Consultant warns against national policy for quake-prone buildings
Wellington risk consultancy Tailrisk Economics is warning against the country’s estimated $10 billion earthquake-strengthening policy, saying it could have “detrimental effects” on the economy and communities.
The consultant’s just released report Earthquake strengthening policy formulation in New Zealand 2003-2013: A study in failure claims there are serious flaws in the way earthquake-prone buildings are designated.
The report’s author, Ian Harrison, says New Zealand’s attempt at an earthquake-strengthening policy will cost more than $10 billion but produce benefits of less than $100 million.
“No other country applies across the board national earthquake strengthening standards because it is economically illogical to do so,” the report’s author Ian Harrison says.
Mr Harrison, a principal with Tailrisk, is a specialist in low-probability, high-impact events, such as financial crises and natural disasters. He has worked for the Reserve Bank, the World Bank and the International Monetary Fund.
Christchurch tried to set its own standards for certain buildings following the earthquakes but that has since been shut down by the Insurance Council of New Zealand through the courts. The case is now headed to the Supreme Court.
Mr Harrison also says the critical earthquake-prone building trigger point of 34% of new building code was decided arbitrarily and has no supporting analysis or regard for costs and benefits.
Policy decisions were effectively made by industry groups, rather than informed ministers, he says.
Jordan Williams, executive director of the Taxpayers’ Union, says if the Tailrisk report is correct, the government is about to force more than $3 billion to be spent on earthquake strengthening in Auckland.
“While it isn’t a tax, it's a massive regulatory burden which appears to lack evidential foundation,” he says.
It’s not just a burden by the private sector. In terms of government-owned buildings, a recent budget report by Auckland Council shows a current $16 million shortfall for the next fiscal year. That number does not yet take into account “the cost of inspecting and strengthening of any council-owned earthquake-prone buildings.”
The latest annual report by Auckland Council Property says the council-controlled organisation managed 1074 properties and its property portfolio topped $910 million.