Special Reviews
Home building compensation

Home building compensation in NSW

In progress
Start Date
Dec 2019
End Date
Dec 2020

Review of home building compensation in NSW

We are investigating the efficiency and effectiveness of the Home Building Compensation Fund (HBCF) in protecting homeowners who are currently covered under the scheme.

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.

We have released a Draft Report which makes draft recommendations to:

  • 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.

Making it easier for providers to enter the market would put downward pressure on premiums and give builders and homeowners’ greater choice. Currently, the 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.

Most builders produce high-quality buildings, but efficient mechanisms are needed when things go wrong. Because the cover cannot be accessed if the builder is still trading when an issue arises, homeowners must pursue the builder through Fair Trading and the NSW Civil and Administrative Tribunal. We have found that it can take a lot of time and money for homeowners in this situation resolve their issue with the builder.

We also support the NSW Government’s approach to improving building quality through enhancing the compliance and enforcement regime under the Building Commissioner. 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 overall means fewer claims and lower premiums.

While icare is the only HBCF provider in the market, and is likely to remain the main provider in the medium term, we recommend tighter regulation to ensure its premium prices and business practices reflect those that a commercial provider would adopt in a competitive market. This could be done by SIRA, as the scheme regulator. Alternatively, IPART, as the NSW pricing regulator, could be given the on-going role of determining icare’s HBCF premiums.

We will hold a virtual public hearing on our Draft Report on 29 September 2020. You can register to attend here.

You can provide feedback by making a submission by 16 October 2020.

IPART will provide its final report on home building compensation to the NSW Government by November 2020.

The review team can be contacted by email.

Key Contact
Jessica Robinson
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