Building owners and taxpayers throughout Australia will have to fork out $6.2 billion to fix shoddily constructed apartments just for those buildings which have gone up over the past decade alone, the latest report says.
Commissioned by the Construction division of the Construction, Forestry, Maritime, Mining and Energy Union (CFMMEU), the research by Equity Economics estimates the likely cost of defects associated with combustible cladding, water leaks, fire safety and structural defects for apartment buildings which have been constructed over the past ten years.
It concluded that the overall cost associated with the four aforementioned types of defect will amount to between $5.2 billion and $7.2 billion, with the most likely cost being $6.2 billion.
Overall, defective cladding is largest source of financial burden followed by waterproofing, fire safety defects and structural defects.
All up, 3,461 apartment buildings around Australia have been found to contain defective and non-compliant cladding.
Whilst cladding accounts for the largest share of the defect bill overall, the report identified structural defects as most expensive to fix when they occur.
All up, structural repairs are likely to cost $60,000 in the case of a substantially affected building or $5,000 for a moderately affected building.
For combustible cladding, water leaks and fire safety defects, likely costs for severely/moderately affected buildings amount to $40,000/$8,750, $25,000/$5,000 and $9,000 (substantially affected building only) respectively.
At the extreme, the report warned that consumers could pay up to $165,000 for defects which occur.
Moreover, the figure above does not account for costs relating to buildings constructed before 2009; defects which fall outside areas mentioned above; defects associated non-apartment construction (detached homes, units, townhouses); or potential costs associated with legal fees, state-wide audit schemes, higher insurance premiums or alternative accommodation where buildings need to be vacated.
For this reason, the true cost of defects is likely to be much higher.
The report follows an agreement reached last month at the Building Ministers Forum (BMF) for a national approach to implementing recommendations of the Building Confidence Report prepared for the BMF by Professor Peter Shergold and lawyer Bronwyn Weir.
CFMEU Construction and General Division National Secretary Dave Noonan said that the cost of defects was now clear.
Noonan says homeowners would likely foot most of the bill.
“Australia’s building and construction crisis will cost a staggering $6.2 billion to fix apartments they’ve (owners) already paid for,” he said.
“Tens of thousands of families, many of whom have purchased their first home, are now stuck with the crippling cost and mental anguish of owning homes that they may not be able to live in, are unsafe and cannot afford to repair.”
Noonan says the crisis results from several factors.
These include deregulation ‘at any cost’, a lack of government oversight and failure by governments to enforce building standards and codes.
He says the union will outline detailed proposals for reform over coming months.