Earthquake-prone buildings review: seismic shift in building resilience?

20 June 2024

Today, the Minister for Building and Construction, the Honourable Chris Penk, announced the commencement of the earthquake-prone building system review. This review aims to ensure that seismic risk in existing buildings is effectively managed. Please see here for the terms of reference.

Given New Zealand’s geographic position, seismic considerations are an important feature of transactions across the New Zealand market and in how businesses operate from their premises. Discussions on balancing life safety risks against the costs of regulation and impact on private property owners have become increasingly common and so this review will be welcomed by many.

In summary, the review will include an assessment of the costs (including non-financial) and benefits of the current system and update the model including by using the latest seismic hazard data, an updated statistical value of life, and current remediation cost estimates. It will also consider how to measure and mitigate risk, technical matters and implementation, finance and funding challenges, regulator responses, and timeframes.

The current legislative regime, which has been in place since 2017, continues to assign earthquake-prone buildings a rating as a percentage of what is described as the New Building Standard (NBS) and mandates remediation within specified timeframes (which differ across regions, based on an assessment of likely seismic risk factors).  

However, numerous buildings remain un-remediated, with the Minister noting that while the current legislation was developed with the goal of making buildings safer, it had put huge costs on owners, councils and organisations “with questionable cost benefit” and that "the system is not working as well as it could, and the reality is many buildings are not getting remediated".

This review, originally scheduled for 2027, has been expedited to address urgent public safety concerns, the financial burden on building owners, and the associated economic consequences. It will evaluate whether the current rating system is the most effective method for measuring and assessing seismic risk.

Key areas of the review include:

    • Assessing costs associated with mitigating earthquake risks and enhancing building resilience. This will include an evaluation of societal expectations and willingness to invest in reducing the risk of injury and death in the event of an earthquake, as well as improving building resilience over time.
    • Recommending equitable and effective regulatory responses for managing seismic risk in existing buildings, balancing life safety considerations with regulatory costs and impacts on property owners.
    • Proposing alternative methodologies to assess seismic risk in existing buildings, accounting for regional variations, building types, and prioritising resilience for critical facilities.
    • Identifying financial barriers to managing seismic risk in existing buildings and suggesting incentives and support mechanisms to address these challenges.
    • Considering how seismic risk management aligns with broader government objectives, such as fostering housing growth and economic recovery efforts.

The review will also consider where costs and benefits currently fall – including at the individual building owner level, as well as regionally and nationally.

The review will also consider issues such as the interplay between the seismic risk regime and other legislation such as the Health and Safety at Work Act 2015 and powers under the Building Act 2004 regarding “dangerous” buildings. 

While the recommendations from the review will primarily relate to managing the risk associated with existing buildings, findings and recommendations will also (where appropriate) inform future work on the management of seismic risk in new buildings.

The review process will occur in three stages:

  1. reviewing the current state and making high-level recommendations;
  2. developing detailed options through public consultation; and
  3. implementing legislative and non-legislative measures.

A Steering Group will oversee the review, with an independent Chair and representatives from central and local government, technical experts, and earthquake-prone building owners. It will involve engagement with relevant stakeholders and include a formal consultation and submission process for the resulting policy proposals.

The final report is due in the second quarter of 2025.

The current regime is complex and requires a lot of thought for building owners and occupiers, including in relation to how it informs contractual and lease provisions dealing with seismic risk, and how it interacts with obligations under the Health and Safety at Work Act 2015. We expect there to be a high level of interest in the review, and if it results in significant change, how it impacts on the allocation of risk between commercial parties.  

We will keep you updated about the review as it develops, but if you have any questions about the matters raised in this article, please get in touch with the contacts listed or your usual Bell Gully adviser.

Disclaimer: This publication is necessarily brief and general in nature. You should seek professional advice before taking any action in relation to the matters dealt with in this publication.