Posts tagged Canterbury
Why is it taking so long to repair the houses in Christchurch?
Many people have asked this question or complained about how long it is taking. So for several weeks, I’ve been exploring what the issues are with fixing housing and why it is taking so long. Here’s what I’ve learnt.
There are three main contributors to the length of time it is taking to fix the housing in Christchurch.
1.The scale of the increases in major building repairs and in the number of new houses being built.
2. The complexity of the insurance issues caused by 16 separate earthquake insurance events.
3. Challenges in ramping up the level of construction resources (labour and materials) to meet the big increase in demand.
1. The scale of the problem
There is a massive increase in the demand for home repairs and new home construction, over a relatively short time period.
Pre-earthquake the usual number of house renovations in Christchurch was 3000 per year. Now there are about 110,000 Christchurch houses requiring major repairs, about 30 times more than the usual demand. The recently released ECan report on land use indicates that “91% of the 190,000 dwellings in Christchurch were damaged by the earthquakes”, so there are about another 60,000 houses requiring smaller repairs.
The usual number of new home consents for all of New Zealand is about 15,000 per year. Now Canterbury alone, is expecting to build 30,000 new homes by 2016.
There are also about 10,000 house demolitions which draw upon a similar pool of labour and construction machinery.
2. Insurance complexities
The Christchurch/Canterbury earthquakes are the 4th largest global insurance event ever. The 16 earthquakes that caused enough damage to be rated as separate insurance events have considerably increased the complexity of resolving insurance claims. While householders are mostly insured with the same company right through all the earthquakes, insurance companies have changed their reinsurance partners over the time period of the earthquakes. Reinsurers audit the insurance claims and expect good quality supporting documentation. In other large global events reinsurers have withdrawn from the market, which has not happened in Christchurch.
About 30% of the claims have been paid out, leaving just over 2/3 of claims still to be settled. While homeowners wait for their claims to be settled they are unwilling to progress home repairs, in case that compromises their claims. Since insurance money is likely to be forthcoming eventually, other sources of potential funding for fixing housing are limited.
There are challenges in ramping up a workforce that is sufficiently skilled to conduct the assessments and evaluations.
3. Construction resource constraints
It is a challenge to increase the construction labour force and the availability of construction machinery and building materials quickly enough to meet the sharp increase in demand. The resource requirements to build and repair houses are also competing with the requirements to support commercial construction, repairs, and demolitions and the workforce needed for insurance evaluations and assessments.
New programmes have been added to train more construction workers, but will take some time to deliver enough skilled NZ labour. Recruiters are turning overseas for the necessary workforce which also avoids an oversupply of construction labour once the level of construction returns to lower levels in Canterbury.