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GENERAL PROPERTY

Vic govt pledges $600m to fix buildings with flammable cladding

Victorian Premier Daniel Andrews. (Photo: David Hewison)
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OWNERS and residents of unsafe and potentially unsaleable apartments were thrown a lifeline by the Andrews government via a $600 million package to fix buildings with combustible cladding, making Victoria the first jurisdiction in Australia to introduce a rectification scheme and only the second globally after the United Kingdom.

Developers will need to stump up for half of the total via increased permit levies after the federal government quickly rejected a request to make a contribution.

The program will be overseen by a new agency, Cladding Safety Victoria, which will manage funding and work with owners corporations. The agency will soon begin contacting owners corporations and property owners, starting with those whose buildings are at the greatest risk. They include the Neo 200 on Spencer St in Melbourne which caught fire in February.

Rectification of buildings with high-risk cladding and the establishment of a dedicated cladding agency were among 37 key recommendations from the final report from the Victorian Cladding Taskforce, headed by former Victorian Premier Ted Baillieu and former Deputy Premier John Thwaites.

Premier Daniel Andrews and Minister for Planning Richard Wynne said the grants will fund rectification works on hundreds of buildings, found to have high-risk cladding, to ensure they are compliant with all building regulations.

Taxpayers will directly fund half of the rectification works, and the government will introduce changes to the building permit levy to raise the other $300 million over the next five years.

Proposed increases to building permit levies

Dwelling type Dwelling construction cost Existing levy Extra levy Total increased levy
House $900,000 $1152 $0 $1152
Apartment $900,000 $1152 $1152 $2304
House $1,250,000 $1600 $0 $1600
Apartment $1,250,000 $1600 $3200 $4800
House $2,000,000 $2560 $0 $2560
Apartment $2,000,000 $2560 $14,280 $16,840

Source: Victorian government

The Cladding Taskforce has also recommended the Victorian government seek a contribution from the Commonwealth to help fund rectification, as combustible cladding is a national problem.

“Combustible cladding is a national problem and we want the federal government to be part of the solution here in Victoria,” Premier Andrews said.

However, Treasurer Josh Frydenberg said the federal government would “not be picking up the bill for what is a state responsibility”.

“The problem with cladding has come from a lack of compliance and enforcement at a state level.

“So, I say to the states. Look in your own backyard, make sure it’s fixed.” Frydenberg said.

The Victorian government will also review the state’s Building Act to identify what legislative change is needed to strengthen the system and better protect consumers.

Wynne said, “This isn’t just about safety, it’s about fairness for people who bought apartments in good faith and were let down by dodgy builders or dangerous building products.”

Also among the Taskforce’s recommendations were the introduction of a statutory duty of care on building practitioners, strengthening disclosure requirements to tenants about the presence of combustible cladding in buildings, and the implementation of a process to pursue responsible parties for rectification costs.

However, the process of chasing responsible parties to pay for costs could be challenging.

A Deakin and Griffith universities report found it is common practise for small and large development and building companies to create single purpose vehicles or “two dollar companies” for each new project, which makes it very difficult to establish whether that has any assets, and that company could go belly-up at any stage during the proceedings or after.

Nonetheless the Taskforce recommends that the Victorian Building Authority be given the appropriate powers to require a builder to rectify defective building works beyond the issuing of a certificate of final inspection or occupancy permit.

Development and implementation of a protocol between the VBA and councils that sets out “accountabilities, mechanisms for cooperation and communication, strategic interventions and agreed procedures for referring enforcement actions” were also recommended by the Taskforce.

Furthermore, it called on building industry bodies, practitioners and professionals to “proactively seek to improve the culture within the construction industry”, with the Department of Environment, Land, Water and Planning and the VBA to review current legislative and regulatory provisions for the disciplining of building, plumbing and architecture professionals as a means to reducing delays and improving transparency.

The package has been welcomed by the industry, however some believe the $600 million package will not be enough.

A recent study by RMIT University of 629 known buildings estimates the bill could be as high as $1.6 billion.

APIV chair, WAVO vice president and the United Nation’s International Fire Safety Standards (IFSS) Coalition member Robert Hecek said it was inevitable that “we would follow the lead from UK Government in May this year where they allocated 200 million sterling towards replacing cladding on private home unit blocks, as the pressure on developers and builders failed to produce any results, except Lendlease, who paid $9.33 million to replace flammable cladding on two towers in Manchester’s Green Quarter”.

“The Victorian government should be congratulated for a world first programme to tackle high risk cladding and keep Victorian home unit owners safe from fire and financial hardship.

“Also although Victoria was the first state to offer loans to owners and body corporates with apartments covered in dangerous cladding, repayment of such bank loans was to be via council rates. We know this did not work so the current move is a blessing for all owners who simply have nowhere to go with unsaleable apartments,” Hecek said.

He added that the RMIT’s $1.6 billion estimate was based on 629 known buildings with flammable cladding in Victoria, but warns there could be as many as 1,200.

“If it is found there are 1,200 buildings, it may be the cost could be $3 billion to $4 billion.

“This is truly a global issue and in Australia, a national issue. It seems totally unreasonable that the federal government has not stepped in to support the states to date as this will not go away and it is unfair and unreasonable that the states should go it alone,” Hecek said.

Despite the federal government’s lack of interest in the issue, the Australian Institute of Architects repeated its call for urgent national reforms.

Victorian Chapter President Amy Muir welcomed the $600 million package.

“Victoria has set the benchmark and now it is time for other states and territories to take similar action in a nationally consistent manner with support from the Commonwealth government,” she added.

Muir said there ought to be strict controls introduced Australia-wide on the use and sale of combustible cladding, rigorous enforcement of existing safety and certification laws, more thorough examination of materials, and the registration of practitioners in building design, construction and maintenance.

The Builders Collective’s Phil Dwyer said the government’s package would be enormous from an emotional point of view not to mention the financial side however these owners should never have been placed in the position they were for such a long period of time.

“The owners being targeted for cladding removal and replacement when they had nothing to do with the building process and conformed with all the gatekeepers to deliver to them a compliant building/home. The cladding issue is an industry problem and as such the industry together with both the States and Commonwealth are the responsible entities.

“Our industry has been in decline for the past two decades and its failures are immense which is the very reason we have called for a Royal Commission as it will have the strength to resolve the issues unalike the past 70 plus enquires/reviews over the past 20 years.” Dwyer said.

British engineer and Chair of the UK government’s Independent Review of Building Regulations and Fire Safety Dame Judith Hackitt recently said in editorial on Australian Property Journal that even if the government pays to rectify the problems, it does not that mean those who cut the corners in the first place get let off the hook rather than being held to account.

“We need to drive a massive culture change in the whole construction and built environment sectors that holds people accountable for designing, building, maintaining and managing buildings which are safe for people to live in throughout the full life cycle.

“A new regulatory system needs to drive the right behaviours, make responsibilities crystal clear, create significant penalties for those who flout the law and incentives for those who do the right thing.

“The market needs to find a way to recognise the importance of quality which means changing procurement practices away from simply awarding the contract to the guy who bids the lowest cost.” Dame Hackitt said.