Towards a Rational Discussion Of Earthquake Strengthening Requirements: a critical analysis of the MBIE proposals

Executive Summary

In December 2012 the Ministry of Business, Innovation and Employment (the Ministry) released a set of proposals relating to the earthquake strengthening of existing buildings. The most important of these proposals is a nationwide timetable that would accelerate the strengthening or demolition of ‘earthquake prone’ buildings.

The Ministry’s proposals are largely based on the premise that between 15,000 and 25,000 buildings in New Zealand are earthquake prone. This is not true. In fact very few buildings are earthquake prone as defined in New Zealand law, or as most people would understand the term.

In assessing the size of the problem the Ministry did not use the legal definition of an earthquake prone building, which defines earthquake prone as ‘likely to collapse in a moderate earthquake’. Instead it used a test devised by a working group of the New Zealand Society of Earthquake Engineers (NZSEE) in 2006. This test applies a much stronger definition of earthquake prone, and captures a much wider set of buildings, than the legal test. Very few of the buildings caught by the NZSEE test are likely to collapse in a moderate earthquake.

In Auckland a moderate earthquake for the purposes of the Act is defined as about a one in fifty year event. This is equivalent to about a 4.5-5 earthquake on the Richter scale - sufficient to break teacups but not to destroy buildings. But in Auckland it is possible that thousands of buildings will be designated as earthquake prone using the NZSEE’s test.

The NZSEE test has been used by territorial authorities to designate earthquake prone buildings. It is likely that most of their designations would not survive a legal challenge.

The NZSEE working group’s test was not supported by an analysis of its costs and benefits. Recently the Ministry commissioned Martin Jenkins and Associates to do a cost benefit analysis of the NZSEE test and other policy options. This analysis showed that the present value of the direct benefits of the Ministry’s preferred strengthening option was $37 million. The benefits are low because very few lives will be saved by the Ministry’s proposals - just 0.25 a year on average.

The present value of the costs of strengthening was $1,717 million. The actual costs of strengthening are likely to be over $4 billion but have been discounted because it is assumed that they will be incurred some time in the future.

The analysis did not capture wider economic and social benefits because the consultants did not think they would be material. However, the Ministry came to an ‘on balance’ view in favor of an accelerated strengthening option, giving the impression that it believed that these economic and social benefits must be substantial.

Our analysis shows that this is not true. We have assessed the wider social and economic benefits as having a present value of just $5 million. The earthquake strengthening requirements are designed to save lives not buildings; they will not materially improve the post earthquake resilience of our cities.

We also found that the Ministry’s preferred option would impose substantial additional economic and social costs on those who will have to strengthen their buildings. Some people could lose their homes and others will see their retirement savings devastated. Communities will also be affected with the loss of low cost buildings that support small businesses and possibly hundreds of heritage buildings could be demolished.

With total benefits of $42 million and costs of around $2.4 billion (present value) the Ministry’s proposals are clearly sub-optimal. Proposals with a cost to benefit ratio of greater than one should normally be rejected. What is needed here, are standards that are more precisely targeted to identify buildings with design flaws or which have deteriorated over time.

It is also clear that the proposal to impose a nationwide set of standards is flawed and has not taken appropriate account of the seismicity of different cities. As a result the cost to benefit ratios in cities with the low seismicity are extremely high. We have estimated the Auckland cost benefit ratio to be 1762 to one and Dunedin’s to be 888 to one. Under the proposals over a billion dollars will be almost entirely wasted strengthening buildings in these cities. The Martin Jenkins study estimated that the Auckland strengthening would save just one life every 4000 years. Our overall conclusion is that the Ministry’s proposals are not based on a coherent analytical framework and are fundamentally flawed. They will result in substantial economic and social damage with very limited safety benefits. Our key recommendations are that:

• The Ministry should publicly correct the false impression it has given that there are a large number of buildings that are likely to collapse in just a moderate earthquake.

• The Ministry should go back to the drawing board and develop earthquakestrengthening standards and policies that are based on sound, transparent and disinterested analysis.

• Territorial authorities should withdraw earthquake prone classifications that are not based on the legal definition of earthquake prone.

• If the Government decides to proceed with the proposals to fulfill a societal need to ‘do something’ after Christchurch then it should fund most of the strengthening work.

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