Tuesday, May 18, 2010

Leaky logic on leaky homes

John Key and Maurice Williamson are now both saying taxpayers have to cough up for around one-quarter of the multi-billion dollar leaky-home bill because it's all akin to "a natural disaster of huge proportions."

For most people, that would lead to the obvious quip that it's good to see National Party ministers recognising that the National Government that caused the problem was akin to a natural disaster.

But that would be too easy, and not quite accurate, because most people inclined to make that quip still labour under the assumption that the primary cause of the problem was the Nats' “deregulation” of the building industry in the early nineties.

As you know, I don't buy that argument. Sure, the government played a part in the problem, but it wasn’t the Nats’ deregulation that caused the problem (because, dear reader, there was none).  Their role consisted in putting into place a regulatory regime that, in obscuring who was bearing the real risk in new buildings, ended up as the worst of both worlds. 

Basically, local-government bureaucrats  are simply not competent to do the job that the legislation of successive governments have required of them, i.e., to act as some sort of 'gatekeeper' of building quality. 

And the central-government bureaucrats at BRANZ and the Building Industry Authority, who between them were required by law to vet all materials and building processes, were not competent to act as any sort of ‘gatekeeper’ of materials’ quality.

The involvement in the building process of both government and council might have suggested to buyers that somehow the rules of risk and reality had been suspended, and that that the rule of caveat emptor didn’t apply.  But they do, and it still does.

Who drives a car off the lot without first getting it checked out? But putting central and local government bureaucrats into positions of authority that they just weren’t competent to carry out encouraged buyers to “drive away” a new house with only some un-backed pieces of paper to protect them.

Buyers may not have realised that a council-issued Code of Compliance for their new house and a BRANZ appraisal for the materials it was built with were between them about as credible as a Goldman Sachs mortgage-backed security. But they didn’t.  And they weren’t.

Sadly, the intrusion of councils and government departments into a process in which they're just not competent to play a part raised costs for builders and home-buyers in the first place, and puts ratepayers and taxpayers on the hook now for something they themselves haven’t done.

That’s the direct consequence of placing risk where it shouldn’t be.

But that leaves us all confronting a tough question: while we can all sympathise with those caught up in this plight, why should ratepayers and taxpayers who didn't choose to invest in these lemons have to bail out those who did?

That’s still the hard question that talk of a “natural disaster” just doesn’t so easily brush away—because this was not a natural disaster, it was entirely man-made, and those who were mainly to blame have largely managed to escape responsibility for it.  And by saying "those who are mainly to blame," for the most part I don't mean designers and builders.

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4 Comments:

Anonymous James Stephenson said...

Which leads me to the question: What really then, is the difference between those people saddled with a leaky home that we're all going to bail-out and those who lost significant amounts of savings with dodgy finance companies, which we are not?

5/18/2010 11:19:00 am  
Anonymous Anonymous said...

Great point James.

I think there are 2 other elements we need to keep an eye on too.
- Exorbitant fees for repairers and consultants.
- And that all that is paid for is a repair and not an improvement.

Kenneth

5/18/2010 01:10:00 pm  
Anonymous Anonymous said...

Tax payers keep electing politicians who advocate the use of regulation, and politically appointed 'experts' to manage risk. They can hardly complain when reliance on this risky practice leaves them paying the costs.
Ken

5/18/2010 03:59:00 pm  
Blogger PC said...

@Ken: Yes, fair point.

[ Does that same principle work in a similar fashion with Treaty claims? ;^) ]

5/18/2010 04:07:00 pm  

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