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SME homebuilders might lose out over cladding crisis they were never involved in

We already know that housebuilders are expected to pay £5bn to release leaseholders trapped by the cladding crisis which emerged in the wake of the 2017 Grenfell fire.

What’s concerning is that some SME homebuilders who have not been involved might be expected to contribute.


Where is the £5bn coming from for the cladding crisis?

Under a new agreement drawn up by Housing Secretary Michael Gove, housebuilders will collectively pay a minimum of £2bn to fix fire safety problems in their own blocks and will refund any taxpayer cash that has been used for works so far via government grants such as the building safety fund.

Already announced, up to £3bn will be collected over a ten year period through a tax on all new residential buildings in England via an extension of a tax on new homes (RPDT).


What’s been happening with the cladding crisis up to now?

The Government has been negotiating with the largest developers on a solution to the cladding crisis, and initially, 53 of the largest developers were asked to sign a pledge to remediate their own blocks of more than 11m in height, going back 30 years, at their own expense. So far 39 have signed.

The government also introduced RPDT, designed to raise up to £3bn to pay for the Building Safety Fund which funds remediation of blocks of more than 18m in height.

Clearly this is all not enough though and it seems that the Government is now going to target smaller housebuilders to fix the problem.


What has also been announced?

The Government has announced that remediation works will also be funded by a new extension to the Building Safety Levy that every new build developer will be forced to pay, whether they were responsible for the cladding crisis or not.

The Government has said that it is going to going to ask smaller house builders to commit to remediating their own blocks above 11m, and that this will be done “in due course” and in a “targeted way”.


What are the implications for SME housebuilders?

Currently there’s no detail about which house builders would be targeted or on which criteria they would be chosen but the announcement gives cause for concern that smaller developers may be financially hit.

The Home Builders Federation are not the only ones to have declared the levy unacceptable while voicing fears voice over the impact on innocent SME builders.


Our thoughts

As the detail is not yet clear, we can’t fully understand or comment on the impact this announcement might have on SME house builders.

Stuart Stead, Partner and Head of Property and Construction said “Of course, it is right that leaseholders should not pay to make their own buildings safe but nor should smaller developers who are in no way to blame.

A significant number of the larger UK housebuilders have already committed to remediate all their own buildings, plus there’s the £3bn which will be raised through the Residential Property Developer Tax.

A further levy on other businesses could threaten those businesses, the jobs they provide, investment in new sites, and importantly SMEs who are crucial where the Government’s housebuilding ambitions are concerned.”


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The information was correct at time of publishing but may now be out of date.

Posted by Cowgills
10th May, 2022
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