thechristchurchfiasco

"The Private Property Insurance Industry Expose"

The Boom is about to Begin: the Perpetual Rebuild

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I read in the paper yet again this week that the Canterbury Rebuild is said to accelerate, the boom is about to begin. Which boom? The Central City building boom or is there going to be a serious effort to get SAM_1263Cantabrians back in their homes? What I experience and what I see is bickering between EQC and insurers together with dubious EQC and private insurer behaviour scaling assessments of serious damage back down to ‘cosmetic damage’.  Everyday the shameful stories abound. It is not possible to rebuild a city without sufficient housing and the reinstatement of citizens to their homes.

It is not my intention here to be negative but rather to imbue a bit of honesty and reality back into this situation. How many times have we heard this phrase- ‘the building boom’ in the past two and a half years? Too many times, particularly in light of the fact that there seems to be little substance behind the hype. For many thousands of Cantabrians the insurance industry is failing to settle their claims. Until these claims are settled, nothing will happen.

As David Lindsay, Deputy Minister of Ontario, Canada stated during a presentation in August 2011 to Christchurch leaders,  “Be open and transparent about choices, budgets, timetables.  The private sector needs certainty – if they know the rules and expectations they can decide how they will participate“. (See http://www.centralcityplan.org.nz/resources/iss/David-Lindsay.20110914.pdf). A concept this Government and CERA seems to have a hard time grasping.

In contrast with this statement, Douglas Ahlers, of the Harvard John F. Kennedy School of Government, also in Christchurch as part of the International Speaker Series, wrote these words,

Recovery is all about capital. Insurance converts fixed physical assets into very liquid assets (cash), Capital is Mobile, Capital likes to be committed (It will not wait)“. (See http://www.centralcityplan.org.nz/resources/iss/Christchurch-Speaker-Series.Ahlers.pdf).

Another slide states that “Much of Disaster recovery is an investment problem, more specifically, it is an investor confidence problem. Economist Thomas Schelling was interviewed soon after Katrina and he immediately saw the problem as a coordination game. Thousands of individuals simultaneously make an investment decision as to rebuild or not“. (See http://www.ccc.govt.nz/thecouncil/newsmedia/mediareleases/2011/201108172.aspx).  Both these quotes make reference to ‘capital flight’….

So capital is the key to accelerating or decelerating a recovery process.  The inference is- that in order to avoid a loss of population one must avoid providing homeowners with liquid assets i.e. payouts. Could it be that Government policy and agendas are ensuring the population does not take flight? Could it be that the Government, CERA and the insurance industry are ensuring the population base of Christchurch is retained and this is being achieved by an intentional and slow settlement process. If this is the case there are major questions around personal freedom and ethical behaviour to be raised.

While it is true, that we are no longer nomadic societies and there is a need to retain a sustainable population base after a natural disaster. Added to this are the concerns that city infrastructure and densities constraints in Auckland and Wellington are already stretched. However the practice of settling claims later rather than earlier leads to a community’s loss of cohesion. While there will always be those who leave the region immediately after a natural disaster,  those who remain must be facilitated and enabled to restore life to a ‘state of normality’ as quickly as possible in order that that their surrounding environment is considered once again desirable. Delaying claims actually has a counterproductive effect.

This aside, there are a host of other issues that will see the Christchurch boom slowed to a mere trickle of activity. These include the resourcing problems. Peter Townsend, chief executive of the Canterbury Employers’ Chamber of Commerce has stated that the big issues in the coming year are likely to be those around shortages of workers and material resources. “We don’t necessarily have the right people, with the right skills in the right places to do the work.” Based on the hundreds of complaints EQC is receiving and other horror stories relating to repairs, one quickly comes to the conclusion that we don’t have the right people. Just the time to insist that all tradespersons are ‘registered’, they never miss a trick.  That really speeded things up!

There is the odd property development and management firm who have yet to begin to build a few 100 houses for rebuild workers in Christchurch before the end of 2013. Bearing in mind that 24,000 workers are required, a few hundred houses here and there is hardly addressing the need. What is the Government doing to address this serious issue? Not to mention issues around sky rocketing material cost-surges and labour rates. Then of course there’s the issue of freeing up more land for building. Where’s the project management plan for all of these issues?

In August 2011 there was very little residential construction going on in Christchurch. We were told that the main obstacle was the slow pace of insurance paperwork, coupled with concerns of further aftershocks. It was predicted that for Christchurch houses on unstable land, it might take till mid-2012 to get going. (See http://www.stuff.co.nz/business/rebuilding-christchurch/5425579/Building-boom-may-hamper-other-areas).

In July 2012 Canterbury builders were saying that they are “treading water” until the region’s residential rebuild begins in earnest. Master Builders Association Canterbury president Clive Barrington said “Twelve months ago, we said in 12 months we’ll be so busy we won’t know where to turn. We’re nowhere near where people predicted.” The small to medium-size building companies were “treading water” or laying off people. Insurer IAG said Hawkins (its project management group) had completed only 23 new residential home rebuilds and 90 commercial rebuilds. Southern Response had completed only 12 residential rebuilds by the end of June 2011. (See http://www.stuff.co.nz/the-press/news/christchurch-earthquake-2011/7296828/Builders-tread-water-waiting-for-the-boom).

Earthquake Recovery Minister Gerry Brownlee said “…I do think the insurers need to shift themselves. I think some of their processes are unacceptably long-winded now. However, “short of the Government nationalising everything”, it could only add pressure through regular talks. One gets the impression the regular talks are few and far between. ‘Nationalizing’ the industry would actually be a much better idea!

In the Central Business District the Government has yet to complete the forced acquisition of some 870 properties but the Government has reached agreements with less than 5 per cent of property owners and has bought just 1 per cent from private owners. (See http://www.stuff.co.nz/the-press/business/the-rebuild/8220927/Rebuild-buy-ups-at-1-per-cent). Some owners are unwilling to sell, particularly at rock bottom prices and who can blame them? These properties are apparently required in order to clear space for the city’s new infrastructure and other anchor projects as indicated in the blueprint, such as the huge convention centre, which we do not need. This is not going to be a quick process. Until the settlements take place,  much of the central city will remain in deadlock. “We’ve been waiting two years paying rates without action. They can’t even tell us when our site can be developed.” (See http://www.stuff.co.nz/the-press/business/the-rebuild/8215686/Workers-sick-of-overcrowded-offices).

The reality is that the overall building activity still below pre-quakes levels. (see http://www.stats.govt.nz/tools_and_services/services/newsletters/economic-news/aug-12-article-canterbury-by-numbers.aspx).

My prediction for 2013 is that it will look very similar to 2012. Until this Government takes the private insurers head-on, nothing will happen to create much-needed repairs and new housing in the city and we’ll still be sitting amongst the rubble in five years time! It is definitely on the cards! So what are you waiting for Mr. Key? Will the change in Cabinet mean that we see more focus on the incomprehensible lack of priority setting? Will the people actually get somewhere to live??  Or is it that you don’t really mind if they leave…..?

~Future Proofing for a sustainable, participatory, democratic society.

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Author: Sarah Miles

Hi, I am the author of "The Christchurch Fiasco: the Insurance Aftershock and its Implications for New Zealand and Beyond" I have a diverse educational background having trained and worked in the following fields: law and dispute resolution (mediation); psychology and gestalt psychotherapy; viticulture and oenology. I believe in the multi-disciplinary approach to problem solving and idea creation. My goal is to make my voice heard for the causes in which I believe so as to improve and contribute to a more sustainable and equitable society. I am an experienced international lawyer in the field of corporate and commercial law in a global market. During the past years my husband and I have run a psychotherapy practise in Christchurch. Since the earthquakes our usual business routine has been disrupted. During part of 2011 and most of 2012 I have dedicated my time to writing. It was my intention to expose the insurance industry and its' actions during Christchurch's post earthquake recovery. I believe in the enormous power of the human spirit and the power within each of us to effect major change. "The only triumph of evil is for good men [and women] to do nothing". Namaste!

One thought on “The Boom is about to Begin: the Perpetual Rebuild

  1. Well written article. I know how difficult it is these days still waiting for a rebuild to occur – even though I keep hearing from our insurer (IAG) that as my home is unliveable, I’m a priority. My home still sits broken on the hillside and NOTHING has occurred since February. I’m still waiting for the costings and of course every time I phone my claims manager, I am told that they still need to get this report or that. Perhaps someone needs to remind them that project management is parallel planning in order to coordinate all tasks so that progress can be made speedily. I received my quantity surveyor report (I’ll call this item A) from IAG in May 2012 even though it was dated January 2012. This week I was told that IAG need my below ground costs (foundation costs) (I’ll call this item B) before they can proceed. IAG of course knew that they needed both items A and B in order to arrive at C (equals total rebuild cost) a way back in January 2012, but it seems obvious that they are now going out of their way to delay things another year. Why not, my house in worth over a million $’s and I’m guessing IAG’s money is invested in OZ at around 5%. That means they have made $100K by delaying me 2 years, so plan on going for another year, perhaps two. Why not? They are getting away with these shameful delay, deny, defend tactics and the Govt stand with their hands in their pockets and allow it to happen.

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