Owners of buildings with flammable cladding in New South Wales will still need to pay tens of thousands of dollars per apartment to rectify their complexes after the NSW Government refused to Victoria’s lead in paying for flammable cladding to be rectified.

In its 2020/21 budget delivered on Tuesday, the NSW Government said it had allocated up to $139 million to establish a three-year program to help remove combustible cladding on high-risk buildings.

Under the program, owners of apartments who have been confirmed by the NSW Cladding Taskforce to have high-risk flammable cladding on the façade of their building will be able to access interest free loans for the purpose of cladding removal or rectification.

Instead, the interest on these loans will be paid by the government.

Owners Corporations within such buildings will also be able to access a project assurance service which will assist with the remediation process and will oversee construction to ensure that rectification is performed to a suitable standard.

All up, the government expects that 225 buildings will be remediated under this program.

But whilst the government will pay the interest component of cladding loans, owners will still be left to pay for the cost of the cladding removal and rectification itself.

This is unlike the situation in Victoria, where the government-owned Cladding Safety Victoria is overseeing a $600 million program under which the Government pays the full cost for rectification and removal of the cladding.

The effect of this on apartment owners can be significant.

In Victoria, RMIT University Senior Lecturer Simon Lockrey and Lecturer Travis Moore last year put the average cost of removal/rectification at $15,000 per apartment for low to moderate risk buildings and $60,000 per apartment for high-risk buildings.

Throughout NSW, more than 185,000 building records have been audited by the NSW Cladding Taskforce which was established after the Grenfell Tower collapse in 2017 whilst more than 4,127 buildings have been inspected.

Of these, 3,740 buildings have been cleared whilst 387 are under review, assessment or remediation.

Whilst owners will need to pay the costs to remove the cladding, strata management bodies welcome the measures which have been announced.

In a note to its members, Strata Community Association NSW welcomed the program, which they say has been effectively designed.

“Despite the time it took for the government to announce their support, ultimately, we believe the initiative is well planned, well-resourced and expertly consulted; giving building owners and owners corporations a tangible commitment to helping fast-track the removal of unsafe cladding,” SCA NSW said.

Karen Stiles, Executive Officer of the Owners Corporation Network broadly agrees.

Whilst the preference would be for the government to pay for the cost of remediation, Stiles welcomed both the announcement of the low interest loans and the technical support for affected owners.

“Since the Lacrosse fire in Melbourne in 2014, and the tragic Grenfell fire that cost 72 lives and caused the creation of the NSW Cladding Strikeforce ‘to force owners to remove flammable cladding’, OCN has consistently called for government support for those innocent owners,” Styles said.

“We called out the elephant in the room – the problem was not of their making and it was egregious to expect voluntary committees to manage the complex and costly remediation process.  Owners basically had a large bullseye painted on them for unscrupulous and risk-averse operators to aim for.

“Whilst OCN would prefer the NSW government pay for remediation of high risk buildings, as the Victorian government has done, we welcome the 2020 NSW Budget announcement of no interest loans, and critical technical support for affected owners.  This will be a huge relief for concerned and confused committees.”

Asked about owners needing to pay for the cost of cladding removal, Minister for Better Regulation and Innovation Kevin Anderson said the NSW approach delivered a balance between the needs of apartment owners along with those on the budget given that the economy been impacted by drought, bushfires and COVID-19.

A spokesperson also pointed out that there had been a huge body of work that has gone into establishing the technical, assurance element of our program that is lacking in the Victorian model.

The NSW model also provides free project management to ensure every affected building is fixed to the highest standards, the spokesperson added.

This will mean that cladding will be removed more quickly and effectively.

“The NSW model is the quickest and most effective way to get high-risk cladding off our buildings,” Keen said in a written response to questions from Sourceable.

“This cladding has to be removed – there is no question about it. Without Project Remediate, building owners would have no other option but to turn to commercial loans for cladding rectification which can have an interest rate of up to 10 percent.

“A loan scheme also balances the needs of impacted residents and demands on the budget given the economy has taken a huge hit through drought, bushfires and now COVID-19.

“We will be doing this once, and we will be doing it right. We have a strong plan in place that will manage the remediation process for owners and help support them financially.”