Insurance Hikes & Land Taxes

Insurance Hikes & Land Taxes

Higher insurance premiums and land taxes; but more work for unregistered builders?

The recent decision from the Victorian government to increase domestic building insurance (DBI) premiums by up to 65% is another blow to housing affordability. This increase in premiums will do little to help increase the number of new homes built or existing homes renovated.  Consumers are already dealing with the pain of increased housing costs, and this will further compound the issue.

A likely outcome of the increased DBI premiums will be more consumers deciding that this insurance is not needed. Registered builders, including those working for owner builders named on building permits, commit an offence and risk their building licence if they enter into contracts or carry out building work on homes for more than $16,000 without insurance. This means that unregistered builders, who usually don’t trouble themselves with complying with other laws either, will end up doing work that should be done by registered builders.

In other disappointing news, the impact of land tax increases from last year’s Victorian budget has hit owners of land with granny flats. HIA understands that the reduction of the land tax threshold to $50,000 will exposure many owners of land with granny flats to a land tax bill. However, if the granny flat is occupied by a family member without rent being paid then a land tax bill may be a mistake. Builders who build and supply granny flats should review the information about government taxes and charges to make sure that consumers are warned about this possible tax bill.

Finally, the Victorian government has recently proposed reforms to improve energy efficiency in rented homes. Improving the energy efficiency of existing homes is expected to be more beneficial than imposing more stringent requirements on new homes. There are, however, legitimate concerns about the impact of these proposals on the supply of rented homes in Victoria. While the costs incurred by landlords may not be large, they add to other costs as well as restrictions of landlord rights that discourage investment in rental homes.

HIA also notes that much of this work in rented homes will be relatively inexpensive and will probably end up being carried out by unregistered trades or contractors. This segment of the home building industry will no doubt welcome the work but hopefully they won’t end up exceeding the $10,000 limit by doing other work while they are on site. Consumer Affairs Victoria will need to be vigilant to make sure that landlords and tenants are not exposed to poor work.

HIA members can contact HIA on 1300 650 620 to get more information or guidance on insurance hikes and land taxes.