Outline of the Red Section Owners Group:
There are 89 owners of vacant land in the Red Section Owners group, organised by two spokespeople and supported by a committee of six members.
Table 1: Red Section Owners
|Flat Land||Port Hills||TOTAL|
|Number of Owners||34||55||89|
|Number of Sections||38||59||97|
According to CERA, there are 65 vacant sections in the flat land residential Red Zone (Revised Cabinet Paper: Red Zone Purchase Offers, M/12-13/084, Paragraph 37, page 6, Appendix A). In addition to our group numbers, we are aware of one property developer who owns 11 sections in the flat land residential Red Zone. Despite CERA not releasing numbers of vacant sections in the Port Hills residential Red Zone, we are confident that our group represents the majority of Red Zoned owners of vacant land in Christchurch.
The aim of the Red Section Owners group is to achieve a fair and consistent purchase offer compared to the other 6500+ property owners in the Residential Red Zone who have been offered 100% of their land’s 2007 rateable value (RV).
Executive Summary: The government created the Red Zone in response to the Christchurch earthquakes. It made an offer to purchase property owners’ land at 100% of the 2007 RV. However owners of vacant land were only offered 50% of the 2007 RV. The Red Section Owners group are asking that all the owners within the Red Zone be treated consistently and fairly. An offer of 100% 2007 RV for all land within the Red Zone is the only way to achieve this as initially proposed by CERA (M/12/0314, Appendix B).
As a result of the Canterbury earthquakes, the Government agreed on five recovery objectives. The offer of 50% RV to owners of vacant land is inconsistent with these objectives.
In making the decision to only offer 50% RV the government has failed to meet their own recovery objectives:
1. The government has failed to provide certainty of outcome as soon as possible due to uncertainty around future availability of services, compulsory acquisition and land use;
2. The government has failed to create confidence for people to be able to move forward with their lives because the financial losses, and the stress related to this, are too great to bear;
3. The government has failed to create confidence in this decision making process due to the lack of any transparent process or analysis in the consideration of this offer;
4. The government has failed to use the best available information on which to base decisions;
5. The government has failed to have a simple process in order to provide clarity and support for land-owners, due to poor communication and lack of credible information.
Two reasons were cited by CERA in their ‘offer to purchase’ material as a rationale for the 50% offer: “The Crown is only paying 50 per cent of the land value as an acknowledgement that the land is damaged and in recognition that the land is uninsured.”
We regard this reasoning as spurious and deeply misleading. We would point out that:
• Vacant land is no more damaged than adjacent occupied land. However, these neighbouring home owners have been offered 100% RV for their land.
• Land cannot be insured in New Zealand.
Owners who had just started building their homes (or started after the earthquake but before 22 June 2011) have been offered 100% RV for their land despite there being no EQC component in contract works or builder’s insurance. This is completely inconsistent with owners of vacant land only being offered 50% RV. Some owners of vacant land were within days or weeks of starting building and a number have building consents. One owner had only owned their land for 4 days before the February earthquake.
Families who have already had to deal with the trauma and stress of the earthquakes are now effectively being forced to accept huge financial losses and face the uncertainty, stress and ill health that accompanies this (see Red Section Owners – Personal Stories, Appendix E). In most cases each family owns only one vacant section, which is the primary family asset, and was purchased with the intent to build a family home.
In summary, we consider that a purchase offer of 100% of the 2007 RV to owners of vacant land in the Red Zone can be justified on a policy basis because:
a. It is consistent with the offer to insured residential properties because, like the insured residential properties, the vacant land properties are in most cases the owner’s primary asset, intended to be the family home rather than held for investment or commercial purposes.
b. It reflects a fair approach in view of the significant losses which owners of vacant land will incur, even if an offer of 100% RV is made, as a result of improvements and design costs which cannot be recovered. It protects, as much as possible in the context of the devastating earthquakes, the hard-earned equity of hard-working New Zealanders.
c. It provides certainty and confidence to the owners of vacant land and this would be consistent with the Government’s recovery objective – a timely, focused and expedited recovery in greater Christchurch.
d. In the overall picture of the earthquake recovery, the difference to the Crown of a 100% RV offer for owners of vacant land, versus a 50% RV offer, is a relatively small amount of money to save approximately 100 families from financial ruin.
Background: As a result of the Canterbury earthquakes, approximately six square kilometres of land has been assigned the Red Zone status. This has occurred in areas where there is area-wide damage that implies an area-wide solution is required and that this solution would be uncertain, disruptive, not timely nor cost effective, and the health and wellbeing of the residents is at risk (Revised Cabinet Paper: Red Zone Purchase Offers, paragraph 18, page 3, M/12-13/084, Appendix A).
On 23 June 2011 Cabinet agreed to the zoning and the Crown announced two purchase options to support insured, residential property owners in the Red Zone. Option 2 involved the Crown purchasing the property for the 2007 Rateable Value (RV) of the land only, with the Crown taking over the EQC claim for land damage. The Crown extended this offer to insured Red Zone properties under construction and non–residential properties owned by not-for-profit organisations on the 15 June 2012. The Ministers with Power to Act agreed to further extend this offer to owners of similar properties in the Port Hills Red Zone (Paragraphs 19 and 20, page 4, Revised Cabinet Paper: Red Zone Purchase Offers, M/12-13/084, Appendix A).
However, this offer was not extended to owners of vacant residential land.
The Government’s recovery objective is a timely, focused and expedited recovery in greater Christchurch. To achieve this, the Government agreed on the following objectives (CAB Min (11) 24/15, Appendix F):
1. Certainty of outcome for home-owners as soon as possible;
2. Creating confidence for people to be able to move forward with their lives;
3. Creating confidence in decision making processes (for home-owners, business-owners, insurers and investors);
4. Using the best available information on which to base decisions;
5. Having a simple process in order to provide clarity and support for land-owners, residents and businesses in those areas.
Evaluation of Government Recovery Objectives
In offering 50% of land RV to owners of vacant land the government has failed to meet these objectives:
1. Certainty of outcome for home-owners as soon as possible. There is still little or no certainty for owners of vacant land following the September 2010 earthquake. An offer to purchase the flat vacant land for 50% RV was announced 13 September 2012, some 24 months after the September earthquake. Meanwhile, 31 months after the event, owners of vacant land in the Port Hills have not received any offer whatsoever. In addition to these delays, owners of vacant land have no certainty in relation to the provision of services, the potential of future compulsory acquisition, or future land use plans.
There remains no certainty for owners of vacant land over the future of their land should they not take the ‘offer’.
Minister Brownlee has stated that this is a ‘voluntary’ offer and owners of vacant land do not need to accept it but he has made it clear that in his opinion there is no point not accepting it by saying “I hope not – because at that point, the value put on any compulsory acquisition would be market value on the day. It’s not going to be very high, so I don’t think we’ll get huge numbers of holdouts”, outside the Parliament’s finance and expenditure select committee 7th March 2012, (Radio NZ, ‘Authority confirms Red Zone land has no legal status’ 7 March, 2012, appendix G).
He has also stated the any “remaining residents would be left with unreliable or non-existent services on land that was uninsurable and worth almost nothing” (The Press, ‘Owners fight red-zone buyout’ Marc Greenhill & Michael Wright, 07/09/2011, Appendix H).
Prime Minister John Key stated that “the council will not be supporting the infrastructure there [in the Red Zone], that means water, sewerage, electricity, roading, so it will be quite a bleak environment to be living in” (TV3 News, 2.04.13). This is at odds with his earlier statement that no one would lose equity as a result of the earthquake (Brooklands Community meeting, October 2010).
CERA answered the question “What will happen to my property if I decide that I do not want to accept the Crown’s offer?” by stating:
“If you decide that you do not want to accept the Crown’s offer, you should be aware that:
o The Council will not be installing new services in the residential Red Zone.
o If only a few people remain in a street and/or area, the Council and other utility providers may reach the view that it is no longer feasible or practical to continue to maintain services to the remaining properties.
o Insurers may refuse to issue insurance policies for properties in the residential Red Zones.
o While no decisions have been made on the ultimate future of the land in the residential Red Zones, CERA does have powers under the Canterbury Earthquake Recovery Act 2011 to require you to sell your property to CERA for its market value at that time. If a decision is made in the future to use these powers to acquire your property, the market value could be substantially lower than the amount that you would receive under the Crown’s offer” (CERA Purchase offer supporting information for vacant land in the Residential Red Zone, Nov 2012, Appendix C).
However, this advice was changed days before the offer closed on 31st March 2013, to state that “The Council may not be installing new services in the residential Red Zone” (CERA Purchase offer supporting information for vacant land in the Residential Red Zone, March 2013, Appendix I).
The Christchurch City Council has stated services will be progressively removed, as their Legal services manager outlined to one section owner;
“I do need to advise you that as Red Zone land is vacated the Council will progressively cease to provide water, sewer, solid waste and roading services to properties in the area. Unfortunately you will also find similar impediments to building should you seek insurance or a bank loan in relation to the property” (CCC letter to Section Owner, from Chris Gilbert, Legal services manager, 7 Nov 2011, Appendix J).
To date CERA has made it clear that no decisions on future land use have been made. This was made clear in a meeting with CERA’s General Manager Rebuild Ivan Iafeta who said “The key question about what will happen to the land, I can tell you categorically, that there has been no decision or determination about that” (Meeting at CERA offices, Wednesday 20th March 2013 11am).
This cannot be considered a ‘voluntary’ offer with such uncertainty about the future of the land, the threat of compulsory acquisition and the complete inability of owners of vacant land to make an informed choice.
This is a very different situation from owners of vacant land in the green zone (even with the worst affected TC3 land), as their land has retained its value (The Press, Zoning kills price, Appendix K). Owners of vacant land in the green zone can sell, build, access insurance and finance, and will have services into the future.
2. Creating confidence for people to be able to move forward with their lives. By offering 50% of land RV the government is effectively forcing these families to accept huge financial losses (over $100,000 in most cases) and the uncertainty, stress and ill health caused by this. Families will end up still owing their bank substantial amounts of money for a section they no longer own. One young couple has worked out that they will have to work one day for “free” each week for the next 25 years to pay back the remaining debt to the bank. Another couple will still owe the bank over $100,000 with no security. Families have faced pressure from their banks that want to recover at least some of the mortgage. Elderly members of this group are losing the ability to support themselves in their retirement. Despite the Red Zone having no legal status (Radio NZ, ‘Authority confirms Red Zone land has no legal status’ 7 March, 2012, appendix G), it is clear that the banking and insurance industry are unwilling to operate within the zone, further reducing the confidence of owners of vacant land to decline the offer, and continue with plans to build a home (Rebuild Christchurch, BNZ now providing home loans and insurance for newly built TC3 homes, 28th March 2013, Appendix L).
Owners of vacant land have been incredibly stressed and absolutely torn about what to do leading up to the deadline of the offer. There is significant economic value in a healthy and secure society, the stress and uncertainty involved in losing large amounts of equity will end up costing the health and welfare systems as families are forced to rely on Government support. The Human Rights Commission has expressed its concern about the inequity of this offer and its effect on people’s long term health and wellbeing.
3. Creating confidence in decision making processes. The decision making process appears to have been very limited. From Official Information requests it is clear that the first suggestion provided by CERA to offer 100% of land RV (M/12/0314, Appendix B) was not acceptable to Minister Brownlee but there is no clear reasoning and process that led to the final recommendation to offer 50% of land RV (M/12-13/084, Appendix A).
A draft Cabinet paper (M/12-13/075) was submitted to Minister Brownlee of the 24 August 2012 and a subsequent meeting was held between CERA and Minister Brownlee on 27 August 2012. However the Red Section Owners group have been refused access to this paper. Roger Sutton, CERA Chief Executive, writes “Your request for a copy of the draft Cabinet paper is refused under section 6(2)(f)(iv) of the OIA – to maintain the current constitutional convention protecting the confidentiality of advice tendered by ministers and officials and also under section 9(2)(g)(i) – to maintain the effective conduct of public affairs through the free and frank expressions of opinion. Your request for notes of this meeting is also refused under section 9(2)(g)(i) – to maintain the effective conduct of public affairs through the free and frank expressions of opinion” (CER500– OIA response to missing documents, Appendix M).
The only recorded feedback to the Initial Thinking Cabinet Paper (M/12/0314, Appendix B) was made available after a complaint to the Ombudsman, and appears to be an undated hand written note that reads “Vacant – not unless they can prove they were going to do it very soon” (Official Information request, OMB 025, Appendix N). As stated in the information received from CERA, although an offer was extended to properties under construction and not-for–profit properties on 5 June, 2012, the issue of consideration of an offer to vacant property owners “was not a front-of-mind priority for MCER or CERA due to other priorities. There were no formal discussions with MCER on the remaining insured leasehold and commercial/industrial, vacant and uninsured properties, nor was it set down as an agenda item on MCER’s weekly meeting with officials. On or about 9 August 2012, an A3 document was presented to MCER. As a result of further analysis and discussion the preferred option for remaining insured leasehold and commercial/industrial, vacant and uninsured property owners was 50 percent of rateable land value ” (Official Information request, OMB 025, Appendix N).
In respect of the OIA complaint, CERA has advised the Office of Ombudsman that it undertook a search in excess of 5000 documents and emails and has found no further documentation on the matter. When a further complaint was laid CERA stated:
“The ‘analysis and discussion’ referred to in the s23 statement was intended to encompass the discussion between the people present with either the Minister and/or his advisors when the feedback bulleted in the handwritten note was made; any relay of that discussion on to other staff involved in the policy process; general conversations between colleagues in the course of arriving at the content of the A3 documents and personal reflection of the writer of the final version of the policy paper (and anyone who gave feedback during the course of its finalisation) that resulted in the move from one preferred option towards the other. As noted above, there is nothing I have found that indicates there is further documentation on the matter and, in drafting the s23 statement, I have spoken to the people that are still with CERA who were involved in that process at length about what they were able to recall” (OIA request complaint CERA response to Ombudsman, Appendix O).
This clearly demonstrates the lack of any transparent process or analysis in the consideration of this offer. There is no documented evidence to create confidence in the robustness of the decision making process.
4. Using the best available information on which to base decisions. Minister Brownlee stated on Campbell Live (19 February 2013) that he took advice on a range of valuations when the process started in 2011 and that one of these pieces of advice was from the Valuer General. According to Minister Brownlee, the Valuer General said the unoccupied land was probably worth 10%. This figure has been used widely to justify the 50% offer. Minister Brownlee said when you have advice from the Valuer General that says the value of the land is about 10% then a 50% offer is “generous”. Prime Minister John Key went as far as saying that the recommendation from the Valuer General was “pretty mean and unfair” (More FM, 21 Feb, 13).
However, the Valuer General has stated “The Government Agency responsible for the ‘red zone’ polices and associated research is CERA and the Office of the Valuer-General has had no official involvement within the development and implementation of these policies, neither have we provided valuation workings regarding any ‘red zone’ policies” and “I do not recall giving such an indication about residual land value as foot noted on the cabinet paper. If I did make such a comment it would have been in a very generalist manner…. No formal analysis had been completed.” (LINZ OIA reply 8/02/13, Appendix P).
This comment from the Valuer General was used in the Revised Cabinet paper: Red Zone Purchase Offers, “Around the time of the initial zoning decisions in June 2011, the Valuer General indicated that the land may be worth only 10% of its pre earthquake value (CAB Min 11 24/15 refers)” (Revised Cabinet Paper: Red Zone Purchase Offers, paragraph 39, page 6, M/12-13/084, Appendix A). It was later determined that the reference (CAB Min 11 24/15 refers) was incorrect, leading to added confusion (OIA request CER/531 10% Valuation, Appendix Q).
On further investigation it appears the 10% figure was first used in Decisions on Canterbury Earthquake Kaiapoi Orange Zone (CAB Min (11) 30/18, Appendix R) in a new methodology for determining the cost-effectiveness of land remediation solutions and therefore which land should be zoned red.
Clearly this 10% valuation is not the best information available having been based, at best, on a general comment made during a conversation, with no analysis or process involved. It is disturbing that this acknowledgement was given in the same context as comments about “back of the envelope calculations” (OIA request CER/531 10% Valuation, Appendix Q) and that this unsubstantiated value could have been used to justify the cost effectiveness of the red zoning decision itself.
On the 20 February 2013 Denis O’Rourke asked Minister Brownlee the following question: “What criteria did he use in deciding that owners of vacant sections in the Red Zone of Christchurch should only be compensated at half of the sections’ most recent rateable value?” Minister Brownlee went on to refer to a valuation completed for CERA by Knight Frank Valuation and Consultancy, for the properties CERA had acquired before June 30, 2012 for the CERA Annual accounts, as these properties were considered an asset (CERA Annual report 2012). Minister Brownlee used this report in his response to the question by stating “We had a valuation conducted on 4136 properties on 30 June 2012, and the result was that the market value assessed for those properties was $2600 per property” and he went on to say “I want to be more generous, and give them 50% of the 2007 valuation” (Questions for Oral Answer – Wednesday 20th February 2013, Appendix S).
CERA set the following scope for the basis of the valuation report (Official Information request CER/528, Appendix T) as follows:
• The land is to be valued as one title;
• The land is to be valued as completely cleared of all improvements and infrastructure;
• Situated in the residential living zones, however is unsuitable for residential building in the foreseeable future. In the Knight Frank report (Official Information request CER/528, Appendix T) was considered that the possible highest and best uses of the land to enable a valuation could include:
• Passive or scenic reserve;
• Active reserve, such as sports fields, subject to infrastructural development; • Agriculture including market gardening and grazing;
• Uses in conjunction with adjacent land capable of building.
Valuation experts say that Government policy, rather than the earthquakes, is responsible for making land in Christchurch’s residential Red Zone almost worthless. These Valuers agree the land had substantial value until it was red-zoned.
Subsequent to signing the valuation report written for CERA, Will Blake, Valuation and Consultancy Director at Knight Frank, said those risks [services being cut and compulsory acquisition] cut the value of red-zoned land. “There may be a feeling that it has a good engineer’s report but it still has been identified by Government as being in this horrible Red Zone.” Knight Frank research showed built TC3 properties had largely held their value in sales since the September 2010 quake, he said (The Press, Zoning kills price – valuers, 13.03.13, Appendix K).
Geotechnical engineer Nick Harwood, who testified in a recent High Court insurance case involving a red-zoned Dallington property, said in his evidence the land tested was “actually much better” than many Technical Category 3 (TC3) properties. Natalie Edwards, of Urban Edge Valuations, said that zoning had “basically stripped the value” of land. “That’s the point of difference. If that land was TC3, then it would be readily sellable, but it’s not” (The Press, Zoning kills price-valuers, 13.03.13, Appendix K).
Will Blake went on to say bare land could be more affected [than properties] but “not dramatically. There’d be no cutting of values in half” (The Press, Red-zone uproar over late advice, 1.04.13, Appendix V).
5. Having a simple process in order to provide clarity and support for land-owners, residents and businesses in those areas. Owners of vacant land still have no clarity for all the reasons stated above. Nor have they been offered the support to enable them to move on with their lives. Instead they face continuing stress, uncertainty and financial hardship, in some cases bankruptcy (See Red Section Owners – Personal Stories, Appendix E).
Owners of vacant land have not had a simple process to follow. The only notification of zoning was via the media and CERA website. They did not receive individual information about the offer; they had to ring CERA to request it. To make matters worse the supporting material available on CERA’s website specified a different offer deadline and gave different advice regarding the likelihood of services being provided from a version created at the end of March (CERA Purchase offer supporting information for vacant land in the Residential Red Zone, March 2013, Appendix I). Given owners of vacant land received such poor communication from CERA, there maybe owners that are unaware that the offer deadline has now passed.
Obtaining information to provide clarity and support for owners of vacant land from CERA required Official Information Act requests. These requests were never answered within the required timeframe and often did not provide adequate answers. This led to complaints being made to the Ombudsman before information was revealed. Both Minister Brownlee and CERA Chief Executive, Mr Sutton, declined requests to meet with our group as we attempted to clarify our position.
Evaluation of the 50% RV Crown Offer
Two reasons were cited by CERA in their ‘offer to purchase’ material as a rationale for the 50% offer:
“The Crown is only paying 50 per cent of the land value as an acknowledgement that the land is damaged and in recognition that the land is uninsured.” (Purchase offer supporting information for Vacant Land in the Residential Red Zone, CERA, November 2012, Appendix C).
These and other explanations that have been given to date, to justify CERA’s position of only offering 50% RV to owners of vacant land in the residential Red Zones, are now examined.
1. Damaged land
The damage to vacant land is the same as the damage to its neighbour’s land that has a house on it, or a partially constructed house.
For example, one street in the middle of the Red Zone, the whole street has suffered the same level of damage:
• The rental investment property at Number 1 has been offered 100% RV for their land.
• The house owner at Number 3 has been offered 100% RV for their land.
• The owner of vacant land at Number 5 has been offered 50% RV for their land.
• The partially built house owner at Number 7 has been offered 100% RV for their land (they have contract works or builders insurance but this has no EQC component i.e. they have no insurance for their land just the same as the vacant section at Number 5).
Damage to the land or value of the land cannot be used to justify a different offer from the over 6500 property owners who have been offered 100% of their land RV.
In a letter to Hon Lianne Dalziel Minister Brownlee states “The value of this offer provides assistance for the owners to move on from the Red Zone while acknowledging the land is damaged and not insured. To offer full compensation for uninsured damage would be unfair to other Red Zone property owners who have been paying insurance premiums, and create a moral hazard by potentially eroding the incentives to insure in the future (where insurance is available)” (GERGB12-13/0864, Appendix X). However, in this case there is no ‘moral hazard’ as there is no option in New Zealand to insure vacant land so these owners did not make a choice not to insure as this simply was not an option for them. CERA recognised this in the Initial Thinking Cabinet Paper and reported “The argument for extending a Crown offer to purchase is the strongest for residential properties with dwellings under construction and for vacant land. Property owners would have been expected to obtain residential property insurance for improvements once the land was built on. Lack of insurance providing land cover is largely a temporal issue that would have been expected to end once construction was completed” (Executive Summary, Paragraph 6, M/12/0314, Appendix B). In a letter to a vacant land owner Minister Brownlee acknowledged this fact “Vacant land is not insurable, and therefore has no EQC cover” (CERGB12-13_0663, Letter from Minister Brownlee confirming land cannot be insured, Appendix D).
Therefore, a decision to offer 100% RV for vacant land could not be said to reward any wilful failure to insure. Owners of vacant land were unable to insure their sections against the risk that led to the red zoning of their land. The Earthquake Commission (EQC) and the government, for reasons yet to be ascertained, failed to provide land cover on residential land where no dwelling existed. If EQC levies had been collected via rates rather than private insurance companies this current issue would not exist.
To use insurance status of the property as a determinant of an offer’s value in this case is not reasonable or fair.
A purchase offer of 100% RV was made to properties under construction in the Red Zone where contract works insurance was held before 22 June 2011. This type of insurance has no EQC component and therefore these owners are in the same position as owners of vacant land, with no insurance cover for their land. And yet one group was offered 100% RV for their land, while the other group was only offered 50%. Neither owner was living on the land. This highlights the inconsistent treatment of various groups of property owners in the Red Zone.
“The purchase of home insurance, specifically the contract of fire insurance over a residential building triggers EQC cover. This insurance provides additional cover to residential property owners, including cover for land immediately around the dwelling, main accessways and retaining walls, within certain limits” (Paragraph 10, page 6, M/12/0314, Appendix B).
The 100% RV offer to purchase all the land of an insured property, is in fact, offering to purchase a proportion of uninsured land, as not all the land is actually covered by EQC.
CERA states the cost of acquiring 65 vacant sections on the flat land would be $6.031 million plus transaction costs and legal fees, therefore an offer of 100% of RV would only cost an additional $6.031 million (Paragraph 71, page 10, Revised Cabinet Paper: Red Zone Purchase Offers, M/12-13/084, Appendix A). Compared with the $1.7 billion taxpayer bail out of South Canterbury Finance investors, this is a very small amount of money but individually this is financially devastating for these families.
As of February 23, 2013, 5454 Red Zone property owners had concluded settlements at a cost to the Crown of $1,036.7 million (CERA email 23/2/13, Appendix W). An additional cost of $6.031 million is a very small amount of money to make a fair offer to these families, give them some certainty and allow them to move on with their lives. We estimate from our database that if all owners of vacant land in the Red Zones were offered 100% RV for their land, the additional cost to the Crown, over and above 50% RV, would be no more that $20 million. The fact the government cannot claw back any of the offer costs from insurance companies or their EQC liabilities for sections should not be a consideration in a response to a national disaster where the government created the Red Zone. We do not believe offering 100% RV to owners of vacant land in the residential Red Zones sets any precedent for other disasters. It was not the earthquake but the red zoning policy that has determined who would receive offers.
4. Primary asset
Presumably a key factor in the Government’s decision to make offers to acquire properties in the residential Red Zone based on 100% of RV is to recognise that for many New Zealanders their home is their main financial asset. This appears to reflect a policy intention to achieve appropriate social outcomes by offering assistance to private residential landowners in relation to the loss of their home and primary family asset due to the effects of a natural disaster.
The same rationale can be applied to owners of vacant land who have invested time, energy and significant financial resource into planning their new homes. Most have mortgage commitments just like residential homeowners and have already committed large sums towards building plans or improvements, which cannot be recovered. In some cases the land represents the landowner’s retirement savings, and so a loss in the value recovered from the land will have implications for the retirement support of those people. In other cases young families face a lifetime of debt, with mortgages in excess of $100,000 still to be repaid if they accept the 50% offer.
An offer of 100% RV would allow them to minimise their additional loss in land value and would be consistent with the Crown’s recovery objectives, supporting property owners to move on with their lives with certainty and confidence.
As demonstrated by the attached personal stories from group members, their sections are in most cases their primary asset (see Red Section Owners – Personal Stories, Appendix E). It is important that it is understood that the fact that a property is unimproved does not imply that it is held for commercial or investment purposes.
These are not sections owned by developers or property speculators. Nor are they used or intended for commercial or industrial purposes. CERA has acknowledged this, stating of the 86 vacant sections, all except approximately 10 are owned by individuals (rather than developers) and all are zoned residential (Table 1, M/12/0314, Appendix B).
Minister Brownlee stated on Campbell Live (19 Feb, 2013) that there has to be a “stop point” and it is “unfortunate” for this group, a line has to be drawn. The government drew this line when they decided on the boundary of the Red Zone. The earthquakes didn’t create the Red Zone, the government did as a way of meeting their EQC liabilities and recovery objectives. The government should be treating everyone affected by their decision making consistently and not discriminating against a small group of families.