New Government cladding proposals

The government’s long-awaited announcement yesterday of a further £3.5bn of funding towards the costs of remediation of unsafe cladding on high-rise blocks of flats will be a welcome relief to many homeowners and property investors who are currently facing potentially tens of thousands of pounds of costs in order to make their buildings safe.

We await further details of yesterday’s proposals to be published by the government in order to ascertain who will benefit from them and to what extent and we also note that no details have been given as yet with regards to timescales and when the funding will be made available.

However, the headline promises made in the announcement are:

• Leaseholders in high rise residential buildings of 18 metres and above, or above 6 storeys in England will face no costs for the removal and replacement of unsafe cladding;
• For lower and medium rise blocks of flats between 4 and 6 storeys, the government is introducing a long term low interest loan scheme and has promised that no leaseholder will ever pay more than £50 a month towards the removal of unsafe cladding and many will pay far less than that;
• A new building safety regulator will be established and will shortly be legislated for as well as a new national regulator of construction products;
• A new levy will be introduced on developers, to be applied when they seek planning permission to build high rise buildings; and
• A separate new tax will be introduced from 2022 on money made in UK residential property development to raise £2 billion over a decade to help pay for cladding remediation although no further details are available yet as to how this will be applied.

Memery Crystal comment:

Although the proposed funding will be welcomed by many leaseholders, there is widespread anger and disappointment from many that they do not go far enough and will only cover the cost of cladding remediation and will not cover other fire safety problems including defective insulation, missing fire breaks and timber balconies, and leaseholders will still need to cover these costs which could run into the tens of thousands.

There is also anger that there are a large number of leaseholders who will fall through the cracks, such as those in buildings under 4 storeys which have unsafe cladding but do not qualify for either the grants or the proposed loans. They will have to bear the cost of all remediation works including cladding and other fire safety faults amounting to huge sums which will saddle many with long term debts through no fault of their own.

The loan scheme seems to have been rushed without taking into account the full impact it would have on leaseholders long term. A bill of £40,000 for example would take over 65 years to pay off at £50 a month. No details have been given as to whether the loan will attach to the property or the owner or whether it will be secured against the property – if so, for many people this could plunge them into negative equity and make it impossible to finance or sell.

The other side of the coin is the potential impact of the proposed levy and new tax on the residential development and construction industry and we have grave concerns in this respect. The government has been saying for years that there is a real shortage of housing but the viability of future residential schemes are threatened as the government is now proposing to add additional costs and make such schemes less attractive at a time when we should be encouraging more residential development, instead of discouraging them.