Why low-cost defects loans are not enough

Despite the first rumblings of discontent among some commentators, NSW seems likely to offer strata owners interest-free loans to rectify defects  in apartment buildings.

And so they should. In fact, they should do a lot more.

Newly appointed Building Commissioner David Chandler last week told the parliamentary committee inquiry into the building industry that low or no-interest loans are among the favoured options that he plans to recommend, within the next two weeks, to deal with the growing crisis of confidence in the apartment building industry.

According to a story in the Sydney Morning Herald, this would involve direct support for residential apartment owners suffering significant defects or facing large bills to remove dangerous cladding, possibly including low or no-interest government loans.

The NSW government has not offered compensation and Mr Chandler said he did not support taxpayer cheques to fix previous behaviour. Government loans would be repaid, he said.  Already, the commentariat is heavily stressing that this would involve “taxpayers’ money”.

Why should lucky taxpayers who didn’t buy defective apartments pay for other people’s mistakes? Well, let’s not forget how we got into this mess in the first place.

The largest contributor to the current problem was self-certification, introduced to accelerate the apartment building program which, in turn, has contributed billions to state coffers in stamp duty and general revenue from increased commercial activity.

Who’s to blame?  Previous governments and the builders and developers.  Who benefitted? Apart from the corner-cutting builders and developers, it was us, the taxpayers, through direct revenue like stamp duty, and indirect revenue through the stimulus all this activity provided to the economy.

Want a shiny new sports stadium? A motorway tunnel? A train system?  Come on down! We have shiploads of cash, thanks to the building boom.

And who paid for all this? Apartment owners and, indirectly, renters. What did purchasers get in return for committing to 25-year mortgages and draining their life savings for a deposit?  Less consumer protection than you’d get for an electric kettle or a new car.

There is much talk in the building industry of “duty of care” – the responsibility on builders and developers to provide what they promised and fix it if it isn’t up to scratch (which, it has to be said, is legally non-existent in terms of relationships between builders and apartment owners).

So what about the duty of care of successive governments that encouraged us to buy apartments to fill their coffers (while, until recently, also taking political donations from developers)?

Okay, Mr Chandler, we understand your baby-steps approach to putting things right, and your reluctance to spark a boom in building costs, but let’s get real.

You work for a government who, along with its predecessors, oversaw one of the biggest con games in NSW history.  It’s time both sides of government owned up to their collective part in creating this mess, and paid up accordingly.

We keep hearing about the problem being the “crisis of confidence” in the apartment sector.  What?  People are reluctant to buy your shoddy product? Well boo-bloody-hoo!

The real problem is a crisis of construction, with potentially thousands of owners secretly working away to fix the disasters handed to them when they signed their sales contracts.

So, no, low-interest loads are not enough. No apology required – just get the chequebook out.