Special Reviews
Home building compensation

Home building compensation in NSW

Status
Consultation
Start Date
Dec 2019
End Date
Dec 2020
Last day for submissions
Deadline: 1 Jun 2020
Have your say
What

IPART has been asked to review the efficiency and effectiveness of the Home building compensation fund (HBCF) in protecting consumers who are currently covered under the scheme.

We have released an Issues Paper for this review for stakeholder comment.

The Home building compensation fund compensates homeowners if their builder is unable to complete building work or fix defects because of insolvency, death, disappearance or licence suspension for non-compliance with a money order made by a court or the NSW Civil and Administrative Tribunal in favour of the homeowner. It is funded through a mandatory insurance paid by builders for each project.

It applies for the following:

  • new buildings, renovations, alterations, and swimming pools
  • where the value of the building work exceeds $20,000
  • where the defect becomes evident within two years of the building work being completed for a minor defect, and six years for a major defect

Multi-unit dwellings over three storeys are excluded from the scheme. 

 

Why

Reforms to the Home building compensation scheme commenced on 1 January 2018 to improve the financial sustainability of the scheme. The market for insurance was opened to competition and innovation, and premiums were to be transitioned to levels that reflected the risk of different projects, and recover the costs of the scheme. At present, the Government-owned insurer, icare, remains the sole provider in NSW.

Our review will consider the effectiveness of reforms implemented in 2018 and whether the scheme could further mitigate risks of builders becoming insolvent reduce impediments to private sector participation. We are also interested in whether there are other products that would provide more value to builders and homeowners.

IPART’s review is only one small part of the NSW Government’s broader reform program in relation to the building and construction industry.  The Building Commissioner has been appointed to lead the implementation of the reforms and advise Government on any additional measures that may be needed to ensure better protections for homeowners and to lift building standards across NSW.

 

 

 

How

Our Issues Paper invites comments on whether the purpose of the scheme is being achieved effectively at least cost, and whether there are other products that could provide greater value for builders and homeowners. Further information, including the specific questions we are seeking feedback on are detailed in our Issues Paper.

We are seeking to make recommendations on the scheme that would:

  • Result in a choice of products that improve outcomes for homeowners and builders
  • Improve administrative processes
  • Encourage confidence in the market for construction of residential dwellings (up to three storeys), and
  • Increase the financial viability of the scheme.

As required by our terms of reference, we will focus on whether improvements can be made to help protect consumers who are currently covered under the scheme.

 

 

 

What Next

Due to the current COVID-19 situation, we have extended our timeframes for this review to provide more time for stakeholders to participate.

Submissions to our Issues Paper can be made until 1 June 2020. We will then be releasing a draft report by September for comment. Our final report is due to the Minister by November 2020.

 

 

Key Contact
Jessica Robinson
Email
Have Your Say
IPART routinely seeks public input into our reviews via submissions, public hearings, stakeholder workshops and community surveys.
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