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Expert opinion: Do we need a Royal Commission into residential building?

Steve Jovcevski

Thursday 20 June 2019

The Builders Collective of Australia has called for a Royal Commission into the residential construction industry in Australia - and considering the news about the Mascot Towers apartment building recently, there’s no surprise.

So how did we get here?

There was a massive property boom in Sydney that spanned from around 2013-14, right through to 2017. During that time, developers were encouraged to build as many apartment blocks as they could - but they exceeded what was necessary and currently the market is flooded with more apartments than there is demand for.

The problem now is that these buildings went up quick and, we’re finding out, may have cut some corners. I think the cases of defective work may escalate in the next few years as recently built units wear and more problems are exposed.

If builders are bankrupt or won’t repair their defects, it’s now imperative for the government to step in and help make these apartments habitable again, not to mention look at new rules that will prevent such problems from happening again.

The problem with new-build apartment blocks

One big problem with all this is that currently, there is only home owners warranty for houses and unit blocks up to three levels. That means that if a builder runs out of funding in a building taller than three levels, homeowners and investors who’ve purchased an apartment in that building have no protection under insurance.

This is very outdated and represents a 1970's view of building density in Sydney. Most apartment buildings are now built over three levels and people who live there should be afforded the same insurance scheme as any other homeowner.

It sounds ridiculous that a builder has to have a builders license to build a house but not an apartment block over 3 levels, which is classified as commercial. Again, a totally outdated rule which should be reconsidered in a Royal Commission.

What a Royal Commission into residential construction needs to cover

There would be value in a Royal Commission, as long as it’s handled properly. There are a lot of different stakeholders that need a seat at the table if a Royal Commission is to really work - it can’t just be the builders, architects and developers.

I think banks need to be involved as well because they should be doing due diligence and checking the quality of the build before they finance any construction. If they’re not, or not doing it properly, the banks need to be held accountable for funding a lot of these projects without confirming the quality of the property.

Another thing that I’d like to see come out of a Royal Commission would be insurance companies confirming that once these properties are fixed - and many of them would likely be salvageable - that they will insure the properties at a reasonable price so people can live there with peace of mind.

Finally, there needs to be more oversight on residential construction projects. Currently, the rules are changing so that a builder cannot pick their own certifier but it may need to go one step further and have an independent certifier or council body that carries out random inspections of worksites. There should also be more safety inspections carried out by organisations like WorkCover to keep workers safe on these sites.

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