Buyers of apartments in high-rise buildings greater than four storeys are not protected under the scheme, because both private insurers and the government pulled out due to the risk in 2003. The Urban Development Institute of Australia (UDIA) NSW warned the premium rises were likely to be passed on and to "cause strain" for people buying new homes or low rise apartments. "It is crucial that government enables solutions for industry and the community to have confidence in purchasing new homes while maintaining housing affordability," chief executive Steve Mann said. The NSW Government stepped into the insurance market for low-rise building work in 2010 and has since amassed more than $639 million in liabilities. To stem the flow, premiums are set to rise for all new multi-dwelling constructions, three times, every six months, from January 2020 until January 2021. "High-risk" builders will also pay a higher premium.

NSW Greens MLC David Shoebridge. Credit:AAP "We are talking about effectively negative equity growing at about $100-plus million a year, and this has been going on for years," Liberal MLC Matthew Mason-Cox told a Parliamentary committee. "The pricing and risk issues have been known for years. It is just getting worse," he said. An auditor general's report last week said the taxpayer-backed insurance scheme "expects to receive funding from the NSW Government until all losses incurred before the establishment of sustainable premium rates are recovered. "The unfunded position has built up over time because HBCF's historic premium rates have not generated sufficient income to meet claims and operating costs."

Greens MLC David Shoebridge said building reforms proposed by the NSW Government so far amount to "mythical, magical, unicorn insurance products". "There is no appetite from any insurer to provide this insurance or to cover designers and principal contractors," Mr Shoebridge, who led a parliamentary inquiry into building defects, said. "Home-building warranty insurance has an accumulated deficit of about $640 million, paid for by taxpayers." Minister for better regulation and innovation Kevin Anderson and minister for customer service Victor Dominello declined requests for comment. The Owners Corporation Network has argued that the "scourge" of phoenixing - where $2 companies are used to build apartments and are then wound up to avoid paying the defects bill - is contributing to the skyrocketing deficit and is why the market was abandoned by private insurers.

A 2017 study by the network found that in 63 per cent of cases where the "insolvency" of a building company had triggered an insurance claim for defects, that builder simply continued working through another company. They also found that only 18 per cent of licenses to build homes in NSW belong to companies, but they account for 85 per cent of all insurance claims lodged due to insolvency. “There cannot be an innocent explanation for such an extremely disproportionate statistic,” Owners Corporation executive officer Karen Stiles said. The network is pushing for the licensing of builders and developers, with conditions including track records of financial performance. Home warranty insurance for all types of homes has risen since April 2017 but multi-dwelling unit premiums will more than triple from 1.58 per cent of the building's contract value in 2017, to 4.79 per cent in 2021. Single dwelling home warranty premiums will not increase again because their rates are "at sustainable levels" according to the insurer icare.

The "current intention" is that icare’s portfolio of insurance written in recent years will operate on a sustainable or break-even basis by 2021 without the need for any more taxpayer support. The cost of HBC insurance for multi-dwellings may increase again after 2021. Insurance Council of Australia spokesman Campbell Fuller said this is "a crisis of the building and construction sector's doing", saying "the situation is unsustainable". "Until the construction industry can demonstrate that poor practices and building quality has improved insurers will maintain the current prices and exclusions."