The government is moving to a proportionate liability system for the Building Act, so each party is liable for the share of work they carry out.
It says councils have been reluctant to sign off building consents because they're liable for defects, causing unnecessary delays in the construction process.
Building and Construction Minister Chris Penk said the government would be exploring mechanisms to protect homeowners, such as indemnity insurance or home warranties.
Property lawyer James Wollerman told RNZ it was not clear how that would work.
Under joint and several liability a homeowner could claim full compensation for a botched building project from the council, he said. Under the new scheme of proportionate liability - if the council and builder were sharing liability by 50 percent each - the homeowner would be left carrying that 50 percent if the builder went missing.
He said there was an option of an insurance scheme, but it was not clear who would underwrite that insurance.
"We've seen that insurers are not generally prepared to insure for weather-tightness defects.
"So there's a big question out there as to what the government's going to be able to put forward in terms of an insurance scheme that would provide some sort of protection for homeowners."
Deputy Prime Minister David Seymour said Australia had had a proportionate liability scheme since the 1990s.
He said it made sense to shift liability away from councils, which was creating high rates for ratepayers and a risk-averse culture in construction.
"If you're a council, and you know that you can end up liable for an entire project, then you get increasingly stressed and often obstructive, when it comes to allowing more innovative building materials, more innovative techniques.
"And as a result, we end up with high rates and little innovation in building and high building costs," Seymour said.
He said the shake-up of the building consents regime would cut delays and costs for construction projects.
"Moving to a regime where the various people involved, those who provide the materials, those who do the work, perhaps those who do the design, and those who do the consent, have liability when things go wrong, is not a scary or different thing.
"It takes us to where most of the world is."
Labour Party leader Chris Hipkins told RNZ the current rules were introduced in the early 2000s during the leaky home saga.
"Are they slowing things down? Yes they probably are. So I think the government are making the right steps, you know they are heading in the right direction.
"The issue will be getting consumer protection right."
Hipkins said that the government believed if it pushed house prices up the economy would be fixed.
"House building sure creates jobs but the housing market is not the totality of our economy."
