The Honourable John Carey MLA
Minister for Planning, Lands, Housing and Homelessness;
11th Floor
Dumas House
2 Havelock Street
WEST PERTH WA 6005
Via E-Mail: Minister.Carey@dpc.wa.gov.au
cc:
The Hon Sue Ellery
Minister for Finance, Commerce and Women’s Interests
12 Floor
Dumas House
2 Havelock Street
WEST PERTH WA 6005
Via Email: Minister.Ellery@dpc.wa.gov.au
The Honourable Roger Cook MLA
Premier of Western Australia
13th Floor Dumas House
2 Havelock St
WEST PERTH WA 6005
Via E-Mail: Roger.cook@mp.wa.gov.au wa-government@dpc.wa.gov.au
Dear Minister
Thank you for meeting with me today.
I’d like to thank you for the frank and open discussion.
The major objective of the HBAG is to ensure you are aware of the difficulties small to medium-sized home builders are facing. You hit the nail on the head when you said the Government had put in place measures that allowed builders on Government contracts to pass on fair and unavoidable price rises.
Home builders abiding by your contract were prevented from doing what you thought you should do. The law said we could not pass on price rises. Then – on top of that – the federal and state government stimulus overheated demand in an industry that simply could not keep up.
The result was record building company collapses as Builders did everything possible to avoid insolvency including selling many of their own assets leaving everyone a loser:
- The Client’s home is delayed by many months or years as the Builder slowly collapses;
- Staff, Suppliers and Sub-Contractors lose substantial income and revert to increasing prices to recover losses and then need to charge more to recover their losses;
- Housing Indemnity Insurance sees a new Builder is selected to complete the remaining works at a much greater cost; and
When the dust settles everyone has lost something.
As I tried to stress, the HBAG is offering positive solutions – not just talking about the problem.
Apart from the review and amendment the Home Building Contracts Act (1991) – which is not fit for purpose in the present environment – the HBAG proposes:
A low, or no interest loan scheme (similar to that which operated during COVID-19.
A survey of our members and supporters ranked the introduction of such a scheme as the second most favoured assistance option after an Assistance Package that directly helped builders through their difficulties. It was made clear to the Home Builders Action group [HBAG] that banks and other mainstream financial institutions are restricting lending on the basis that after the past two years of loss-making trading had left many builders unable to qualify for loans essential to bolster cash flow.
In that context, a Government supported low, or no interest loan scheme is seen as an important support for long term reputable builders.
And I can see no basis for any concern about impacting prices. The proposed low, or no interest loan scheme is not “free” or “grant” money that will contribute to overheating the sector. In fact, it will have the opposite effect by increasing the capacity of the industry to deliver the homes demanded of it in circumstances where there is inadequate indemnity insurance and where the worst of all worlds is a builder closing its doors because of impossible cash flow challenges.
And an intelligent Industry Assistance package should address:
1. The funding crisis resulting from 2 years of losses and that means No and Low interest loans Assistance for legacy and loss-making contracts resulting from the shortcomings of the Act;
2. Indemnity schemes that work and don’t leave builders and homeowners high and dry; and
3. The need for a much closer working relationship between the industry and government.
In CONCLUSION and SUMMARISING: the HBAG acknowledges that as is almost always the case in these sorts of problems, the answers are a complex matrix of reasons.
Well intentioned Government Grants overheated a struggling sector.
The Building Industry had endured three years of neglect and decline as thousands of Tradespeople left the Building Industry in a seismic shift of labour to the resources industry. Our Industry previously had the capacity to build up to 24,000 homes but increasing costs, labour shortages and government grants with unrealistic commencement timelines put the Industry under immense pressure.
Now, the industry only has the capacity to complete around 15,000 homes per annum, far fewer that needed to solve the problems the industry faces or to meet the unrealistic demands of Government.
The ABS Data for Building Approvals since 2015, tells the story:
Approvals were:
- $25,420 in 2015
- $19,490 in 2016
- $18,360 in 2017
- $15,470 in 2018
- $13,570 in 2019
- $23,450 in 2020 [When the Government Grants kicked in]
- $21,240 in 2021
- $14,950 in 2022
Government has access to all of these alarming statistics and it is essential that they be understood in making sure everything is done to mitigate this boom and bust cycle from happening again.
Had Government recognised that Approvals had fallen off a cliff in 2018 and 2019, action to support the industry would have added to the housing stock and ameliorated many of the issues confronting the industry and the community. Instead, the industry is now confronting unprecedented problems from a position of weakness.
Builders have borne the brunt of unprecedented price rises and have been scrambling to make progress on site and now they have prioritised work on profitable jobs to generate funds to pay for the heavily loss making legacy projects. Clients waiting years for their homes to be built are clogging up the Rental Market and there is estimated to be between 15,000 to 20,000 homes still to be completed as a result of the Government Grants.
So, there are tens of thousands of clients who have waited years for their houses to be completed; paying Interest and renting while they wait. Compounding and amplifying the problem is the fact that these are the houses that Builders are losing tens of thousands of dollars on and the houses where progress has slowed to allow builders to concentrate on profitable jobs to avoid having to close their doors.
Unless the decision makers understand and accept the problem, recognise the solutions and act on them, 20-24 will be a very, very difficult years for home buyers, builders, trades and suppliers.
Finally, as I stated at the outset of our discussions, the Home Builders Action Group had previously advised that it would be represented by myself as the group’s chairman and by Damien D’Ascenzo, the vice chairman of the HBAG. And so, I was naturally surprised and disappointed that Damien was excluded from the meeting even though he was available and in the building.
The HBAG understands that numbers should be limited if it was seeking to be represented by an unwieldy or large number but, in this instance, it believes two representatives – the same representation that attended the Housing Industry Round Table – is entirely appropriate. And, in the event, Mr D’Ascenzo has been an industry leader in the small to medium sized sector for more than 20 years and was a recent award winner at the HIA Awards Night.
And, of course, Michael McGowan’s attendance at out meeting was approved without any reference to the HBAG and that the meeting has been rescheduled twice before. The HBAG accepts the onerous nature of your schedule and, while it would have thought it should have been consulted about Mr McGowan’s attendance, is content that his status with the housing Industry Association means he could potentially make a valuable contribution.
Thank you once again for meeting with the HBAG. Please don’t hesitate to contact me if the HBAG, or I can be of any assistance to you.
Best Wishes
Yours sincerely
Jason Janssen
0412 373 404
CHAIRMAN
Home Builders Action Group