Government rethinks home owner buyouts amid rising climate costs

NZ Herald

17-07-2025

But, in a changing world and climate where these events are happening harder and faster, is the idea of the Crown stepping in with unlimited cash sustainable?
This week, Prime Minister Christopher Luxon said the Government 'won't be able to keep bailing out people in this way'.
Insurance Council New Zealand chief executive Kris Faafoi told The Front Page it's not the first time the Government has voiced similar views.
'Regardless of which stripe you are, the appetite for continuing the kind of buyouts that we've seen over the last decade-and-a half is starting to wane,' Faafoi said.
'That's a Government decision to make. But, from the insurance perspective, if they're gonna invest, if they're gonna spend taxpayer money, then instead of paying out after an event has happened, we'd prefer that you spend that money to protect the communities that we're seeing being devastated by these kinds of events on a relatively regular basis.'
Estimates have the amount paid out after the Auckland Anniversary Weekend floods and Cyclone Gabrielle in the billions of dollars. Hundreds of sites in Auckland that are now vacant after storm-damaged homes were removed will be offered to community groups for playgrounds, planting and even grazing sheep and horses.
Auckland Council is the new owner of about 260 empty sections from the clearing of homes deemed a risk to life in future storms, and expects to have all 1200 homes in the same category cleared by the end of 2027.
The buyout process has left the council with scores of properties of little value, and is a result of a $2 billion Government storm recovery package, set up in October 2023.
Faafoi said something needs to be done to reduce the impact of climate events in the future.
'So there are some difficult decisions to be made ... We are seeing these kinds of events happen more and more often.
'Insurance is obviously quite important in those situations for Kiwis to fall back on. You would've seen in the last 12 to 24 months after [Cyclone] Gabrielle, that people have found, along with everything else, that paying those insurance premiums can be a challenge.
'In order to keep it manageable in the long term, that kind of risk reduction, getting infrastructure put in place [has meant] some difficult conversations, so we can make sure that if things do happen, we're lowering the impact of those weather events.'
Faafoi said those 'difficult conversations' will have to include the question: who pays?
An independent climate adaptation report, released earlier this month by the Ministry for the Environment, suggested home owners whose houses are weather-damaged should not expect buyouts in the future.
'That's the billion-dollar question. At the end of the day, I think the Government will end up deciding that the report from the independent reference group, which said beneficiaries pay.
'Now in some instances, that might be a community or an individual family or business... I think one of the promising signs from that report is in some instances, some communities won't be able to pay, and they see a pretty clear indication that, in some instances central government might have to chip in and make sure it can protect communities.
'It's extremely complex. From an insurance perspective, we wanna see some urgency. We wanna see some clear leadership from central government. We've seen some good indications of that from the Prime Minister this week, and really, we just need to get on with it.'
Listen to the full episode to hear more about what changes could happen to buyout schemes, and whether they should be a thing of the past.
The Front Page is a daily news podcast from the New Zealand Herald, available to listen to every weekday from 5am. The podcast is presented by Chelsea Daniels, an Auckland-based journalist with a background in world news and crime/justice reporting who joined NZME in 2016.
You can follow the podcast at iHeartRadio, Apple Podcasts, Spotify or wherever you get your podcasts.