able to pull forward the pace of the repair job.

"For instance, in that original estimate there was $50 million of cost escalation expected over five years. Well, if you're going to do the job in three rather than five, and you're going to get all the cash upfront of which you can earn interest on, that changes those figures."

Nick Smith said the new state housing stock would include many more one- and three-bedroom units and a lot less three-bedroom homes, of which there is declining demand for.

Housing New Zealand chief executive Glen Sowry said on Friday he is confident that the work wold be completed within the reduced timeframe and to a high standard.

Mr Sowry said the organisation is negotiating with large-scale contracting companies that have the capacity to get the job done.

Canterbury Communities' Earthquake Recovery Network (CanCERN) says the payout allowing the homes to be repaired will help those shut out of the rental market and forced to sleep in cars or garages.

Spokesperson Leanne Curtis says there has been a shortage of available rentals since the quakes, so landlords have their pick of tenants, leaving the most vulnerable with nowhere to go.

Christchurch city councillor Peter Beck, who represents the Burwood Pegasus ward, says the city faces a housing crisis, and the sooner Housing New Zealand can get moving to reinstate its stock, the better.

He says he understands Housing New Zealand is quite advanced in its plans to rebuild and repair state housing in the city.

The work is expected to be completed by December 2015.