Yahoo Finance What the Government’s cladding ‘reset’ means for flat owners
Homeowners trapped in flats in high-rise buildings covered in cladding could soon be spared from huge bills by an impending Government "reset".
But campaigners have warned the plans will fail to protect leaseholders from hefty costs.
Levelling Up Secretary Michael Gove is expected to announce that flat owners in buildings 11 metres or higher will now pay nothing towards the remediation of unsafe cladding. Instead the building industry will have to foot the repair bill.
Campaigners have repeatedly called for a "polluter pays" approach to the cladding crisis, which has left owners trapped in unsaleable and unsafe homes.
But what will it mean in practice for victims of the scandal?
Who will benefit?
Leaseholders living in buildings taller than 11 metres will be spared from paying to remove unsafe cladding from their homes.
It marks the end of a controversial scheme under which the Government would have covered the costs for buildings above 18 metres in height, but owners in smaller buildings would have needed to take out punitive loans to pay for works. Those long-term loans would have dragged down property prices, as they would have been tied to the flat, not the owner.
The change will spare tens of thousands more flat owners from crippling costs. Some 38,000 apartment blocks are estimated to be 11 to 18 metres high, although campaigners put the figure at closer to 90,000.
Savings will be significant. Leaseholders have faced average costs of £40,000 each to rectify unsafe cladding, but bills can spiral to in excess of £100,000.
What is covered by the package?
The proposals are only expected to cover the replacement of unsafe cladding. This leaves flat owners in blocks of all heights liable to fix other fire safety defects such as combustible insulation, wooden balconies and missing fire breaks. These often only become apparent when cladding remediation work starts on the building.
This is a crucial issue, as External Wall System 1 (EWS1) forms – the fire safety forms that are required for flats in blocks to be sold – take into account these issues.
Even if the cladding is removed, but there are other defects remaining, the property will not be saleable as lenders will refuse to offer mortgages without this form. This means that to fix all the problems necessary, so that the property can be sold, flat owners may still get hit with a huge bill.
Liam Spender, spokesman for End Our Cladding Scandal, said: "Solving issues such as the compartmentation of flats, and properties not being properly divided from each other, can be as expensive as the cladding itself.
"In some buildings each flat is facing a bill of £30,000-£40,000 to fix unsafe cladding and then another £40,000 to remedy compartmentation."
Another major issue is the global supply chain crisis, which has caused construction costs to spiral amid an extreme shortage of labour and materials. It means the price of making buildings safe and fit for sale will only get more expensive.
There is also an acute shortage of trained surveyors who can carry out these fire safety checks.
Who will pay?
The Government now intends to make developers pay the bill instead, to the tune of £4bn. However, it is currently unclear how the building industry will be forced to pay up. There will be no new taxpayer money made available.
A Whitehall source has confirmed there would be "commercial consequences" for businesses which refused to take action over repairs. Plans are also being drawn up to create a new team to name and shame uncooperative developers.
Developers of high-rise buildings have already been hit with a levy on profits to raise £2bn for the Government's cladding remediation pot. It is unclear if tax will be expanded or increased.
Property developers have historically refused to accept financial responsibility for the crisis and questions still remain as to how the "polluter pays" principle will work in practice.
"I don't envy Michael Gove's task in getting money from developers," said Mr Spender.
There is also concern that even with this extra £4bn – on top of the £5bn pot for buildings over 18 metres – there will still not be enough money to solve the problem. The housing committee has previously estimated it will cost £15bn to fix the crisis, while others have claimed it could be much more due to other non-cladding related defects.
The role of freeholders, which are ultimately responsible for the buildings and their common areas, was not mentioned.