PROPERTY DEVELOPERS gave the government’s plans for a building safety tax a ‘cautious welcome’, but warned that the funding intervention ‘leaves many questions unanswered’.
Housing Secretary Robert Jenrick announced yesterday that the government would fund removal of combustible cladding ‘for all leaseholders in high-rise buildings’ above 18m, while a new levy and tax on developers would ‘ensure industry contributes’, with the measures to ‘boost the housing market and free up homeowners to once again buy and sell their properties’.
The £3.5bn in new funding means a total of £5bn has been provided by the government, with the complete funding of all cladding for buildings 18m and above ensuring ‘funding is targeted at the highest risk buildings in line with longstanding independent expert advice and evidence’. The government cited Home Office analysis of fire and rescue service statistics, which showed that buildings between 18m and 30m ‘are four times as likely to suffer a fire with fatalities or serious casualties’ than apartment buildings ‘in general’.
Lower rise buildings between 11m and 18m will ‘gain new protection’ from a ‘generous new scheme’ that will pay for cladding removal via a ‘long-term, low interest, government-backed financing arrangement’ meaning no leaseholder will ‘ever pay more than’ £50 a month towards cladding remediation. The government claimed this would ‘provide reassurance and security’ to leaseholders, while mortgage providers ‘can be confident’ that where cladding needs to be removed, properties ‘will be worth lending against’.
It also said it was working with industry to ‘reduce the need’ for external wall review (EWS1) forms, thus ‘preventing leaseholders from facing delays’ and allowing for purchases and sales. A ‘Gateway 2’ developer levy was also announced, that will be ‘targeted’ and ‘apply when developers seek permission to develop certain high-rise buildings’, alongside a new tax for the UK residential development sector that aims to raise £2bn over a decade to fund cladding remediation.
The tax aims to ‘ensure that the largest property developers make a fair contribution to the remediation programme, reflecting the benefit they will derive from restoring confidence to the UK housing market’. Legislation being brought forward this year to ‘tighten the regulation’ of building safety will, alongside review the construction products regime, help ‘prevent malpractice arising again’.
On the EWS1 situation, the government said it was ‘aware’ that securing ‘appropriate’ professional indemnity insurance for the work was a ‘major barrier’, and so it said it was ‘committing’ to work towards a ‘targeted, state-backed’ indemnity scheme for professionals unable to obtain said insurance for the EWS1 surveys. It would ‘work closely’ with industry to design such a scheme, with more details to come.
Financial Times reported on UK housing developers’ responses to the government’s plans to ‘make property developers pay to address’ the building safety crisis, namely that they gave these a ‘cautious welcome’ but warned that the ‘intervention leaves many questions unanswered’. Redrow chairman John Tutte stated that ‘a headline statement is welcome, but there is a hell of a lot of detail to work through.
‘Developers probably think: “we can pay a bit of money, wipe our hands of it and leave the government to get on with it”. But what will it cover?’. The news outlet noted that beyond cladding, concerns about fire safety in buildings extend to timber balconies and a lack of cavity barriers among other issues, which the funding announcement ‘did not cover’.
Mr Tutte added that ‘in some cases mitigation measures might be more appropriate — that might be sprinkler systems or safe routes. It needs a far broader view than simply saying “we’ll throw money at it”. Recently, Barratt became the first construction firm to call for a levy on developers to ‘bail out victims’ of 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. The company ‘welcomed the government’s focus on this issue’, adding that ‘as we have previously stated, we do not believe affected leaseholders should have to pay for remediation work on their buildings . . . developers and the broader sector have a collective responsibility to be a part of the solution to these complex problems’.
Last week, it was reported that 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 considering funding fire safety works 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’.
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’. Most recently, developer Persimmon shared its plans (https://www.thefpa.co.uk/news/persimmon-to-spend-75m-on-cladding-issues) to spend £75m on rectifying cladding issues in its builds.
Read our article 'What is cladding?' here