Property owners could foot the bill to replace combustible claddings

Source:, June 5, 2019
Australian building owners face a bill that could run into billions of dollars to replace combustible cladding of the sort that fuelled the Greenfell tower fire in the UK, which killed 72 people, as well as fires in Australia and overseas. The cost estimate is based on our calculations for Victoria, which has had apartment building cladding fires in 2014 and 2019.
Nearly two years on from the Grenfell disaster, there is ongoing tension between policymakers, the building industry and owners about how to resolve the problem of combustible cladding. And little information is available about the scale of the issue for owners across Australia, particularly those living in apartments.
So what could the costs be? We looked at Victoria as a case study. Our modelling produced cost estimates of between A$250 million and A$1.6 billion. The ultimate figure will depend on the cost-efficiency of any rectification program and the risk level and size of the 629 buildings known to be affected – and many more could yet be identified.

How were costs estimated?

The 2018 Victorian Cladding Taskforce identified 354 low/moderate-risk buildings and 275 high/extreme-risk buildings in a statewide cladding audit update last October.
There is little data available on dwelling density for Victorian apartment building stock. Melbourne City Council (MCC) records show residential buildings with ten dwellings or more (medium-to-high-density buildings) have an average of 75 dwellings per building in the built-up municipality. Buildings of this density are known to be receiving notices from the Victorian government to act on cladding.
To model costs we have also used real quotes owners have received to rectify their properties, as well as quotes revealed in media reports. These quotes reveal a range of lower costs for low/moderate-risk buildings and higher costs for high/extreme-risk buildings, usually based on the work for varying levels of rectification.
Firstly, we conservatively applied lower rectification cost data, being A$2,500 per dwelling for low/moderate-risk buildings and A$20,000 per dwelling for high/extreme-risk buildings.
Secondly, we applied higher costs found in quotes and media reports. These are $15,000 per dwelling for low/moderate-risk buildings and A$60,000 per dwelling for high/extreme-risk buildings. These figures are still conservative, based on multiple sighted estimates approaching $100,000 per dwelling.
We have calculated costs for two scenarios for all 629 buildings identified by last October:

  1. an average of 75 dwellings per building as per MCC data
  2. an average of 37 dwellings per building, 50% less than MCC data to account for a higher proportion of lower-density developments affected (based on averages in municipalitiessignificantly affected by the crisis such as Port Phillip, Stonington and Moreland).

So how high could the bill be?

Our estimates show Victorian owners who are known to be affected may conservatively face a rectification bill of A$250-$500 million, if industry and government work with them to cap costs in economies-of-scale solutions. The bill may be as high as A$1.6 billion, if an inefficient approach is used and we have a higher proportion of larger buildings affected.

Author provided

Cladding audits are ongoing. The number of identified affected properties is likely to rise. At the 2019 Building Surveyors’ Conference, the Victorian Building Authority appeared to categorise over 1,200 private Victorian buildings as moderately through to extreme risk for combustible cladding.
If this figure is correct, our cost estimates are conservative and will double.
Our estimates do not factor in the apartments yet to be identified or, more broadly, the issues in other states that have also been identified.

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