Phil Heatley MP National Party Housing Spokesman

18 April 2006

National seeks to widen HNZ probe

National Party Housing spokesman Phil Heatley has written to the Auditor-General in a bid to get the probe into Housing New Zealand widened.

"Housing New Zealand is spending $105,000 per room to upgrade and extend state houses. I was, and still remain, suspicious about the cost. I believe it to be excessive.

"Given allegations that the accounts are being doctored to hide budget blow-outs, I want to know whether the modernisation costs are being inflated to disguise financial mis-management elsewhere at HNZ."

The 2005 building costs survey says it should have cost around $1,500 per sq metre, including all structural, electrical and plumbing costs.

Mr Heatley still plans to press ahead with a request to have the HNZ scandal examined at select committee level.

"Though I welcome the Auditor-General's inquiry, I still believe that the matters which have been raised need to go before a select committee. The Auditor-General can't, for example, examine the culture at HNZ.

"It's important that all the issues are canvassed in a transparent and open way. Only that will restore confidence in an organisation that manages significant taxpayer assets."

Mr Heatley says the claims are serious and, if proven, call into question recent evidence given at the select committee about the financial position of HNZ.

Kevin Brady
Auditor-General
Private Box 3928
WELLINGTON

12th April 2006

Dear Mr. Brady

Re: Inquiry in to Certain Allegations Involving Housing NZ

Under the Terms of Reference 2.1.4, I write requesting that you also investigate the tendering and invoicing of capital works done within the “HNZC’s housing modernization and maintenance program” as referred to in Background 1.2.

I was concerned to discover from recent answers to written Parliamentary questions that HNZC was paying an average $105,000 per room to extend state houses from 3 to 4 bedrooms.

Further, the HNZC Modernisation budget estimate for completing similar work appears to be at a maximum of only $50,000 per home.

According to a Government-run building industry survey released last July, the average cost of building was around $1500 per square metre which also includes all structural, electrical, plumbing and finishing work. With an average bedroom being about 20 square metres this would equate to $30,000.

It's understandable that some of these houses do need work. However, at an average price of $105,000 to add an extra room, the cost to the taxpayer does seem excessive even taking into account some of the more expensive work being done on kitchens and bathrooms.

I enclose:

1. The Housing Ministers 2003 announcement of this budget allocation,
2. HNZC Modernisation budget for 2005 - 06
3. PQ-00956-2006 reporting the actual costs,
4. A report on average building costs and
5. A recent NBR media article on the matter.

I believe that it would be appropriate for the Audit Office to include in its investigation the tendering and invoicing of this work as it directly relates to the inquiry into allegations of accounting irregularities of HNZC’s housing modernization and maintenance program.

Thank you for your consideration.

Kind regards

Phil Heatley MP
National Party Housing Spokesman

Sent: Friday, 3 March 2006 03:59 p.m.
To: Philip Heatley
Subject: 00956 (2006) Published - Housing - Normal Reply

Question: How many, broken down by neighbourhood unit, of the 80 three bedroom houses owned by the Housing New Zealand Corporation that were identified for conversion into four or more bedroom houses in the Budget 2003 announcement have actually been converted into four bedroom homes only; what was the average price of conversion per home?

Portfolio: Housing
Minister: Hon Chris Carter
Date Lodged:23/02/2006

Answer Text: Housing New Zealand Corporation has supplied the attached table showing the number of three-bedroom houses converted to four bedroom houses only since 1 July 2003 broken down by Neighbourhood Unit.
The average cost of conversion for each home to 31 January 2006 was $104,852.
All of the houses had money spent on additional bathroom and kitchen facilities.
This is also my reply to question number 957.

Attachment: 956 House converted.xls
Date Received: 03/03/2006

PQ 956
Housing New Zealand Corporation houses converted from three-bedrooms to four bedrooms only, by neighbourhood unit, between 1 July 2003 and 31 January 2006.
Neighbourhood Unit Number of houses converted to four bedroom only
Hutt North 1
Hutt South 1
Invercargill 1
Linwood 1
Mangere 2
Mt Roskill 11
Nelson 1
Onehunga 8
Otahuhu 5
Otara 1
Papanui 1
Riccarton 1
Takapuna 5
Total 39

Requests: What is the average cost of building an extra room onto a dwelling?

Date of Request: 11th January 2006

I could not locate the specific information you requested, and I am assuming that such information is not readily available. The cost of building an extra room onto a dwelling would depend on so many variables (location, room size, room function, materials used, site), that an average figure would not be very meaningful.

However there are figures available that give a cost per square metre of building a dwelling. These figures could be used as a proxi instead, as I suspect that the cost per metre of a new building, and the cost per metre of building onto an existing dwelling would be roughly comparable.

The Department of Building and Housing arranges for the survey of the costs of building two standard houses. The results of this survey indicate that in July 2005 the cost of building a typical 145 square metre house in New Zealand was $1,435 per square metre, while a typical 202 square metre house cost $1,265 per square metre.

The average price for a typical 145 square metre home ranged from $1,449 per square metre in Auckland and Canterbury, to $1,425 per square metre in the Rest of the South lsland (excluding Canterbury). The average price for a typical 202 square metre home ranged from $1,274 per square metre in Auckland, to $1,257 per square metre in the Waikato/Bay of Plenty.

Rawlinsons produce an annual New Zealand Construction Handbook, in which they calculate the cost (per square metre) to build a single storey house of medium quality. As at 1 June 2005 they estimated an average cost of $1,550 per square metre. A breakdown of the cost per metre is below:

Breakdown of cost Single storey house, medium quality ($/m2)
Substructure 99.12
Frame 114.36
Structural Walls 60.99
Structure 274.47
Roof 96.07
External walls 85.39
Windows and doors 154.01
External fabric 335.47
Internal walls/partitions 109.79
Internal doors 60.99
Floor finishes 77.77
Wall finishes 114.36
Ceiling finishes 60.99
Fittings and fixtures 111.32
Internal finishing 535.22
Sanitary plumbing 112.84
Electrical services 85.39
Special services 36.60
Drainage 15.25
Services 250.08
Sundaries 15.25
Preliminaries and general 116.25
Contingency 23.25
P&G, contingency 154.75
Total 1549.99

Source: Rawlinsons, Rawlinsons New Zealand Construction Handbook 2005. 20th Edition. P.2-55.

Rawlinsons also provided a cost range for Auckland, Wellington, Christchurch and Dunedin. These cost ranges (per square metre) are below:

Residential Single storey,
medium quality ($/m2)
Auckland 1,450 - 1,650
Wellington 1,425 - 1,625
Christchurch 1,400 - 1,600
Dunedin 1,325 - 1,525

Source: Rawlinsons, Rawlinsons New Zealand Construction Handbook 2005. 20th Edition. P.2-55.

ENDS

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