Better building industry regulation throughout Australia could deliver net benefits of $4.3 billion over ten years, a new analysis has found.
In its latest report which was prepared for the Australian Building Codes Board, the Centre for International Economics (CIE) examined the costs and benefits associated with full implementation all 24 recommendations of the Building Confidence report which was prepared for the Building Ministers Forum (now called the Building Ministers Meeting) in 2018 by Professor Peter Shergold and lawyer Bronwyn Weir.
It found that on a present value basis, benefits from implementing all recommendations will exceed costs involved by $4.3 billion over the ten year period beginning in 2022.
It says the biggest gains will fall to consumers.
“In the long term, consumers (homeowners, building owners and tenants) will receive these net benefits,” the CIE says in its report.
“Specifically, they may pay slightly higher costs to buy or rent a building or a property, but the quality of the building (via fewer defects) will more than offset it.
“Moreover, some of the benefits from national consistency, in terms of reduced cost to building industry, will pass to consumers in terms of reduced price or less increment in price.”
Prepared in 2018, the Building Confidence Report identified widespread gaps in building regulation which it says were contributing to concerns about building quality and safety.
These concerns had grown amid revelations about widespread use of combustible cladding and the subsequent discovery of structural problems at the Opal and Mascot Towers in Sydney in 2018 and 2019.
All up, it made 24 recommendations for change. These covered areas such as building practitioner registration and training, roles and responsibilities of regulators and authorities, integrity of private building surveyors, information sharing and intelligence, documentation and record keeping, inspections regimes, post construction information management, building product safety and implementation of the recommendations.
In its report, CIE estimated that $4.281 billion in net benefits could be achieved over the aforementioned period if all recommendations are implemented across each state and territory.
This consist of $9.009 billion in benefits against $4.729 billion in costs.
Benefits would accrue as better compliance and enforcement led to fewer defects, the report said.
Additional benefits will acome as a nationally consistent regulatory framework efficiency gains for the building industry.
In terms of costs, meanwhile, around half of these will occur through additional construction costs.
These may occur through additional rectification costs as more diligent checking processes lead to a greater number of problems being identified and needing to be rectified during construction.
Building to better standards may also require more labour and use of higher quality/more expensive materials.
Other costs include greater costs for training, independent review and mandatory inspection.
Training costs would increase as more practitioners need to be registered, registration requirements would become more stringent and practitioners would need to undertake mandatory training in respect of the National Construction Code.
Meanwhile, review and inspection costs will increase as a number of recommendations will introduce additional processes in independent audit and review.
The latest report comes as the Australian Building Codes Board has released a series of model guidance publications in response to the BCR recommendations.
The guidance is comprehensive and covers key matters including national registration of building practitioners, codes of conduct for building surveyors and fire safety engineers, improved building design acceptance processes, mandatory building inspections and independent third-party review of fire and structural safety design.
The guidance is intended promote implementation of the recommendations in a nationally consistent manner by serving as models of best practice which states and territories can use to guide their own reform efforts.
It was endorsed by Commonwealth and State Ministers at the Building Ministers Meeting last month.