The Government is working on a rescue package for owners of leaky homes, promising to help fix them although it has no legal liability and the cost has been estimated at more than $11 billion.
Building and Construction Minister Maurice Williamson says he will take a plan to Cabinet early next year.
His negotiations with councils, which appear to have fallen apart, involved the Government underwriting bank loans and offering subsidised interest rates to owners of leaky homes.
"Too much money has been spent on lawyers and not enough on actually fixing the rotten homes," he said last night after releasing a shock report which said between 22,000 and 89,000 homes could be affected.
Basing its cost estimate on 42,000 "failures" the report said the total cost of fixing them was $11.3b.
The crisis developed in the mid 1990s and the previous government ordered an inquiry which blamed shoddy materials, bad building and inadequate inspection procedures.
It set up a resolution process, which became bogged down in litigation and delays.
Mr Williamson said thousands of New Zealanders were in a terrible position.
"They may not be able to borrow the money to repair their homes, or sell them, so their single most important asset is decaying in front of their eyes," he said.
Mr Williamson commissioned the PricewaterhouseCoopers report and said it revealed the damage was much larger than anyone had previously wanted to acknowledge.
It said only about 3500 homes had been repaired and about 9000 were beyond the 10-year legal liability limit.
The inquiry focused on homes built between 1992 and 2008. It said the failure rate was much lower after 2006, when new regulations were put in place.
"The issues were largely confined to buildings constructed with monolithic external cladding, either fibre cement, stucco or coated polystyrene, installed over untreated timber framing and without a drainage cavity," the report said.
Mr Williamson said he had hoped the rescue package would include a contribution from councils, but they told him yesterday that wasn't possible.
"While this is disappointing, the Government believes that local authorities have a key role to play and the door remains open for them to be part of the solution," he said.
Mr Williamson said talks with local government had centred on councils making a fixed percentage contribution to repair costs, with the Government underwriting the remainder as a bank loan and offering subsidised interest rates.
The direct contribution to repairs from councils would have been offered to claimants in lieu of litigation.
Now he seems set for a scrap with the councils.
North Shore Mayor Andrew Williams last night accused the minister of "slamming the phone down on a conference call with civic leaders in a childish fit of pique".
He said that happened when councils insisted the Government at least match the contribution offered by the councils.
"In desperation, he is mounting a pathetic attempt to spin the blame back on local councils," Mr Williams said.
