The home building compensation scheme cannot continue in its current form. It needs to become financially sustainable so it can continue to protect homeowners into the future.
What was wrong with the scheme?
The home building compensation scheme has been underfunded and has become a burden on all taxpayers. It does not operate as effectively or efficiently as it could. As a monopoly product, builders and consumers have had no choice of product or provider to suit their needs.
The NSW Government has been the sole provider of cover since private insurers left the market in 2010, and despite some improvements, premiums have not been sufficient to cover the costs of emerging claims.
By the end of the 2015/16 financial year, the scheme had unfunded liabilities of $375.8 million.
The video below explains the reasons for reform.
Benefits of reform
Other building industry reforms
Improvements to the home building compensation scheme will complement other NSW Government reforms that promote a strong building industry.
We will continue to work closely with co-regulators such as NSW Fair Trading to support effective industry regulation.
When will the reforms be implemented?
The NSW Parliament has passed laws needed to implement the reforms.
We are designing the details for how the new scheme will operate. We have been consulting industry and other stakeholders during the second half of 2017.
Insurers and providers will be able to apply to us for a licence to sell home building compensation products in 2018.
History of reform
The NSW Government announced the scheme reforms in November 2016. Further consultation was conducted during the development of a bill to amend the Home Building Act and related legislation.
The Home Building Amendment (Compensation Reform) Bill 2017 was introduced to Parliament in May 2017.
On 20 June 2017, the NSW Parliament passed legislation to overhaul the home building compensation scheme by allowing competition into the market, ensuring the scheme’s financial sustainability and maintaining high levels of consumer protection. Read the media release