And the most common problem, accounting for 63 per cent of complaints, was poor workmanship.

A major audit of consumer protections in the building industry has found that amid record low interest rates and a craze for renovations fuelled by reality television shows, homeowners are battling dodgy builders, unnecessary costs and weak legal protections when building or renovating their homes.

Auditor -General John Doyle said more than 101,000 building permits worth more than $25.3 billion had been issued in Victoria last year, with domestic building work making up about 82 per cent of these permits.

But the domestic home building insurance system has been exposed as a multimillion-dollar rip-off, with customers forking out more than $21 million more than they needed to in the past four years.

Domestic building insurance is mandatory for builders on jobs worth more than $16,000 and can only be paid out as a "last resort" - when a builder "fails to complete works and has died, disappeared or become insolvent within six years of completion".

Although though there is only one insurance provider, the system forces people to pay for an agent and brokers, Mr Doyle said. 

"This means that the model is significantly more costly than if it did not include intermediaries, and has cost consumers an estimated additional $21.6 million over the past four years," he said.

This cost had been borne, he said, "for little, if any, tangible benefit".

Various agencies oversee aspects of the domestic building industry: the Victorian Building Authority (VBA), the Building Practitioners Board (BPB), and Consumer Affairs Victoria (CAV).

But Mr Doyle said: "The practitioner registration system does not ensure that the only practitioners who are registered are qualified, competent and of good character, and the disciplinary system is not protecting consumers, as current sanctions are ineffective in deterring practitioner misconduct."

Nor are consumers properly protected in the event of a dispute with builders, Mr Doyle found.

Consumer Affairs' conciliation and dispute resolution functions "provide only limited consumer protection because they lack enforcement powers", it does not have the power to enforce the negotiated outcomes.

He said successive governments had been made aware of the lack of protections for consumers, and had failed to act. "These issues now require urgent attention."

Adam Fennessey, the secretary of the department of environment, land, water and planning, said the government was committed to strengthening protections against home-building malpractice. It will work with the government and the Victorian Building Authority and Building Practitioners Board to strengthen consumer protections.