National tax reform is what's needed to effectively assist building owners with seismic strengthening, the head of the Property Council says – not just a Canterbury-specific tax policy.
Property Council chief executive Connal Townsend's comments follow the release of a report prepared for the Royal Commission that proposes a single national policy for unreinforced masonry building (URM) maintenance and seismic strengthening.
‘The Performance of Unreinforced Masonry Buildings in the 2010/2011 Canterbury Earthquake Swarm’, a technical paper co-authored by Associate Professor Jason Ingham and Professor Michael Griffith, acknowledges the cost to upgrade about 3,867 unreinforced masonry buildings around the country is about $2 billion – more than the estimated $1.5 billion value of the total stock.
It said all URM buildings should be improved to the full design strength required for new buildings in New Zealand,
so that the public would be protected from falling hazards such as
chimneys, parapets, gable end walls and out-of-plane wall failures.
"If required, further building improvements should aim for 100
percent of the requirements for new buildings with lower values
negotiable on a case by case basis. However, a minimum of 67 percent is
In view of the cost of such an undertaking, the report proposed that first priority be given to public safety by securing or removing falling hazards.
"The cost to do this is unknown but would be substantially less than the amount to fully upgrade all buildings."
Townsend said while the report acknowledged the need for a cost-effective strategy, it did not propose a solution.
“A national approach to tax policy, as opposed to Canterbury-specific tax policy, would help. In particular, the government should allow earthquake strengthening costs to be deducted," he said.
“At the moment, these costs need to be capitalised, effectively meaning no deduction because depreciation is now disallowed."
He said making these costs deductible would help property owners comply with the requirements of an increasing number of councils for buildings to be earthquake strengthened.
He said tax policy should allow an immediate deduction for all or part of the cost of rebuilding; allow a special depreciation deduction for repaired/new buildings; and bring back depreciation for commercial building structures.
In a submission to the report, the Property Council also argued the current review of the Building Code should be widened to include a review of section 112 (Alterations to Existing Buildings) and section 115 (Compliance Code Requirements: change of use) of the Building Act 2004, which state buildings should be strengthened when the building is upgraded or a change of use occurs.
“The transition to upgrading New Zealand’s building stock is going to take time, and this should be acknowledged in a widely-consulted review that includes sections of the Act,” Townsend said.