Still no cladding loans issued

By Sean Car and Alex Dalziel

Since the state government introduced its cladding rectification agreement (CRA) scheme in October last year, not a single loan has been granted to an owner affected by flammable cladding in Victoria. 

In July last year, the state government announced that it would be introducing CRAs as part of changes to the Local Government Act 1989. The scheme, which came into effect in October, allows owners to pay off low-interest loans through their council rates over a minimum of 10 years to pay for the removal and replacement of flammable cladding. 

The government told CBD News last month that it was still finalising CRA provisions with several inner-city councils.

“We’re working through agreements with a number of inner-city councils, most are keen to find ways to help apartment owners fix their buildings,” a spokeswoman for Minister for Planning Richard Wynne said. 

“We are encouraging all councils where flammable cladding needs fixing to work with apartment owners towards solutions.” 

In order for the loans to work, an owners’ corporation (OC) must enter a three-way agreement with a lender and the relevant council. However, the scheme is voluntary for councils and some, such as the City of Stonnington, have chosen not to be involved. 

The state government said that CRAs were just one possible funding option for cladding rectification work and that it was up to lenders and councils to consider whether a CRA was the best option. 

While the City of Melbourne is one council that has agreed to participate, its assistant chair of planning Cr Rohan Leppert said it was a “massively complicated” scheme.

The news comes amid new modelling by RMIT University researchers released in June, which showed the cost to replace combustible cladding in Victoria could be upwards of $1.6 billion. 

Debate continues among state government, the building industry and apartment owners as to who is responsible for replacing the flammable material, which has caused two fires in the CBD and Docklands.

In a statewide cladding audit conducted in 2018 by the Victorian Cladding Taskforce, 354 low/moderate-risk buildings and 275 high/extreme-risk buildings were identified. 

The municipalities of Moreland, Melbourne and Port Phillip have been found to have the highest number of buildings containing flammable cladding. 

The modelling used the average data for the number of dwellings within both medium- and high-density apartment buildings to estimate how many dwellings required rectification.  

The RMIT study conservatively applied lower rectification cost data, being $2500 per dwelling for low/moderate risk buildings and $20,000 per dwelling for high/extreme risk buildings. 

The modelling also applied costs based on reported quotes which ranged between $15,000 and $60,000, but noted that these figures were also conservative based on some sighted estimates up to $100,000. 

The study’s author Simon Lockrey said that the results demonstrated how prevalent the issue was in Victoria. However, with the cladding audits still ongoing, he said that costs would only rise. 

“There’s an argument that the numbers we used for the costing are low,” he said. “The reason we used $2500 and $20,000 was due to an article about rectification published in the Australian Financial Review.”

“When we spoke to owners we did not see a quote under $15,000 an apartment.” 

The Victorian Building Authority (VBA) announced in June that it had audited 1000 buildings in the 2018/19 financial year. It will audit a further 500 buildings this year.  

While the 2019/20 state budget included $160 million over the forward estimates to replace the cladding on 95 government-owned buildings, the government has yet to put any funding forward for residents.  

Victorian Greens leader Samantha Ratnam hosted a cladding roundtable meeting with residents and experts on May 21 at Parliament House, which called on the state government to fund rectification works for buildings identified as “unacceptable risk”. 

Participants argued that the financial burden owners faced by having to rectify their buildings, among increased insurance costs and loss of value on their homes was unfair. 

“The government must step up, listen and work collaboratively with residents and owners to fix the cladding problem, starting with funding rectification.," Ms Ratnam said.

Premier Daniel Andrews told 774 ABC Melbourne on June 25 that public money would be used as part of a package of cladding rectification reforms to be announced in July.

It is understood that the government will also establish a new agency Cladding Safety Victoria, which will provide the community with a one-stop-shop for advice and assistance on removing dangerous cladding.