16 Feb 2022

CIH responds to latest building safety announcements

Earlier this week, (14 February 2022) housing secretary Michael Gove outlined a number of amendments to the Building Safety Bill, which if passed by parliament will be brought into law.

At the Chartered Institute of Housing, we’re pleased to see that Government is looking at what more can be done to force those who profited from the building safety crisis (developers and manufacturers) to pay to make buildings safe. It is right that social landlords should be able to apply to the medium-rise cladding fund to alleviate some of the cost of cladding works and that they will not be responsible for properties purchased through Section 106 agreements or joint venture agreements. However, requiring housing associations and local authorities to fund the cost of non-cladding works on blocks they built will add further pressure to budgets at a time when social housing providers are struggling to balance the demands of net zero, improving the condition of existing stock and seeking to deliver new supply. Building safety must always come first but there are clear trade-offs here that will have to be carefully considered if social landlords are to deliver upon their ambitions in these areas.

More generally, not for profit social landlords and leaseholders should not be expected to pick up part of the bill when they had nothing to do with building the properties.

Charging leaseholders up to £10,000 or £15,000 (in London) is still too much for many and it doesn’t appear that those who have already paid out more than this will be compensated. In reality, social housing providers will be left (as they are now) to foot the bill or spend time and money finding another party to pursue for compensation. That represents potentially huge costs for a sector already facing competing pressures to deliver on government priorities. Social housing providers have spent vast sums remediating buildings (with and without cladding) and providing intermediate safety measures. As evidenced in recent submissions to the LUHC Select Committee, this undermines their ability to make routine upgrades, to deliver much needed new social homes and services, and to meet priorities on zero carbon. (In a survey last year, the National Housing Federation found that one in ten affordable homes will be lost to building safety costs).

There are also potential implications for the valuation of social housing properties, which is calculated on the rental income less the cost of necessary works; so lower valuations as a result of increased costs could bring covenant breaches nearer or reduce the borrowing capacity of the sector. This needs further exploration.

It is essential that these new measures do not mean that existing and future social housing residents – people often forgotten in this – end up picking up an even bigger bill. As a sector we want to work with the government to ensure that leaseholder and social housing residents are protected from these costs and that we can move forward in a fair and sustainable way. It must be remembered that the money social landlords spend on homes comes from rent paid by tenants – so a large part of the bill for this crisis will be felt by some of the country’s poorest households. At a time of rising living costs and a focus on ‘levelling up’ that cannot be right. The polluter pays principal must apply.