Mortgages  

Govt reserves for cladding removal ‘nowhere near’ enough

The investment in the UK’s planning scheme is also intended to help remedy the country’s supply crisis, which has helped to buoy house prices over the last year by around 10 per cent.

Impact on supply

But Phil Kinzett-Evans, partner at accounting firm UHY Hacker Young, argued a developer levy would only worsen the supply crisis faced by UK homebuyers today.

“From April 2022, this new tax imposes further costs on an industry that already has to deal with multiple targeted taxes like Section 106 and the Community Infrastructure Levy,” he explained.

“When property developers are already facing rising raw material costs, a skills shortage driving up wages and spiralling energy prices, introducing another tax is going to be a tough pill to swallow.”

Kinzett-Evans is concerned the levy will scupper the government’s affordable housing scheme, which it has put £11bn aside for.

“It could well trigger more developers to look to higher-margin markets like prime residential property. It remains to be seen what impact this will have on government targets to meet affordable housing demand.”

Potential solution

In August, FTAdviser learnt the government is currently looking at an amendment to its recent Building Safety Bill which campaigners say could “unlock” leaseholders in buildings with unsafe cladding.

Campaigners led by Woolwich leaseholder Steve Day created the amendment, which would place the responsibility of remediation costs on those who failed to make the grade in construction standards - rather than on leaseholders.

Called the ‘Polluter Pays Bill’, the scheme would work alongside the government’s grant schemes which are backed by £5.1bn in public funding remediation.

This money would be used to foot the initial bill. But over time, building companies would pay the government back based on the Building Safety Fund - a document which sets out how to calculate which parties are responsible for unsafe cladding and to what degree.

Until a clear pathway to funding all the cladding remediation is found, lenders remain cautious to lend on buildings with potential cladding issues.

But as Kinzett-Evans highlighted, placing all the heat on developers could only worsen the supply crisis, which is only continuing to push property prices up, fencing more and more buyers out of the market.

ruby.hinchliffe@ft.com