BARRATT IS the ‘first construction firm to call’ for a levy on developers to ‘bail out victims’ of the cladding crisis, with the company also revealing it spent £56m on removing cladding from a London block.
Mail Online reported on Barratt becoming the first housebuilder to ‘back’ calls for a developer levy to help solve the cladding crisis, with the company stating that the industry had a ‘collective responsibility’ to cover the costs. Despite this, leaseholders living in the company’s homes said they had ‘already paid tens of thousands’ for ‘stop-gap safety measures’ while waiting for repairs to begin.
Both MPs and campaigners welcomed the move, but while calling on ‘others to follow suit’, they also warned that developers must not be able to get away with ‘token gestures’. Barratt’s chief executive David Thomas had said: ‘We recognise how distressing this situation is for affected homeowners and we do not think they should have to pay for cladding to be removed from their buildings.
‘While this is a hugely complex situation with many parties involved, we believe that housebuilders and the broader industry have a collective responsibility to be a part of the solution. This is a decision for government, but we would support a fair, prospective levy as part of any way of easing the burden on homeowners without threatening the future supply of much-needed new homes.’
End Our Cladding Scandal’s Emma Byrne responded ‘It is encouraging that Barratt has recognised publicly that the construction industry has a responsibility to address its part in what is an enormous building safety scandal. It is gravely unfair that, at a time when developers are declaring record sales and huge profits, usually boosted by taxpayer-backed schemes, leaseholders –the only truly innocent party in this crisis – are being hit with bills running into the tens of thousands of pounds – bills they cannot even begin to afford.
‘However, the devil, as always, is in the detail. A levy is long overdue and must reflect the decades of malpractice. Builders and developers must not be allowed to get away with token gestures. They must contribute properly and fairly to the projected £15billion-plus costs of fixing serious building safety defects. Leaseholders should not pay a penny.’
Clive Betts, chairman of the Housing, Communities and Local Government Select Committee (HCLGC), said Barratt might have ‘worked out that a levy is coming’ and ‘want to be getting good public relations in advance’, but added: ‘I hope the rest of the industry welcomes something along similar lines. The principle of a levy is one thing, but it must raise sufficient funds so that there’s a real contribution from the industry to reduce the cost to the taxpayer and ensure that leaseholders pay nothing.’
Earlier this week, it was reported that the Treasury was being beseeched to add a ‘substantial’ amount of cladding remediation funding, with a ‘Cabinet tussle’ over increased funding seeing pressure ‘mounting’ on Chancellor Rishi Sunak from Housing Secretary Robert Jenrick. Ministers were ‘considering’ imposing levies on construction firms, with government sources discussing the ‘intensive efforts’ made to add a ‘substantial sum’ to a developers levy.
Earlier this month the government was said to be considering funding fire safety works on residential blocks via a £2bn levy on developers - which could raise up to £200m a year for a total of £2bn in 10 years, and ‘could mean a levy on all high rise flats and [a] separate charge on major builds’ to ‘atone for building tens of thousands of flats and homes with unsafe cladding and insulation in recent decades’.
The proposals are part of the package of measures being discussed by Mr Sunak and Mr Jenrick, including two annual levies to ‘ease the financial burden on leaseholders’, including adapting the existing community infrastructure levy that sees developers ‘pay to improve the community in return for planning permission’.
The second meanwhile would be a ‘gateway levy’ that would see developers pay a levy on new high rise flat blocks, which would ‘meet demands by campaigners’ to ‘stop big developers shirking their responsibility’. Leaseholders remained concerned the plans ‘do not go far enough and will still lumber them with huge long-term loans to pay’, which could take 30% off the value of homes.
The government was also said to be considering a hardship fund to provide extra help to those facing the largest bills; a cap on repayments to help those facing bills of up to £100,000; prioritising grants for those in high rise blocks ‘who are at most risk’; and a five year freeze on repayments until 2026 or later.
There were however ‘grave concerns’ expressed by the All-Party Parliamentary group for Leasehold Reform after their meeting with government adviser Michael Wade earlier this month. Co chairman Justin Madders understood ministers were ‘going ahead’ with a loan scheme that ‘puts the majority of costs on the unquestionably innocent party. The government is going to frontload it in a way that gets the work done, but ultimately saddles people with huge debts’.
Last week, Prime Minister Boris Johnson promised that the government would provide a plan for the crisis ‘very shortly’, while Labour brought forward a vote and a list of proposals to parliament yesterday that aimed to protect leaseholders from paying for fire safety works – including remediating cladding.
December’s reveal that Mr Wade – the government’s advisor appointed to advise on cladding issues – had been ‘working on a proposal to provide long-term finance to buildings to pay for remediation work’ had been reported earlier that month to have been in the form of flat owners taking on 30 year loans ‘akin to a second mortgage’ to fix fire safety issues.
Mr Wade, an insurance executive appointed last July, was said to have been ‘considering long-term loans’ as a solution to protecting leaseholders from ‘unaffordable’ costs ‘without burdening taxpayers further’. This was said to potentially mean ‘hundreds of thousands’ of flat owners could ‘be forced to take on 30-year loans akin to a second mortgage’ to fix issues.
Building Safety and Fire Minister Lord Greenhalgh had told the House of Lords in December that levies ‘do not raise very much, and you have to balance that with the need to build more homes’, though later ‘advocated’ them as helping to allow developers to ‘regain the public trust needed to carry on in business’.
Additionally, Barratt revealed it had spent £56m on replacing cladding or repairing fire safety defects across its buildings, including the Citiscape block in Croydon In 2017, residents were told to pay £31,300 per flat to fund works at Citiscape, owned by Proxima GR Properties, which stated it was ‘not its responsibility’ to pay for replacement of materials that failed government fire safety tests.
Fire wardens had patrolled ‘constantly’ at a cost of around £4,000 per week, which Proxima was ‘planning to pass on to leaseholders’. The situation had then been that removal would not begin ‘until £2m in costs are paid, either by residents or the government’. Leaseholders were then ordered to pay after a tribunal decided against them, but original developer Barratt intervened to say it would fund works in April 2018.
Work had ‘yet to begin’ by September 2018, and residents were evacuated in September 2019 after ‘unrelated structural issues’ were discovered during cladding replacement. Barratt had later pledged to pay for remedial work on the reinforced concrete frame in July 2020, and Inside Croydon, Inside Housing and The Construction Index have all now reported that the cladding removal was completed in 2020.
This was revealed via the company’s financial reporting, which showed that the developer ‘took a £56million hit on its profits’ to fix both fire safety and structural problems in ‘legacy properties’. The ‘bulk’ of this was spent removing the combustible cladding from Citiscape. Inside Croydon noted that Barratt’s actions there ‘may also be used as a precedent for other developers to make safe buildings’ that were built with combustible materials.
Property expert Peter Bills said that ‘the block has been reclad and the concrete frame strengthened […] Barratt pledged no costs will fall on leaseholders’, adding that it will ‘be good to see others doing the right thing’. The company also undertook a review of 26 other ‘similar’ developments, which is now ‘substantially complete’, with Barratt adding that it has not identified any other buildings ‘with issues as severe as those at Citiscape’.
It said that it was ‘committed to ensuring’ that costs associated with remediation were not ‘borne’ by leaseholders in the building, and that it covered the costs of some work at ‘a small number of developments’ where it had a legal liability to do so. Eight high rises it had built had problems with the frames, with Citiscape the first, though the ‘similar’ issues on other blocks were ‘lesser’ in severity.
Read our article 'What is cladding?' here