Around Australia a series of reviews are underway on the building industry that could lead to dramatic reforms across the whole industry.
At the Federal level the Shergold Weir Building Confidence Report has 24 recommendations for reform. The Federal Minister for Industry, Science and Technology, Karen Andrews, (who happens to be an Engineer) has called for a national unified approach to reform and regulation. In New South Wales the Government has issued a Discussion Paper titled “Building Stronger Foundations” that addresses problems with building defects and recommends 4 key reforms and asks 30 questions of industry. To add to the review process the NSW Upper House Public Accountability Committee has commenced an inquiry into the regulation of building standards, building quality and building disputes chaired by Greens MLC David Shoebridge.
The number of reviews and the associated media coverage have flowed from some major problems with a number of apartment towers in Australian cities. In Melbourne two towers caught fire through having flammable cladding including the Lacrosse building and Neo200 and years after the fires little has happened. In Sydney the Opal Tower had major structural problems just before Christmas 2018 and more recently Mascot Tower ten years after construction developed structural cracks. Each of these problem projects should not have happened and have created massive inconvenience and hardship for residents who had to move out of unstable buildings. A number of commentators said all high rise buildings had problems which was an over-reaction.
Even Townhouses Have Defects
Clearly high rise buildings are being built in cities around the world so we must learn from our local problems so we can continue with the construction of taller buildings. While the media focus is on high rise residential buildings even low rise buildings have problems. One of the biggest payouts in a NSW court judgement was in fact for townhouses in Thornleigh where $5.1 million was awarded against the builder in 2014. There were 1,500 defects alleged. A number of commentators have quoted from a University of New South Wales report that they say found that 85 percent of new apartment buildings in NSW had defects. This seems a very high figure so I examined the report in some detail.
Some Surveys Exagerate The Problems
The 2012 report by City Futures at UNSW stated that 85 percent of apartments built since 2000 had defects. The survey went to 20,000 apartment owners but the letter said that they were interested in problems so I suspect this eliminated content owners. Only just over 1,000 owners responded of which 293 were from apartments built since 2000 and a number of these owners said the defects were fixed. There are around 600,000 individual apartments in Sydney but the survey seems to focus on only a few hundred owners with defect concerns. It is of concern that some commentators are over stating the defect problems.
Private Certifiers Under Attack
Compounding the issue of defects in residential buildings is a related issue about the role of private Certifiers. Governments around Australia have been putting pressure on certifiers as the final approval person on a building project and the public has now blamed them for any building they don’t like. As a result of this blame game the insurers have found that from 1 July 2019 their Profession Indemnity Insurance premiums have jumped up dramatically. One small scale certifier in Sydney found his premium was $18,000 a year but had now jumped to $221,000. Larger sized certifiers were looking at $1 million a year for PI insurance. Many certifiers are now looking towards other careers while state governments realising that with no certifiers building will stop have enacted legislation to remove the liability for flammable cladding from the responsibility of certifiers. In NSW some certifiers are worried that the legislation refers only to cladding that could include a skin of brick work. It is these unintended consequences of legislative changes that many in the industry are concerned about.
While it is fashionable to attack certifiers the end product could be to eliminate the whole profession as insurance premiums kill the business model with governments left to provide a tax payer funded version of the role. One NSW Minister announced that there had been 140 or so complaints against certifiers listed in the Building Professions Board Annual Report but left out the next sentence that 93 percent were dismissed.
The NSW Building Stronger Foundations Paper
The NSW Discussion Paper, Building Stronger Foundations (BSF) , says it is implementing the NSW Government Response to the Shergold Weir Building Confidence (BC) Report. The four key reforms proposed by NSW are:
- All Building Designers must ‘declare’ their plans comply with the Building Code of Australia (BCA) and builders ‘declare’ that buildings are built to these plans.
- All ‘building designers’ are registered.
- That there is an industry wide ‘duty of care’ to subsequent homeowners.
- A NSW Building Commissioner be appointed as the consolidated regulator for building.
While on the surface these reforms seem reasonable some commentators have said it is not the ‘designers’ who are the problem but the ‘builders’. Some have said the Design Construct process where consultants can change during a project can encourage the cutting of standards to save money. There seems to be a general consensus that independent checking of ‘declared’ structure plans would help. The NSW BSF paper goes further to say (p16) the ‘declared plans would need to be logged with the Building Commissioner who would audit them to ensure compliance’. The Commissioner will need a massive staff if all declared plans are to be reviewed. Already councils review the plans, certifiers review the plans and now another layer could add months to the planning approval process before construction begins.
Reform Is Needed But Unintended Consequences Could Create More Problems
The building, design and development industries must make big changes to get the confidence of consumers back again. The construction industry is the second largest employer in Australia. We can’t just with it off, we must keep it going but we must get better performance, particularly in high rise residential buildings. Tighter controls on design will help but if a new builder wants new designers then where is the quality control. The ‘duty of care’ sounds good but how does it relate to the 6 year major defects period. Would an architect or a plumber be liable 30 years later for a lack of a ‘duty of care’?
The unintended consequence of tightening responsibility and ‘duty of care’ could make Professional Indemnity Insurance, as is happening with certifiers, reach such high levels that businesses are not viable. If governments overreact then this could lead to the government being the building designer, the developer, the builder and the certifier. We could simply transfer the whole private sector building industry into a super government operation under the control of the NSW Building Commissioner and with equivalents in other states. Reform must occur, but it must work with the private sector building and design industry,