Cracked apartment bill rises above $6bn

Via Martin North:

New research commissioned by the construction union has revealed that Australia’s building and construction crisis will cost $6.2 billion in remediation and associated costs.

The independent research, undertaken by Equity Economics and contained in the report ‘Shaky Foundations: The National Construction Crisis’ being launched today, analysed the additional costs to owners of remediating water leaks, fire safety breaches, structural failure and combustible cladding and associated costs, in apartment buildings constructed within the last ten years.

The research also found that over 3,400 apartment buildings across Australia had defective, non-compliant combustible cladding installed, and would require remediation work to make the buildings safe.

CFMEU Construction and General Division National Secretary Dave Noonan said that the cost of Australia’s building and construction crisis was now clear, and unfortunately often homeowners would likely be the ones to foot the majority of the bill.

“Australia’s building and construction crisis will cost a staggering $6.2 billion to fix apartments they’ve already paid for.

“This includes the cost of remediating water leaks, fire safety breaches, structural failure and combustible cladding, and costs associated with increased insurance premiums, legal fees and alternative accommodation.

“In some cases, the costs of this remediation has been up to $165,000 per dwelling – enough to sink many families.

“Tens of thousands of families, many of whom have purchased their first home, are now stuck with the crippling cost and mental anguish of owning homes that they may not be able to live in, are unsafe and cannot afford to repair.

Mr Noonan said Australia’s building and construction crisis was brought about by a range of factors the union has been raising concerns over for many years.

“This is the result of the construction industry’s obsession with ‘deregulation’ at any cost, and poor oversight by government.

“It’s the result of years of not enforcing building standards and of allowing industry to ‘self-approve’ with little or no oversight.  Often, it has fallen on the union to blow the whistle.

Mr Noonan also said that a national problem required a national solution and that the union was willing to work with government to resolve these important issues for the community.

“This national crisis in construction can only be resolved through close consultation with workers and the Construction Forestry Maritime Mining and Energy Union will continue to play a constructive role in developing solutions for our industry.

“We’ll be producing detailed policy solutions and will work with the Federal and State governments across Australia over the coming months.  Now is the time to come together – not silence dissent.

It’s literally the broken window fallacy.

Houses and Holes

David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the fouding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal.

He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.

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Comments

  1. I feel sorry for the owners who will have to foot the bills. Thank god the tax payer will be spared any expense in this debacle.

  2. Complex Carbon Unit

    Self regulation ! What a joke ! As if that was ever going to work , it’s all falling to bits on Scumo,s watch, how great it is!

  3. It may have been quote before but isn’t this the subprime crisis all over again. Except it is not the bonds that are subprime, its the buildings…

  4. The Horrible Scott Morrison MP

    There is no problem with taxpayers footing the bill because the money will be immediately spent into the economy. It’s the same as tax cuts for the poor.

  5. I don’t think Australian families have purchased these units, more like our friends from China who just want to park their wealth somewhere away from the hands of the Chinese Communist Party.

  6. bolstroodMEMBER

    From a previous post on another thread today.
    A letter in today’s SMH says it best ;
    “Buyers paid market prices for their apartments, and now the building commissioner thinks they should be offered low interest loans to fix the defects. here is a better idea. Sieze the assets of the building and development companies, their directors and past directors, up to the value of the remedial work.
    If that is not enough, sieze the assets of the political parties that deregulated the building industryand allowed their developer mates to get away with shoddy work.” … George Rosier, Carlingford.
    I would only add that prison should not be off the agenda for Builders and developers and Certifiers if they are found to be guilty of substandard work.

    • I’m surprised the usual high profile ambulance chasing law firms aren’t onto this, surely they’d be able to find evidence the property developers or their building contractors were negligent in confirming if the building met the requirements of relevant, Local, State and Commonwealth legislation.

  7. As a diligent and responsible renter I hope that after the government bails out people who made poor investment purchases same government then provides me compensation for not over-borrowing / lying on my loan application which caused me to miss out on the once in a lifetime housing boom that now has me locked-out-forever.

    And my other poor investments, too. The government can get to that after paying out the renters.

    Then we can talk about some unfortunate bets at the races.

    • darklydrawlMEMBER

      ^^^^ This! Where is the limit on this? If they are going to bail out these apartment highrises, they also need to bail out everyone who has made a poor investment decision. Looking forward to getting some dud share investment monies returned soon. Also, I bet not a single home owner has said EVER “Oh, I have made a lot of capital gains here, I will give half to the Government and taxpayers”.

  8. Along with all the builders, certifiers et al what were the CFMEU doing while these broken buildings were being built?