Amazing what a bit of political pressure can do. Christchurch package announced yesterday was clearly put together in the space of a couple of days. Released at last moment before Key went overseas.
Buy-out at government valuation is the obvious solution but will see many out of pocket.
It’s true that house prices in 2007 when valuations were done were pretty similar to 2010 prices. But prices rose and fell between those points. If you bought at the peak, your mortgage might exceed your GV. You’ll certainly make a loss.
What if you made improvements that aren’t captured by GV, or after the 2007 valuation? Government says it will deal with you case by case. But there’s no mechanism. Nothing to insure equitable treatment.
Anyway, the question is whether GV on your Bexley house is enough to have a replacement for your house built out West or in some other city. Answer is almost certainly ‘no’. Everyone I know and nearly everyone on the TV says they’ll take a loss at GV.
That’s why they have option 2. Govt buys land. You get what you can for house from insurers. An admission GVs not enough to get replacement land and house. But only open to some. What if you are not insured for full replacement, only for value, or your house is not damaged enough to trigger the full replacement clauses but the land is wasted? You end up out of pocket under option 1 or 2.
And what if you have no insurance? Sure it’s only a few percent of houses but they are real families. Argument that it’s your own fault for not having insurance doesn’t fly. This government buy-out is not an insurance pay-out. Money is coming from the consolidated fund, not EQC, not insurers. Therefore, why should it be tied to having insurance? Not having insurance is not a lifestyle choice. People who didn’t have insurance when the quake struck probably just lost their incomes not long before.
Brownlee says they’ll work something out for uninsured. He’s known about this problem for 9 months. What has he been doing all this time? The long-term solution: make EQC levies part of rates, not insurance. And make EQC cover such buy-outs. That avoids moral hazard (mythical anyway) and doesn’t screw real people.
Over 10,500 homes are in don’t know’ category. That’s OK. give certainty to who you can know. But it’s proof that this is not the full and final solution that Brownlee said he was working towards and causing the delay. This was thrown together at the last minute. Hell, the website was only built in the last three days. And contracts for red zone won’t be ready for eight weeks.
What about people bordering areas about to become wastelands? What about businesses in the red zones. Key promised to protect everyone’s equity but there’s no mention of these people.
Frankly, this is the package that you and me would come up with if we were given 2 hours and the latest geo-technical reports. None of the fish-hooks have been worked out. What’s Gerry been doing all this time? Working out the hard stuff, I thought.
If this categorisation scheme has been around for months, the government should have been gradually rolling it out for months. If they just came up with it, they’re incompetent.
For now, people are mostly relieved to know their category. But questions already being raised about sufficiency. Wait til we see the size of the offers for red zone homes and hear about those who the govt has forgotten. Some mighty angry people then.