As WA's population soars past three million, the government is looking skyward for a housing solution.

Already one of the world's longest city's, with urban sprawl stretching 150 kilometres, Perth can't keep growing out.

It needs to grow up.

To achieve that, the WA government is trying to entice more people to buy off-the-plan apartments while also "cutting red tape" to speed up development.

But some apartment buyers, caught up in a long-running saga with an embattled Perth builder, are questioning whether the government guardrails are keeping pace.

Their situation has highlighted one of the starkest differences between signing a house and land contract and buying an apartment off the plan – home indemnity insurance.

It comes as the government prepares for a crackdown on apartment builders that it hopes will improve consumer and insurer confidence.

But with those reforms still a while off, these apartment buyers think you should read their story before making a purchase.

One builder, two stories

A few weeks ago, the state government made an extraordinary intervention in the long running saga of around 200 home buyers who had unfinished houses with embattled builder Nicheliving. 

The government struck a deal with Nicheliving and its directors, including Ronnie Michel-Elhaj, to give up their building registration for the next 10 years so that their customers could access government-mandated home indemnity insurance of up to $200,000 and complete their builds.

Builders are legally required take out home indemnity insurance, which covers home buyers if the builder can't complete defective work, disappears, or becomes insolvent.

But it only covers buildings up to three stories high.

So people like Audrey Taylor, who bought an apartment off the plan in a four-storey complex, were not eligible.

She put down a $18,850 deposit for an apartment in the Sky Homes Nicheliving complex in the Perth suburb of Inglewood in 2021. 

The contract she signed was with developer Diamond Development Alliance and its director, Ronnie Michel-Elhaj.

After losing his builders registration, Mr Michel-Elhaj will now need to find a new builder to complete the Sky Homes project but can remain as the developer.

Limbo continues for apartment buyers

Some of the apartment buyers this week received emails stating that the developer was "in discussions with a new builder" and they "anticipate finalising the contract by December".

"I just don't know how much I believe them because they've told me in the past that there were updates that didn't end up happening," Ms Taylor said.

Another woman, who asked not to be named, said she put down a $34,000 deposit for one of the apartments in May 2022.

She said she was at the point where she just wanted to exit the contract but had been advised by a lawyer that this was not an option.

"It is quite stressful and it is taking a toll on me and my work," she said.

"You feel defeated. And I've done nothing wrong."

Another buyer, Claire, put down a $35,000 deposit for a Sky Homes Nicheliving apartment in 2020 and was hopeful it would be completed before her contract was up in mid-2026.

In the meantime, she is paying around $35,00 each year in rent.

"It's the lost opportunity," she said.

'Not unique to WA'

Commerce Minister Sue Ellery said while she sympathised with them, the situation was different to what home builders were going through.

Homebuyers, she said, were being hit with a double whammy of having to pay a mortgage and bills on their unfinished home, at the same time as covering rent and other costs.

"With a single residential home, the contract you sign commits you to make progress payments throughout the life of the build, and there is no finite end point of when that building must be complete," she said.

"For apartment builders … the contract that you sign has you pay an up-front deposit that's held in trust for you … and there is a finite end to that contract."

Ms Ellery said the lack of home indemnity insurance for buildings over three stories was "a market failure".

"There are currently no private insurers offering insurance cover in this particular area," she said.

"This is not unique to WA. 

"I am advised that no Australian state or territory mandates home indemnity insurance for apartment buildings for the very reason that no private insurer offers such products.

"Our government continues to examine options for how we could ensure better insurance protections for apartment owners."

Compliance issues

Building regulation lawyer Bronwyn Weir said government-backed home indemnity insurance had only been around since the early 2000s, when private insurers left the market, and that the three-storey rule had been negotiated at the time and just stuck ever since.

"The reason why apartment buildings over three storeys do not have builder's warranty insurance is because the states and territories have chosen not to offer insurance for taller buildings," she said.

"Governments have chosen not to underwrite that part of the sector."

One of the reasons for this, Ms Weir said, was the higher risk factor.

"[Governments] are quite diligent about how they manage risk and what level of risk they are willing to take on, on behalf of the whole community," she said.

"[This] has been a high-risk area with high levels of non-compliance."

Ms Weir co-authored the 2018 Building Confidence report, which found there had been a lack of accountability and regulatory oversight in the building and construction industry over the past two decades and made recommendations for improving compliance, which were broadly endorsed by government and industry.

Changes planned

Last year, in response to Weir's 2018 report, Ms Ellery announced plans to crackdown on shoddy apartment builders.

The announcement came in the wake of a Perth apartment building saga that saw a builder walk off the job while apartment buyers were left in limbo. 

Key to the WA government's plan is the staged introduction of mandatory inspections of apartment buildings during critical points of construction and beefed-up powers for the state's Building Commissioner – something New South Wales already has in place. 

Ms Ellery said she hoped these changes would boost confidence from both consumers and private insurers.

"Frankly, we're hopeful that might give the insurance industry a reason to get back into the market," she said.

Ms Ellery defended the timeline for the reforms, with the major changes not due to come into effect until 2026.

"The construction industry has been through so much that if we were to impose the mandatory inspections immediately, we don't have the workforce to do it," she said.

"The leap in costs that would then be passed on to consumers would also be significant as well.

"Most West Australian builders conduct themselves in a way that ensures they get ongoing business."