Government Must Be Realistic About Strengthening Costs

Property Council urges the Government to seriously consider costs and affordability issues associated with undertaking earthquake strengthening. Too much time is passing, with ever increasing uncertainty about how to remedy detrimental impacts on local communities.

Under proposed seismic strengthening legislation, local authorities will have five years to assess whether buildings in their local area are earthquake-prone. Building owners will then have fifteen years to strengthen any earthquake-prone buildings.

It is paramount that Government steps in to address affordability concerns associated with undertaking this strengthening work. If not, Property Council warns that significant unintended consequences will result, including the economic decline of businesses and the weakening of entire local communities.

Property Council chief executive Connal Townsend says the costs for undertaking strengthening work are substantial and it is likely many building owners will struggle to afford them.

“This will inevitably result in the closure of buildings, the loss of premises, particularly for small businesses, job losses, and the flight of capital from local communities across New Zealand,”

Property Council is also concerned around local authorities’ resources or capacity to undertake the initial assessments. Inaccurate assessments can result in dire consequences for building owners, for example, if it leads to a loss of tenants. A lack of adequate resources will also have flow on adverse impacts on local authorities’ ability to fund and undertake their other important functions – such as the consenting process, which is already under pressure.

The availability of technical and professional resources to assess and undertake strengthening work will impact on costs and timescales for completion – detrimentally where resources are scarce.

“If strengthening costs are uneconomic or unaffordable, and buildings are abandoned as a result, ratings bases will drop as will the viability of towns and cities.” Said Mr Townsend.

Property Council strongly advocates for changes to the current tax regime along with a suite of other appropriate measures to mitigate the impacts of the affordability issues. Currently, there is no level playing field in the tax regime for undertaking strengthening works – the costs are not tax deductible and they do not qualify for depreciation - nor do strengthening works ncessarily enable building owners to increase rents.

There is only so much that property owners can absorb in costs – the concern is that the policy as it stands, will result in a decline in economic activity throughout New Zealand, if fiscal policy tools and other measures to assist with affordability are not speedily deployed.

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