Thursday, 29 May 2025

Building Legislation Amendment (Buyer Protections) Bill 2025

Second reading

Debate resumed on motion of Ingrid Stitt:

That the bill be now read a second time.

David DAVIS (Southern Metropolitan) (11:44): This is the Building Legislation Amendment Buyer Protection Bill 2025. This is a bill that has been drifting around for some time. It is a bill that the government has been slow to bring forward. It is a bill where consumers have been thumped and crunched for a long period, where the government has been slow, very slow indeed, to take action that will assist the community.

The problems at the Victorian Building Authority and the problems with insurance on building have been known for a long time. I have mentioned this in the chamber repeatedly. In fact I have called the VBA a basket case on numerous occasions in this chamber, and the reason I did that is because in fact it has been an absolute basket case. I know the government has embarked on a reform process. I know the government is trying to address some of the many problems with the VBA and with builders insurance and with building protections for consumers statewide. This bill is part of that process, but it is clear that this bill falls short. It is clear that the bill does not achieve what the government wants to achieve, and that is the appropriate balance between the regulation of builders and the protection of consumers. Greater regulation tends to add to costs. We have a housing supply problem and we have a significant issue with the ability of young people to get into homes, but this bill does not really deal with many of these points.

The objects of the Building Legislation Amendment (Buyer Protections) Bill 2025 are to provide for the transfer of the Victorian Managed Insurance Authority (VMIA) domestic building insurance operations and the operations of Domestic Building Dispute Resolution Victoria to the Victorian Building Authority. I have got to say, we are moving it to the Victorian Building Authority, a body that has been a basket case for a long while, despite the government’s attempts at reform. I know there have been referrals to IBAC for corrupt practices that have occurred at the VBA. I know the new CEO there is trying to clean up these matters, and I wish her well in that process. But this is giving more authority to the VBA at a time when we are still unsure whether the changes and reforms that the government has tried to institute have worked. The bill establishes a monopoly for the provision of domestic building insurance for homes, including in buildings up to three storeys, by the VBA; establishes a statutory insurance scheme for homes, including buildings of three storeys, to be operated by the VBA; provides the VBA with stronger powers to order the rectification of defective, noncompliant and incomplete building works; and establishes a system of developer bonds for residential apartment buildings above three storeys of 2 per cent of build costs for up to two years.

As I say, this is designed to rectify the problems. We saw – and people will remember – the problems with the Porter Davis firm, which because of the increase in construction costs and because of the failure to act in a proper way left many home owners high and dry without insurance. I think many believed that the insurance system was much more extensive than it was. It is genuinely a last-resort insurance system that will have been in place in this state until this bill moves forward.

As to cases of poor workmanship on homes by builders – and, look, I want to be very clear here: the vast majority of builders do a good job. The vast majority of builders are honourable people trying to do a good job and to bring homes to our community, but there is a small group and often repeat offenders where issues have developed over time. Those issues have often been very serious and repeated, and consumers have been left with firms that have not completed the rectification works that are required. The consumer – the home owner – is then often left without that rectification work that is required.

The government has been preparing a response to a number of these problems, including a promised review of the Domestic Building Contracts Act 1995, which controls the basis of the contractual relationship between builder and customer. While purchasers of new homes expect government to provide contractual safety through adequate regulation and supervision of the building industry, all key building stakeholders have expressed strong opposition to this particular bill in its current form. One of our concerns as an opposition is the establishment of the new Building and Plumbing Commission. It is an aggregation of existing personnel from the VBA, VMIA and Consumer Affairs Victoria, and without reform of initial contracts there seems to be no guarantee that dispute resolution, quality management of projects and enforcement will be enhanced. There is no sign that extra monitoring or management of building quality has been identified as part of the solution, and it should have been. The 10-year period for defect claims – customers are able to lodge, under this scheme, a claim for defects from builders for up to 10 years; that is an increase from seven. Without clear definitions of what the word ‘defect’ can mean and without obligation for consumers to raise concerns and issues in a prompt and timely manner this will lead to ongoing uncertainty and will lead to fewer builders and increased costs. No doubt this bill will add to the cost of housing, which has already surged.

Monopoly insurance is another issue. As with other state government insurance like the TAC and WorkCover, there is a strong concern, a real concern, about the risk of bureaucratic costs that will not be capped. Premiums will steadily increase, compliance costs for small builders will become more burdensome and the risk of a new effective tax impost is very real. Some of us remember the old Housing Guarantee Fund. We have been around long enough to remember the old Housing Guarantee Fund, and that became an absolute dog’s breakfast. In the early 1990s the scheme ran out of control, the costs blew out and the community paid a big price in additional costs of building and outcomes. Nobody should believe that a government-run monopoly insurer is necessarily the solution. The President would have been around at the time when the old Housing Guarantee Fund was in operation. He, I am sure, will remember that it was replete with problems. There were endless stories in the media. The more things change, the more they stay the same. I am interested to see how this actually turns out, but I am cautious and nervous, I might say, for the outcomes for our consumers statewide.

The developer bond scheme aims to protect apartment purchasers in buildings over three storeys. While the bond scheme seeks to address a real problem of holding builders responsible for their work, the mechanism proposed is considered by many in the sector as clunky and not well coordinated with existing accountability structures, such as those remaining in place under the Building and Construction Industry Security of Payment Act 2002. There is also universal concern that the 2 per cent bond scheme as proposed will just add 2 per cent to the cost of building.

Young families can ill afford another 2 per cent on top of the costs of building. This is going to be another cost which makes building more expensive. Even today we have seen the government’s proposal for a 234 per cent increase in mining and extractive industry costs. The extractive industries are direct inputs into the cost of construction, so if you if you jack up the fees and charges on quarries, you add to the cost of housing. It is a direct input cost. If you make rock more expensive, the concrete that is produced, whether it be for housing or for major projects, becomes more expensive. A government tax on extractive industries, on quarries that produce rock for concrete, is a straight input cost that is going to jack up the price of houses.

Everywhere you look this government is jacking up the costs, the taxes and the charges and making housing and construction in our state more and more expensive. We wonder why costs blow out – because government puts new taxes on. Aside from their chronic inability to manage projects, there is also this factor of new and increased imposts and burdens put on.

I should say that there has been a wide range of consultation, and our shadow Richard Riordan has talked very widely to the major bodies, the Housing Industry Association, the Master Builders, the property developers – a range of individual firms, I might add – the Property Council of Australia and also to many consumers. I know every electorate office, mine included, has a steady stream of people coming forward with trouble and poor performance by builders. Families that have been left without proper arrangements in place, without repairs that should be made inside the current seven-year period, and soon to be, if this is carried, the 10-year period – these defects that have not been properly acquitted by builders.

In that sense, steps are welcome to go forward and strengthen those points. The question is: are these the right steps? Are these going to deliver the right outcomes? And we are far from convinced that the right steps and the right outcomes will be achieved.

The construction industry and consumers all acknowledge that there are serious issues around building quality rectifications and the building warranty insurance scheme. We just saw what a dog’s breakfast the approach of the government was, with many of those firms going under and leaving consumers high and dry. The Victorian Managed Insurance Authority knew about these problems a lot earlier. I know this because I have actually seen their minutes and looked closely at their minutes, and their minutes show that they knew a long way ahead and failed to act in a timely way, leaving families exposed to the issues with many of these firms.

There is also no clarity in this about the contents and obligations in a building contract that are often at the root of disputes between builders and consumers. VCAT is still the ultimate umpire, and it is poorly resourced and funded. It is under-resourced, and in committee I will raise with the minister a couple of cases where there have been long waits. One I will highlight has been a six-year wait, and they still have not got their proper VCAT hearing. In this case the home owner has tried valiantly to get a hearing at VCAT, and the builder has used every legal shenanigan and trick in the book to try and avoid it. I understand it is scheduled for July, but this is years down the track and a case study in how things ought not be run. The future renaming of the Victorian Building Authority to the Victorian Building and Plumbing Commission, the VBPC, is symbolic perhaps – that is the best you could say. A badging issue is truly what it is. The 10-year defect liability responsibility is long and not sufficiently defined. The definitions are a problem.

Assuming legislation is passed, we will want to monitor this extremely closely to get a clearer understanding of how this will actually be implemented. As I say, I welcome the government’s newfound enthusiasm to clean up the mess at the VBA. It has been a mess for a long while, and I wish the CEO of the VBA well in trying to clean it up and welcome the referrals that have occurred from the VBA to IBAC to deal with some of the corrupt practices that have clearly been occurring at the old VBA – it has been a group of old dinosaurs running the museum, as it were.

A member interjected.

David DAVIS: Well, it is actually quite serious what has gone on. It is deadly serious. I have raised this matter in this chamber many times over the years. I have done that because, as many of us in this chamber have had, people come to our offices and they are in dire need. Their major asset is their home, and the building of the home has not been acquitted properly – there are serious defects. They cannot get the builder to take proper responsibility, and they push forward in every way they can to get an outcome. I understand why this bill is necessary, but I also do not think the government has got to the proper solution, the proper outcome.

Business interrupted pursuant to standing orders.