(27/11/24) The ongoing frustration of trying to meet earthquake building standards was evident at a meeting we hosted on 22 February 2024 at St Peter’s Church on Willis. Here's our report of the meeting.

About the meeting

Around 50 people attended the event, which explored the issues facing apartment homeowners whose buildings have been declared earthquake prone by the Council, and who are supposed to meet deadlines for bringing them up to prescribed standards.

Newtown Apartments – a personal story

Newtown apartment owners Mel Johnston and Craig Sengelow talked through their journey that has spanned more than 10 years - dealing with lawyers, architects, council and body corporates along the way - to try and work out a solution for the ever-increasing remediation costs they face.

More recently their quest has taken them to work with central government authorities such as Kainga Ora, the Ministry for Business, Innovation and Employment, and the Ombudsman, in their quest to work out what costs are so high, and if that is fair on homeowners.

The business case - what are the benefits, and who carries the cost?

Sengelow explained how the original business case government used to supporting the requirement for homeowners to pay for upgrades had a very poor return on investment – an estimated return of 2 cents of benefit for every dollar spent.  Yet spiraling costs mean those costs have increased tenfold. 

A survey of apartment owners found the reality was quite different to what government had initially assumed, coming in now at a whopping $3,000 a square metre. This means the cost:benefit analysis now sits at around 0.2 cents worth of benefit for every dollar spent.Johnston and Sengelow argue that this means the burden of cost is falling unfairly on apartment owners.  They are lobbying for a government review to take place urgently, and are hoping the new government will take notice.

What could be a solution for insuring apartment buildings?

The panel of speakers also included David Middleton, the former head of the Earthquake Commission, and a consultant specialising in insurance.

Middleton explained that the Reserve Bank requires insurers to carry certain reserves in order to operate, and New Zealand insurers who have made large payouts as a result of recent earthquakes and other natural disasters now need to charge higher premiums to rapidly replenish those reserves.

Middleton believes that introducing new insurance providers to the New Zealand market, who are not burdened by the need to rapidly replenish reserves, could lead to cheaper prices. He thinks the government should investigate ways to make insurance in New Zealand more attractive for providers.

Middleton also believes insurance companies need to be encouraged to break away from treating homeowner insurance as a commodity product with no options for the consumer. For example, in cases where insurance costs are high due to one aspect of risk, for example flooding or earthquakes, companies could split up the “perils” so that homeowners could at least access some, such as fire and burglary.  As long as a homeowner has insurance against fire, EQC cover automatically applies.

Middleton criticised the $300k cap on EQC cover.  He had seen evidence that full replacement cover was not much riskier than EQC’s “first loss” cover, for example insuring a home for 40% of its value covered over 90% of likely claims, so EQC may as well cover homes in full.

He urged homeowners to join forces and present insurance companies with a market to serve, if they were willing to offer more options of coverage.

Questions from the floor

Several audience members contributed stories of their own struggles meeting earthquake standards as apartment owners, and argued they are paying ‘twice’ both for high insurance premiums as well as earthquake strengthening costs. Many people commented on the stress and frustration they experienced dealing with the issue, and the need for certainty from government about what standards needed to be met.

• For more information:
  Watch the Livestream recording of the meeting - available on YouTube here