In the early 2000s, significant building industry reforms were implemented following the 2001 collapse of HIH, which prior to its collapse was Australia’s second largest insurer.

This led to the introduction of what is now known in Victoria as domestic building insurance. By law, builders are required to take this out on behalf of consumers before commencing work on residential building projects worth more than $16,000. It supposedly protects consumers against incomplete or defective building work.

When introduced, the legislation was rushed through Parliament with support of the Housing Industry Association (HIA). It was billed as a way to support the industry, protect consumers and deliver better overall outcomes.

However, the opposite has been the case. In fact, the industry now suffers from its worst case of lack of credibility in its history.

For consumers, there are glaring shortcomings in protection offered by the current regime.

For starters, the requirements for domestic building insurance apply only to developments of up to three storeys in height. Owners of apartments in mid or high-rise complexes (four storeys or greater) are offered no protection at all. This is despite the glaring defects associated cladding, waterproofing, structural cracking and fire protection that are evident within these buildings.

Furthermore, the current scheme operates on a last resort basis. This means that consumers can only make claims where their builder dies, disappears or becomes insolvent. Until that time, they are left to fend for themselves.

For these reasons, the insurance is failing consumers.  Yet good builders in low-rise construction are being forced to pay for this product.

Not surprisingly, the government has been forced to act. Good builders and plumbers are demanding change. We want to restore our industry about which we were once proud.

Last week, the Victorian Government introduced the  Building Legislation Amendment (Buyer Protections) Bill 2025.

The legislation contains various measures which aim to improve industry standards. These include creation of a new Building and Plumbing Commission, increased powers for the new Commission regarding rectification orders, new protections for apartment owners through a developer bond scheme, and replacement of the current last resort domestic building insurance scheme with a new first resort scheme through which consumers will be able to lodge claims as soon as defects are identified.

The Bill has sparked debate among various stakeholders. These include the Master Builders Association of Victoria (MBAV), HIA and the Builders Collective as well as respected lawyers such as Bronwyn Weir.

The HIA and MBAV view

Both the HIA and MBAV have expressed opposition to the Bill.

In a joint statement, they called for the Bill to be withdrawn.

The two organisations argue that the legislation imposes excessive burdens on builders. This, they say, could lead to higher costs for consumers and reduced industry competition.

The associations believe that the practical implementation of these regulations may be challenging and could lead to confusion and inefficiencies in construction processes.

The effect, they claim, could hit particularly hard on smaller builders and may potentially force some smaller operators out of the market.

Our View

In contrast, the Builders Collective broadly supports the proposed changes.

We believe that the changes are necessary to address misconduct and substandard building practices, hold builders to account, improve consumer confidence and protection and raise the overall standards of building.

We are not alone. Highly respected lawyer and building reform advocate Bronwyn Weir has voiced her in-principal support for the legislation. She describes the changes as ‘a step in the right direction’ to improve accountability and consumer outcomes.

We particularly support the move to replace the current last resort domestic building insurance scheme with a first-resort scheme. Only a first-resort scheme which enables consumers to lodge a claim as soon as defects are identified will truly deliver adequate consumer protection.

In regard to high-rise, the Builders Collective supports the intent to improve consumer protection.

However, we advocate for a different approach than what the government has adopted. Instead of the aforementioned developer bond scheme, we propose that large builders should participate in the existing warranty scheme managed by VMIA (Victorian Managed Insurance Authority).

This stance is rooted in a belief that unity within the industry is essential — “one in all and all in one.” Having all builders contribute equally to consumer protection efforts will promote fairness, equity and shared responsibility.

Granted, we acknowledge that the new legislation may initially involve an increased burden in terms of costs and compliance.

However, we believe that these costs will ultimately be outweighed by the more sustainable and reputable industry that the changes will deliver.

Our belief comes against the backdrop of this legislative proposal that includes a history of issues related to building quality and safety. High-profile cases of defective buildings have raised public concern about regulatory oversight in the construction sector. These incidents have prompted calls for stricter regulations as a way to protect consumers and ensure that builders adhere to high standards.

Conclusion

The debate surrounding the proposed building legislation reflects broader tensions within the construction industry regarding regulation, accountability and market dynamics.

As mentioned above, some see the changes as unfair, unworkable and unduly burdensome.

We at the Builders Collective, however, believe that the proposed changes are necessary for reforming bad practices and improving industry standards.