Red zone unease

September 7th, 2011 at 7:25 am by David Farrar

The Press reports:

Disenchanted Christchurch red-zone residents are gearing up to fight for their land.

Some, not all, I presume.

Kairaki resident Tim Stephenson said he and a group of neighbours planned to challenge their red-zoning after he unsuccessfully sought geotechnical data through the Official Information Act.

I’m not sure why it was refused, and whether the Ombudsman has ruled. On the face of it I would have thought all data would be made available.

Kaiapoi resident Brent Cairns did not believe accepting the government offer was compulsory.

“All of the documentation clearly shows that there are only two options available to the families in the red zone. Both included, without exception, that you had to move. You have a third option, and that is to stay,” he said.

If those residents feel the taxpayer has not been generous enough by buying their houses at the 2007 valuation rating (most houses are currently selling for below GV), then I’d say let them be martyrs and stay.

Brownlee said on Friday that he did not believe anyone would choose to remain in the red zone beyond April 2013.

Remaining residents would be left with unreliable or non-existent services on land that was uninsurable and worth almost nothing, he said.

It would be a stupid decision to stay on, but I’d let them rather than compulsorily acquire their land. Wait a couple of years and you’ll be able to acquire it for a few dollars.

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27 Responses to “Red zone unease”

  1. ben (2,372 comments) says:

    I think this is going to turn very nasty. I actually have some sympathy for government officials here – the public expects action from them but the problems they have to solve are overwhelmingly difficult and complex, and so big and very public mistakes are going to be made by them. I don’t know what the answers are but it seems to me a more liberal view which allows people to stay if they want would be more sensible. Blanket rules that override by force people’s (apparently very strong) preferences is going to cause major upset.

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  2. nasska (11,166 comments) says:

    Right on DPF. The residents refusing the offer are playing a game of emotional blackmail. If they get away with it all the other settlements will be up for renegotiation & it will be us, the mug taxpayers, paying for the largess.

    I’m more than happy for the government to call their bluff.

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  3. ben (2,372 comments) says:

    nasska, it might be a bluff, but I’d be surprised if they think they can hold out for more, and there is a massive potential downside for them, which is being stuck with a worthless uninsurable home. My take is they either have non-financial reasons for staying (emotional attachment) or they think in 20 years the land will be worth far more, and they might possibly be right. If most go then it will be like living in the country. Insurers may come back to the party one day.

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  4. Razork (375 comments) says:

    Either option will cost me close to $200K David, so maybe 2nd guessing other people’s concerns from the “safety” of Wellington might be better kept to yourself.

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  5. tknorriss (327 comments) says:

    My parents have a house that is in the red zone and is unrepairable.

    They are going to do very well. They saw the writing on the wall and purchased a section several months ago. On their 2007 valuations they will get 196 k for their current section from the government. The new section in the Wigram Skies subdivision cost them $180k. Because their house is approx 50 years old, the capital value of the house is quite low (94k). They have an offer from State insurance for total replacement of $266k. So they will end up $188k better off in increased equity.

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  6. annie (539 comments) says:

    The government is being rather high-handed here – refusal to release the geotechnical reports is indefensible and furthermore gives the impression that the government has something to hide.

    I think it’s a mistake to uncritically accept this newspaper report. The residents’ comments reported in the media may not representative of residents’ views as a whole – we have no way of knowing. The media will always go for the easy report, and that will be from the vocal minority who contact them with comment.

    Although their demands are unreasonable, I can understand their frustration that sections aren’t able to be replaced – anywhere – for the amount of their previous valuation. Leaving section supply to the market means that new section developments 20 mins from Christchurch – to the south, so another 40 minutes through Riccarton to the centre of the city pre-earthquake – are about to come onto the market for $200-250,000, well above the valuation of lost sections in the city.

    The government really hasn’t been too sharp generally with the Christchurch earthquake management – it was blindingly obvious at the time that they should have been buying rural land to be rezoned and developed into sections which could be sold without significant profit margin. And their management of red zone access has been a PR nightmare from start to finish, giving the impression that no-one with any sense of obligation to the public was in charge of the circus.

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  7. Pongo (371 comments) says:

    I can’t understand not releasing the geotechnical report which just gives rise to conspiracy theorists. Consensus here is it’s a very generous offer from our fellow taxpayers and probably as good as it gets. The big issue is we can’t see where too from here because our useless council have been hopeless in releasing enough land, suspending their reserve contributions despite knowingbfor twelve months that more land is needed.
    It’s not as if there is a shortage of viable land around the outskirts of the city. A case of the taxpayer giving people a great solution and the council doing it’s level best to stymie it.

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  8. ArranH (16 comments) says:

    Just wait for what happens next. The value of the land plummits to next to nothing as people realise that the professional geologists were right (as if the liquifaction wasn’t enough proof). These people then realise that nobody wants to buy their property. The Government steps in with an offer well below the current offer (which these people originally turned down) because the lands only value is as a green space. Labour complain that this is just another sign of the evil rightwing trying to get something for nothing and crapping on the working class, and that these people should be once again offered the 2007 valuation, just as long as the person isn’t paying a great deal of tax (and is then a rich prick and deserved nothing).

    It is strange the government isn’t releasing the geotech data, though I don’t believe that 100% as its just what some person has told the paper, somebody with an axe to grind. I can imagine that every media outlet is now putting in requests and I’m sure it will all be released.

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  9. m@tt (625 comments) says:

    “If those residents feel the taxpayer has not been generous enough by buying their houses at the 2007 valuation rating (most houses are currently selling for below GV)”
    That’s not the point at all. The majority of these people have insurance for their homes which they expected would give like for like replacement in the event of loss of their home. The technicalities around land damage vs house damage make no different to the actual real world outcome for those people. Not many people are going to get a like for like replacement using the just the government offer, they are going to have to downsize or take on debt.
    For those that are elderly, and that’s a fair chunk of these people, they simply are not going to be able to get raise finance to cover the shortfall and in many cases, where we are talking 1 and 2 bedroom units for the elderly in these areas, downsizing is not an option.

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  10. Elaycee (4,355 comments) says:

    “I’d say let them be martyrs and stay.”

    Agree. Let them try to live with no infrastructure / no services / no power / no roads / no insurance and (very soon) no equity. In many cases, common sense is going out the window – I saw some people on TV complaining that they didn’t want to move because they would no longer be near their neighbours… and worse, some others complained because they would have to drive another 15 minutes to ‘get to the CBD’… Pfffttt. Just as well there’s a sunset clause in these offers.

    But calls for the geotech data to be released, are surely correct.

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  11. MT_Tinman (3,094 comments) says:

    Razork (368) Says:
    September 7th, 2011 at 8:13 am
    Either option will cost me close to $200K

    Sue Ngai Tahu, they peddled defective hills.

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  12. GPT1 (2,116 comments) says:

    Hosting an EQ in a major urban centre bites. That is the reality.

    I think that it has been forgotten or overlooked that the Government is stepping up to the mark with taxpayers’ money on this one.

    By coincidence I had just said to a colleague where can I join the “please turn my house red and sign the card thanking the taxpayer for not leaving me in a hole” rally.

    I do have a concern, and I blame Cosgrove for this, that the piecemeal announcements mean that those who go red early are in a far better position to shift and purchase elsewhere than those who go red in, potentially, five months time.

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  13. Rich Prick (1,666 comments) says:

    “I’d say let them be martyrs and stay.”

    I can’t help but wonder if this is some variety of Stockholm Syndrome. But regardless, as a taxpayer I am tired of the moaning on the one hand over not getting enough, and in equal measure, gloating over a tidy windfall.

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  14. Auberon (873 comments) says:

    I’ve asked some questions and learned some things about this Tim Stephenson in Kairaki. He’s anxious to query his zoning – despite the fact that all the science that led to the decision has already been released – because he doesn’t have a government offer. Why? HE’S NOT INSURED! He built a million dollar house on sand next to a river and he’s not insured. Self insurance is fine, but if that’s your choice then when something nasty happens you roll with the punches. You don’t whine about it to the government. Or in his case you do, but I suspect he won’t get much traction.

    The second thing which makes Stephenson’s querying the science behind his red zoning nothing more than a red herring is WHEN he was red zoned. Kairaki was in the first group to be zoned red back in June. That’s because the science was, to use a well coined phrase from the time, glaringly obvious. Kairaki is rooted!

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  15. smttc (731 comments) says:

    Love plughead Cosgrove’s ridiculous analogy comparing the refusal to release geotech data with a judge telling someone they cannot have access to evidence to defend themselves against a criminal charge. If that’s the best he can come up with then God help the constituents of Waimakariri. Comes across as saying something in a desperate attempt to be relevant.

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  16. grumpyoldhori (2,359 comments) says:

    tknorriss christ that is bloody greedy of your parents, National or ACT voters are they ?
    Believe we mug taxpayers owe them do they ?

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  17. tknorriss (327 comments) says:

    “tknorriss christ that is bloody greedy of your parents,…”

    Don’t know about greedy. Certainly lucky. :smile:

    I think people are generally much better off if their home has been red zoned, written off, and they have full replacement insurance. If my parents had taken the house and land offer from the government they would have ended up with $290k instead of the over 460k of equity they will end up with the rebuild.

    However, when you think about it, the government is essentially putting people into the same position they would have been without red-zoning. Those with repairable houses would have had their old house repaired by insurance on the existing site. Those with total write-off would have had a completely new house built on the existing site. So there would still have been similar spreads in outcomes depending on whether houses were repairable or not.

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  18. grumpyoldhori (2,359 comments) says:

    tknorriss I see no reason why your parents should get a new house at taxpayer expense, no reason why they should not have what they had before, just move a second hand state house onto their new section.
    Or, do we taxpayers owe them ? if so why ?

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  19. tknorriss (327 comments) says:

    Well, it is the insurance company not the government that is paying for the new house.

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  20. jonno1 (80 comments) says:

    Circumstances will definitely vary. I have friends (young couple with 2 kids) who bought a do-up 5 weeks before the
    September earthquake. The house and land are munted, they can buy new land with the EQC money but their insurance policy only allows them to (1) rebuild on site (not possible – red zone) or (2) build a new house elsewhere (not buy another do-up) to the replacement value of the old one. Their problem of course is that they can only afford a do-up, as a new house will cost far more than the insurance contribution. They accept the reality of this, just are not sure how to proceed as are at their mortgage limit already. And I think their rent subsidy has just expired too. But I do admire their resilience and know they’ll get through it with help of family and friends.

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  21. kiwi in america (2,428 comments) says:

    This was as predictable as the sun rising – there is an entitlement mentality that is almost part of the NDA of a certain portion of the population. There is one figure above all others that these people need to absorb and take note of – that is 10%: the percentage of the GDP of the entire NZ economy that it will take to repair Christchurch. No other nation hit by such a disaster has attempted a complete rebuild like that which is proposed. Even as devastating as Hurricane Katrina was to New Orleans and the Gulf Coast of MS, the total cost of rebuilding is less than 0.5% of US GDP. Kobe was under 1% and the recent tsunami, as devastating as it was, will be lucky to reach 5% of Japan’s GDP.

    NZ’s unique combination of the massive EQC fund and a 97% insurance rate makes this reconstruction possible. Only 30% of homeowners in Californian can get (let alone afford) earthquake insurance and so if a huge quake hit LA, there would be millions who could not rebuild so that puts the government’s package into some perspective.

    Are there problems in the response to this quake? For sure but then much of what the council and government are doing is learning as they go because this attempt is unique in the world. To Annie I say – what more could the government do? The Red Zone is a PR nightmare because the earthquakes are a DISASTER and disasters are really really really hard to deal with. I challenge you to suggest two substantive changes to the approach given the resources and knowledge base that any government of any stripe could or would do differently. Should the land reports be available – absolutely but then what good will that do? It will tell these people what we already know – their land is munted!

    I get that people are grieving the loss of neighbourhoods they’ve known and loved for decades. The engineers had a job to do and that was to state what land was stable enough to rebuild on. If diehards want to reject the offer and stay in fatally damaged homes with inferior to non existent services in an area where there will be no neighbours then my view is that they ought not be forced from their homes unless in obvious danger to themselves and other family members.

    I applaud Auberon for highlighting the motivation of Mr Stephenson. If he’s uninsured I’ve got no sympathy. However the media won’t let the truth get in the way of a sensational story especially if it embarrasses a right leaning government.

    Most people in Chch I know are OK with the deal. Not ecstatic but OK because they know that the tax coffers are limited. Other people around NZ will be less sanguine about these whingers seeing them as licking the gift horse that all NZers are paying for in the mouth.

    CERA will use its powers to speed up the new section consent process

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  22. grumpyoldhori (2,359 comments) says:

    kiwi in america the South Island entitlement mentality, yes you could be right, but I notice Nat, Labour and ACT types all have their hands out for taxpayer money even when it is not needed by some.

    tknorriss so outside the normal $100, 000 from the EQC your parents will be turning down the gift that politicians are making of taxpayer money because they have more than enough insurance cover ?
    Or, do they need the extra for a trip or something ?

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  23. tknorriss (327 comments) says:

    Grumpy, you may not be aware of the government offers. There are two options:

    1. Sale of land and house to the government at 2007 valuations.
    2. Sale of land at 2007 valuation and then deal with your insurance company.

    It suited my parents to choose the latter. By choosing the land option they have actually saved the taxpayer around 100k, compared to what the government would have had to pay for option 1.

    It is not all loss for the taxpayer. The government, as the new land owner, has the option to remove the houses, remediate the land, and sell it back on the open market again for housing at some stage in the future if they want to. The way land increases in value, the tax payer may end up doing OK.

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  24. leftyliberal (642 comments) says:

    266k for a rebuild of a 50’s house? It pays to be a developer in ChCh by the sounds of things. How large is the new house?

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  25. tknorriss (327 comments) says:

    That includes paths, driveways, garage, etc.

    Also, my parents old house had tongue and groove flooring etc. So the price of rebuilding would not have been cheap. If the insurance company rebuilt on their existing section they would do it to exactly the footprint of what was there. However, because it is a new section, those rules don’t apply (e.g. covenant requirements etc) and they just pay up to the maximum figure and the owner basically gets to build what they want. Their new house will have an attached garage rather than two separate ones as they have in their old house. But the overall floor area is about the same.

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  26. Michael (903 comments) says:

    Centralia, Pennsylvania in 1962 had a coal fire start under the town, when it couldn’t be controlled and the town started slumping the US government offered to buy out the residents. Population fell from 2000 to 20. The last residents of Centralia are living on a live coal mine fire right under their feet. Better them than me.

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  27. Paulus (2,601 comments) says:

    Most property in New Zealand is subject to some sort of finance.

    No Insurance – no finance.

    QED

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