18 December 2019
Taxpayers forked out more than $200 million last year propping up a NSW government insurance fund that offers consumers protection against dodgy builders in an industry so broken that private insurers have fled the market.
And in an effort to bring taxpayer liabilities that have topped $600 million under control, the Government has proposed that compulsory insurance premiums on some new homes and renovations will almost double within 18 months.
“There is no appetite from any insurer to provide this insurance or to cover designers and principal contractors,” Greens MLC David Shoebridge, who led a parliamentary inquiry into building defects, said. “Home-building warranty insurance has an accumulated deficit of about $640 million, paid for by taxpayers.”
The Owners Corporation Network has argued that the “scourge” of phoenixing – where $2 companies are used to build apartments and are then wound up to avoid paying the defects bill – is contributing to the skyrocketing deficit and is why the market was abandoned by private insurers.
A 2017 study by the network found that in 63 per cent of cases where the “insolvency” of a building company had triggered an insurance claim for defects, that builder simply continued working through another company. They also found that only 18 per cent of licenses to build homes in NSW belong to companies, but they account for 85 per cent of all insurance claims lodged due to insolvency.
“There cannot be an innocent explanation for such an extremely disproportionate statistic,” Owners Corporation executive officer Karen Stiles said. The network is pushing for the licensing of builders and developers, with conditions including track records of financial performance.
The Sydney Morning Herald
Nigel Gladstone and Carrie Fellner
> Full article on The Sydney Morning Herald