Special Reviews
Home building compensation

Home building compensation in NSW

Status
Review completed
Start Date
Dec 2019
End Date
Dec 2020
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Review of home building compensation in NSW

In November 2020, we submitted our Final Report on the efficiency and effectiveness of the Home Building Compensation Fund (HBCF) to the NSW Government. 

The scheme provides homeowners up to $340,000 of cover for houses and low-rise apartments if their builder cannot complete a project or rectify defects because they are insolvent, or have disappeared. 

Our Final Report makes recommendations that would: 

  • Reduce the average value of claims on the scheme
  • Make it easier for new entrants to compete with the NSW Government insurer icare to offer home building compensation
  • Ensure faster dispute resolution between home owners and builders
  • Regulate icare’s prices and service more tightly, given its position as the main provider in the market.

Currently, premiums add more than $4000 to the cost of building an average $350,000 home, or $16,000 to each low-rise apartment of the same value. This is higher than premiums for similar schemes in other states. 

Making it easier for providers to enter the market would put downward pressure on premiums and give builders and homeowners’ greater choice. However, as icare is likely to remain the only HBCF provider in the market in the short-term, we also recommend additional regulation to ensure its premium prices and business practices reflect those that a commercial provider would adopt in a competitive market. 

While most builders produce high-quality buildings, efficient mechanisms are needed when things go wrong. Currently, it can take a lot of time and money for homeowners to pursue their builder through Fair Trading and the NSW Civil and Administrative Tribunal.  

Our report recommends measures to improve the timeliness of dispute resolution and complements the Government’s approach to improving building quality through enhancing the compliance and enforcement regime. If all builders know they will be held accountable, defects are less likely to occur in the first instance. In the longer run, fewer defects would lead to fewer claims and lower premiums. 

 

 

Key Contact
Jessica Robinson
Email
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