Greater regulation of our building standards would make it easier to fund social housing
On Thursday evening, the Dáil accepted a Green Party motion to improve regulation of building standards and quality, implement a remedial scheme to assist homeowners resolve serious structural and safety issues resulting from defective building standards, and also provide new legal rights to protect home buyers.
This call for improved consumer protection and regulation of building standards is to be welcomed as housebuilding in Ireland continues to rise. Construction in Ireland experienced a year-on-year increase of 16.8pc in the fourth quarter of 2016, largely due to a 34.4pc increase in residential building work. This growth is set to continue with the Government's 'Rebuilding Ireland' initiative, which aims to deliver an average of 25,000 new homes per year by 2021.
Yet with such a high demand, there is a risk of corners being cut, and a reoccurrence of the issues that arose from defective materials such as pyrite, breaches of health and safety regulations, poor workmanship, and contractor insolvency in the late 1990s and early 2000s - all of which have been the subject of legal action in Ireland.
Lessons have indeed been learned and several measures put in place, such as the Building Control Amendment Regulations ("The Regulations") and the Construction Industry Register Ireland (CIRI). Nevertheless, while these will greatly reduce incidents of serious building failures, they will not eliminate them entirely.
A recent analysis of claims reported to BLP Insurance revealed that, in the UK - where similar building control legislation is already in place - 66pc of latent defect claims (by value) are still caused by poor workmanship. The vast majority of these occur in the waterproofing envelope of the building, allowing the ingress of water through windows, doors, roofs, and wall claddings.
While the Green Party have called for a remedial scheme to provide homeowners with a form of redress, another suitable option to protect consumers is to require that all building developers have a latent defect insurance (LDI) policy in place for every new housing project.
Superior LDI cover is now available for the residential construction sector to safeguard against the problems experienced following the last housing boom. This is a move supported by the Royal Institute of Architects of Ireland, which advocates the implementation of a "system of redress…for consumers to address problems in a timely manner without the need to resort to costly and lengthy litigation."
It is now possible to purchase cover that does not exclude pyrite and which has significant higher sums insured available.
LDI is typically a one-off cost amounting to about 1pc of the total construction value of a scheme for a 10-year policy, which is borne by construction companies and not the taxpayer. In the UK, prospective new home buyers can't obtain a mortgage unless the property is covered by a LDI policy.
Greater use of LDI policies would give enhanced protection to all stakeholders in the residential construction industry, including the taxpayer, developers, investors, and authorities. Not only would this help to ensure improved quality in the housing that is built, in the event of a worst case scenario it would also provide the Government with a form of redress should a claim need to be made.
It would also protect stakeholders against costly litigation, and enable developers to enhance their proposition and thereby price their proposed developments more competitively, which would ultimately save the taxpayer money.
Importantly, the greater use of LDI would help to make it easier to secure long-term funding for social housing projects by reducing risk and improving confidence among investors. This will help drive the construction of social housing that Ireland so badly needs.
Charles Barry is Regional Leader at Marsh Ireland, a global leader in insurance broking and risk management.