The Mascot Towers crisis is the second seismic shock delivered to the Sydney high-rise residential market in just six months, following the emergency evacuation of residents from the Opal Towers at Homebush on Christmas Eve. Loading Residents from 156 of those 392 apartments are still not back in their homes, though builder Icon says it hopes to have repairs completed by next month. A specialist report provided to then NSW planning minister Anthony Roberts earlier this year blamed cracking and movement in the Opal complex on “construction and material deficiencies” affecting a number of concrete plates and hob beams. But the cause of the Mascot Towers woes so far remains a mystery. Strata records reportedly show problems emerging as far back as 2011. But many are convinced the sudden deterioration which prompted the evacuation a week ago is linked to construction at a neighbouring site.

All the residents of the 132-apartment complex know for sure is that they won’t be allowed home in a hurry, and will have to stump up a $1 million contingency fund to start stabilising the complex. And that is just the beginning of the financial pain. Redress seems virtually impossible. The statutory warranty period for claims for recompense (up to two years for “minor” defects and up to six for “major” defects) has long expired. And in any case, owners have been told that the builder/developer of the complex went into administration “some years ago”. The evacuation underway at Mascot Towers last week. Credit:Ben Rushton Owners Corporation Network spokesman Stephen Goddard says Mascot Towers owners have "only themselves upon whom they can rely”. For some, the only avenue of escape may be personal bankruptcy “because they can’t afford the mortgage repayments or the special levies”.

How, Goddard wonders, can the “aspiration of owning your own home go so terribly wrong, that the outcome could be bankruptcy [because] of the absence of consumer protection?” In an already sluggish housing market, the Mascot Towers fiasco is another body blow to confidence in the high-rise residential sector at a time when the industry can least afford it, and when the city has never been more dependent on it. More than 114,000 apartments have been built in Sydney in the past five years. Government forecasts indicate around another 140,000 over the next five years. Nearly 30 per cent of Sydneysiders are apartment-dwellers and that proportion is set to keep rising. Yet what worries many experts is the suspicion – some say the sure knowledge - that the Opal and Mascot Towers cases represent just the tip of a very large iceberg.

Ross Taylor, a consultant who specialises in remedying building defects, is dealing with one case where all 600 bathrooms in an eight-year-old building need replacing. There has been no publicity. And that is not unusual. Loading Taylor says “there could easily be another 10 buildings in that street in Mascot that might have a large array of defects, even more costly to rectify [than Mascot Towers], but you will never hear about them in the press. There is this huge silent pain that many high-rise home unit owners go through.” Karen Stiles, executive officer of the Owners Corporation Network, calls it a “conspiracy of silence”. She recounts sitting down recently with a strata manager whose company presides over a number of new residential strata complexes. The manager confessed that 72 per cent had begun manifesting defects of one kind or another.

Stiles says several factors contribute to the fact that few cases reach the public eye. Many unit buyers, downsizers in particular, are like “ deer caught in the headlights” when problems develop, she says. Strata managers can be hard to spur into action, especially if they owe primary allegiance to the developer. When defects are discovered, owners will often seek to solve the problem under the radar, so they don't suffer the same fate as the owners of the Mascot and Opal developments: inability to rent or sell. (One agent reported this week that opportunistic buyers were ringing up with "ridiculous" offers, $10,000 to $100,000, for an apartment in Mascot Towers where one bedrooms with studies had previously been listed for around $750,000.) In relatively few cases, builders are tracked down and might be willing to make amends – if the company has not vanished or rebirthed like the mythical phoenix. But owners are then forced into non-disclosure agreements. In all, says Stiles, there has been a “total failure of the regulatory system. Peak bodies across the industry have been begging the government to do something”. Governments can't say they were not warned. In February 2018, a report was presented to the Building Ministers’ Forum - comprising ministers responsible for construction in each state – compiled by a former head of the Prime Minister’s Department, Peter Shergold, and a leading consultant in the field, lawyer Bronwyn Weir.

The pair warned that problems in the building and construction industry were legion, with the result that there was “diminishing public confidence that the building and construction industry can deliver compliant, safe building … [for] the long term”. They cited multiple instances of compliance failures in recently constructed buildings; a lack of competence of many operators, widespread lack of understanding of the national construction code; and pervasive poor documentation. Loading “On occasion, builders improvise, making decisions on matters which affect safety without independent oversight,” they cautioned. “We found that, until relatively recently, there has been almost no effective regulatory oversight of the commercial building industry by regulators. Those involved in high-rise construction have been left largely to their own devices.” In February this year, in the run up to the state election, then NSW minister for better regulation Matt Kean promised the Berejiklian government would support the “vast majority" of the 24 Shergold-Weir recommendations, starting with the creation of a specialist building commissioner and an overhaul of compliance reporting and professional licensing.

Yet so far, the reforms have failed to materialise. Those with longer memories recall that little came of an even more detailed and equally damning report into the building industry prepared by a former state Treasury head Michael Lambert in 2015. Most of his 150 reforms were left gathering dust, with the exception of an overhaul of some fire safety measures. Lambert lamented to The Guardian earlier this year that he had tried to achieve progress on his 2015 report but without success. “The bureaucrats don’t want change, and ministers do not seem motivated to push for change,” he said. CEO of developer lobby Urban Task Force Chris Johnson told the Herald that there was “quite a lot of industry concern at the time ... that while this fairly thorough report [of Lambert’s] had been done, the government did not seem to be all that interested on following up”. That may be about to change now. This week a spokesman for Kevin Anderson, the new Minister for Better Regulation, assured the Herald that February’s commitment to the Shergold-Weir report was still in place, and that talks were under way with industry on how best to implement it. "The government is committed to restoring confidence," the spokesman said. "We will be appointing a new Building Commissioner as well as introducing a suite of reforms to create greater transparency, accountability and quality control across the sector". Weir says governments have been reluctant to upset the flow of money and jobs from the industry. “But it's got to the point where they don’t have a choice now - the public interest unquestionably has to be put first.”

Residents of Opal Towers assemble for a meeting in December. Credit:Dominic Lorrimer The origins of the current crisis, in the eyes of experts the Herald has consulted, stems from the growth of what is known in the industry as “design-and-construct” contracts for residential high-rise. The design-and-construct model means a developer can get approval to start a project on the basis of partial concept drawings, a builder then tenders for construction and takes over the rest of the design work as construction takes place. Unlike the system which prevailed two or three decades ago, when an architect or clerk of works or engineer would see the whole process through from start to finish, in the design-and-construct model it can be a bit like pass the parcel. Different individuals may pick up the design and engineering components at different stages, leaving more room for error, lack of accountability, and misinterpretation of drawings and documents. Mistakes are more easily made. Responsibility is more easily evaded. Professor Bill Randolph, whose City Futures Research Centre at the University of NSW is studying defect prevalence in 600 blocks in Sydney, Parramatta and Canterbury-Bankstown, says it's “all about risk shifting”.

“The developer contracts to the builder, the builder contracts to subbies and subbies contract to [the] next layer down. Everyone tries to blame everybody else, once there is a problem; and there are all sorts of opportunities for people to cut corners,” he says. More than 114,000 apartments have been built in Sydney in the past five years. Credit:Dominic Lorrimer “You need someone who is in charge of quality control from go to whoa.” Experts also say the shift of compliance checks from local government to private certifiers has compounded the problem, as certifiers may have conflicted loyalties if they are seeking to lock in repeat work from a developer. They are also not on site frequently enough to detect problems that may be concealed by construction work as it proceeds. Urban Taskforce’s Johnson says the most important thing is to be able to guarantee structural integrity, but “at the moment there are unclear rules as to who is a structural engineer in NSW legislation ... It does seem crazy that these high-rise apartment buildings must be designed by an architect who has to be registered by the architects registration board, but [a similar arrangement] is not the case for engineers”.

He says “teeth” need to be restored to the “chain of command.” CEO of Engineers Australia Peter McIntyre confirmed that in NSW, “almost anybody can call themselves an engineer” and that the sector needed stronger quality control. Consultant Taylor praises those developers in the industry doing “excellent” work but says they are having to compete with “people who don't care so much about quality, focused on short-term profit, who are selling units right next door, and outwardly no one can tell the difference”. He says he is often dealing with builders where “none of them have had a day’s training in design and yet they are responsible for the design process. I’ve got one building now where there was a call for help halfway through a job, the balconies were unable to be waterproofed because the design from the architect was so out there”. Randolph says loss of trust will have critical knock-on effects. “If people don't trust what they are buying, they won’t buy it, lenders won’t lend, developers won’t able to sell off plan, planners will be frustrated … governments won’t be able to house thousands of people heading towards Sydney and Melbourne, and the system will break down. I think the focus has to come right back on the consumer.”

He believes a short, sharp royal commission might be the “shock needed to bring that about”. Loading But Bronwyn Weir is not so sure that a royal commission is the solution. “There is already a massive loss of confidence in the building sector,” she says. “If we have a royal commission there would be plenty more to uncover, but it's not anything more than people like me and people who are in the industry are already well aware of … governments have had lots of warnings. I hope it doesn’t take a royal commission to get them moving.” Most experts say the answers lie with better training and rigorous professional registration of personnel, having a fully qualified engineer or architect with oversight of a development from beginning to end, and more consumer protection and information, coupled with a new, strong and independent watchdog. Adjunct lecturer in architecture at UNSW Geoff Hanmer says greater monitoring during construction is important: “Could building inspectors arrive unannounced and shut the whole thing down if things weren’t being done correctly?”