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UK Can Learn from Melbourne’s Failing Solutions to Affordable Homes Crisis

New apartments are sprouting up over Melbourne: at present, they represent the fastest growing class of property ownership in Australia.

Market researcher BIS Shrapnel predicts that the country’s capital cities will see an estimated 162,650 new apartments go on the market over the next three years.

For those worried about Australia’s affordable homes crisis, this is welcome news indeed. But there may be a cloud behind the silver lining: an alarmingly high number of these new apartment blocks are laden with owner-reported defects.  Some of them will be so expensive to correct that a cheaper solution would be to simply rebuild.

Lax enforcement of Melbourne’s construction standards, combined with the use of cheap building materials, are being blamed for the cracks and leaks, sinkholes, asymmetrical windows, and diluted paint. There have even been reports of glass falling out of high-rises and fumes from car parks seeping into dwellings.

These defects are not maintenance or repair problems. They are entirely attributable to substandard construction, materials or design. Some defects may exist at the construction phase, only to cause problems later on, after being by faults in the original design or construction.

The quality of building work appears to change according to supply and demand. Apartments are sold for a certain price off-plan, but by the time the construction phase arrives, the cost of supplies may have increased and tradespeople have become scarce. Consequently, developers are cutting corners to save money.

During the past financial year there have been nearly 3000 complaints made to Consumer Affairs Victoria over defective workmanship, which represents an increase of 13% over the previous year. According to Strata Community Australia, there are at least 58 defective apartment buildings in Melbourne with a cumulative value of approximately $49 million.

One prominent example is the Lacrosse apartment complex in Melbourne, whose owner-occupants were informed that they had to cover a $20 million bill to address the building’s illegal cladding, which is highly flammable.  An apartment block in Lidcombe, Sydney suffered storm damage worth $2.6 million when its roof came off, but damage was in part due to faulty construction which didn't comply with the Building Code of Australia.

Specialists in Construction Insurance

Sinkholes appeared in one basement car park in Caulfield North. Rain came through the roof of an apartment tower on Collins Street. 34 apartment owners in Brunswick were told that it would be cheaper for them to pay $1.4 million to correct water damage themselves rather than sue a deregistered builder.

Another growing problem is windows and glazed balconies cracking, warping, or falling out entirely. Adrian Grocott, managing director of Express Glass, said that as a trade, glass installers are not licensed and building surveyors are not catching problems before new owners and residents take possession.

He warned that there is nothing preventing anyone from bringing in a substandard product from abroad, installing it in a Melbourne building and having the installer produce a paper stating that it complies with the Australian building code.

Tracey Gramlick, chief executive of the Australian Window Association, said that a growing number of builders were using cheaper imported glass and glazing to save money.

Some complexes are no longer complying with their planning permits, making them “illegal” and preventing the owners from selling. Many of these residents are being forced to pay out thousands of dollars to fix defects themselves because the developer has gone bankrupt or a lawsuit would be too expensive.

Domestic building insurance is required for all Victorian homes up to three storeys in height, but highrises are exempt. This means that if a builder goes into administration, property owners and investors can be stuck with repair bills. Someone can buy a lot for $400,000, only to find that they later have to contribute rectification projects that cost millions.

The Andrews government is talking about changing domestic building insurance requirements in the near future, while a new organisation called Domestic Building Dispute Resolution Victoria will have the authority to order builders to correct problems or pay to have them fixed.

Planning Minister Richard Wynne said that consumer protection measures are being strengthened to avoid expensive disputes and quickly resolve the ones that do arise. These new laws contain potential loopholes: while they do not allow builders to appoint their own surveyors, these builders can still ask their clients to appoint certain preferred professionals.

Builders Collective of Australia president Phil Dwyer said that under these circumstances, real charge is unlikely. He also expressed concern that the proposed dispute resolution system would not include enough building industry experts.

"It might be better, but I don't think it will be good," he said.

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