Government takes lead on cladding

By Sean Car

The state government ended years of speculation last month when it pledged $600 million of taxpayers’ money to remove high-risk cladding from apartment buildings.

Premier Dan Andrews and Minister for Planning Richard Wynne made the announcement on July 16, which followed recommendations from the final report of the government’s Victorian Cladding Taskforce. 

The taskforce also recommended the Victorian Government seek a contribution from the Commonwealth to help fund rectification, mounting the case that cladding was a “national problem”. 

However, the federal government was quick to quash any speculation that it would pitch in, with federal treasurer Josh Frydenburg stating that his government would not be “picking up the bill” for what he labelled “a state responsibility”. 

The Andrews government will instead directly fund half of the rectification works and will introduce changes to the state’s building permit levy to raise the other $300 million over the next five years.

The program will be overseen by a new agency, Cladding Safety Victoria (CSV), which will manage funding and work directly with owners’ corporations (OCs). 

The government’s decision to use tax-payer money to rectify buildings with high-risk cladding ends years of discussion in Victoria around how removal should be funded, with the government set to recoup costs from “dodgy builders”. 

“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,” Minister for Planning Richard Wynne said. “The Commonwealth is shirking their responsibilities when it comes to helping fix combustible cladding.” 

While it welcomed the government’s plan for rectification, the Property Council of Australia warned that a “700 per cent increase” in building levies would add untenable costs to new construction projects in Victoria. 

The Property Council’s Victorian deputy executive director Matthew Kandelaars said he was “deeply concerned” about the impacts of the proposed increase.

“The Government is proposing a 700 per cent increase in the levy for new buildings valued at more than $1.5 million,” he said. “For works as low as $800,000, it is proposed the levy rate will double. These are not big building projects by any stretch.”

“The increases which are being proposed for new projects are disproportionate and unreasonable when you consider that the buildings being targeted for rectification have previously been lawfully approved under the Victorian building code.”

“We understand and support the imperative to strengthen public confidence in construction and building safety and address the looming insurance crisis. However, a unilateral and massive increase in construction costs is not the answer.”

The government’s taskforce, headed by former Victorian Premier Ted Baillieu and former Deputy Premier John Thwaites, has worked with the Victorian Building Authority (VBA) to identify 15 buildings that will have their cladding fixed first. 

The government has said that CSV would soon start contacting OCs and property owners, starting with those buildings that had been identified by the taskforce as the greatest risk, while the VBA continues to audit buildings across the state. 

The taskforce’s final report, released on July 16, stated that of the 2227 buildings audited in Victoria to date, 1069 were found to have combustible cladding. Of those, 72 were deemed to be extreme risk, 409 high risk, 388 moderate risk and 200 low risk. 

Federal Greens MP for Melbourne Adam Bandt welcomed the government’s decision and urged it to begin funding the removal of dangerous cladding immediately. 

“This is a victory for all the residents who have pushed for action. This is what happens when people speak up and demand that governments act,” Mr Bandt said.  

“Once this cladding is removed, the government should pursue those responsible in court and implement a new levy on developers to recoup the costs.”

The announcement would also appear to draw an end to the government’s failed cladding rectification agreement (CRA) loan scheme. CBD News reported in July that not a single loan had been issued in Victoria under the scheme since it was introduced last year. 

The complicated scheme involves a three-way loan between owners, council and a lender, which allows an owner to pay off a loan through their council rates. 

Lannock Strata Finance CEO Paul Morton, whose company funded the Lacrosse building in Docklands to enable the OC to commence rectification and pursue litigation, said that the government’s scheme was never commercially viable. 

“The market for lending to owners’ corporations is mature and competitive. There is no reason or justification for government intervention,” he said. “Lannock will lend 100 per cent of the amount required to fix all cladding rectification on strata buildings in Victoria.”

“From a lenders point of view there are lots of practical problems with the CRA. It’s uncommercial. There is no arrears management process in place and council has to set up all of these new systems, which they don’t normally do.”

The government’s announcement was also followed by the news of a landmark agreement being struck between states, territories and the Commonwealth on July 18, which will see a new national taskforce funded to pursue nationally consistent building standards. 

Held at the Building Ministers Forum held in Sydney, Minister for Planning Richard Wynne said the agreement would mean that the Australian Building Codes Board (ABCB) would be expanded, better resourced and force greater engagement from the building industry. The ABCB will now be tasked with preparing a national framework to guide implementation of recommendations from the Shergold Weir Building Confidence report. 

States and territories also agreed to work towards a coordinated approach on professional indemnity insurance. 

To view the Victorian Cladding Taskforce’s final report:

planning.vic.gov.au/building-policy/victorian-cladding-taskforce