Real Estate

UK government’s plan won’t fix cladding scandal


The government is finally trying to get its arms around a scandal that has trapped tens of thousands of leaseholders in unsafe buildings or homes they cannot sell. And it is doing so by getting its hands around the listed housebuilding sector’s neck.

This principle is the right one: leaseholders shouldn’t be left with the bill for a system-wide failure in buildings and fire regulation, one that raised real safety concerns but that has gummed up lending and sales of properties that are otherwise sound.

Michael Gove, housing secretary, has junked an unfair and unworkable loan scheme for repairs and will instead try to raise £4bn from property developers. But the plans remain full of holes — presenting issues both for trapped leaseholders hoping for relief and for the developers who are firmly on the hook for the bill.

Most obviously, the proposals tackle only part of the problem. The money is earmarked for safety issues in the estimated 50,000 buildings between 11m and 18m tall that are thought to have cladding (buildings over 18m, deemed the highest risk after the Grenfell Tower disaster, are covered by the existing Building Safety Fund).

Exactly how the government got to its £4bn figure or will raise it is unclear — more on which later. There is no solution for those in buildings under 11m, of which there are many. And fundamentally, this is a crisis that long ago mushroomed beyond cladding to take in fire breaks, barriers, timber balconies, insulation and more.

A survey of 400 properties over 18m tall by the Association of Residential Managing Agents found that the cost of addressing safety problems not related to cladding was £26,000 per flat, compared with £22,500 for cladding. A smaller survey of buildings under 18m found non-cladding costs of £38,000 per flat. Work doesn’t tend to start until all the required funding is in place, notes one campaigner.

Whether the government’s sound and fury translates into much for leaseholders depends on how it can secure funds and how quickly and effectively those are spent.

Its “polluter pays” rhetoric sounds reasonable but implies a degree of precision that isn’t feasible. There is no register of which buildings have fire safety problems, where they are, who built them or who owns them.

The government is simultaneously trying to figure this out, while attempting to scale back the crisis. It wants to stop unnecessary requests for fire safety certificates by lenders, a problem its own guidance largely created, and to clamp down on excessive spending and fees from freeholders who are taking the opportunity to charge for more general upgrades to their property.

The lack of certainty means it is impossible to assess whether £4bn is enough for the task at hand or may eventually prove ample if more “common sense”, in Gove’s words, is applied. The money allocated to the cladding crisis has risen from £200m in 2019 to more than £9bn of public and private funds now, but remains short of a select committee’s £15bn estimate of what’s required.

Meanwhile, shares in the biggest listed developers — who say their buildings complied with regulations at the time — tumbled on Monday because they are the only obvious source of readily available cash. Asking them to contribute isn’t unreasonable: they have benefited handsomely from publicly funded juicing of the housing market and have been too slow to allocate and spend money fixing problems in their own developments. Even those that haven’t built high-rise rely on the proper functioning of the residential sales market.

But many, as Gove acknowledged, are in the process of doing the right thing. They are already on the hook for £2bn for the Building Safety Fund, via a new tax, and for a levy on high-rise planning applications. Quite how much more the industry stumps up on a voluntary basis remains to be seen. For all the threats of withholding public funding, or court action, the Treasury has not signed off on a new tax.

The government will try to reach into the smaller, unlisted sector for funds. That is less transparent and less susceptible to political sabre-rattling. Developers will have gone bust, or be based overseas. Other projects will have been built within a one-use special purpose vehicle. Even if the government knew who should pay (it doesn’t), it might not be able to get at them.

Meanwhile, the makers of cladding and other materials have yet to contribute to fixing a crisis where they are directly culpable. And the government’s eagerness to blame developers doesn’t suggest much soul-searching over a policy and regulatory environment that ignored repeated warnings over fire safety and has bungled the crisis response such that only now — four-and-a-half years after Grenfell — has anyone thought to ask developers for comprehensive details of what they’ve actually built.

helen.thomas@ft.com
@helentbiz





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