U.K. Puts Tax on Developers to Fund Safer Apartment Blocks
(Bloomberg) -- The U.K. announced an extra 3.5 billion pounds ($4.8 billion) toward the cost of stripping dangerous cladding from apartment blocks in England, with a new tax on developers from next year to help cover the costs.
Housing Secretary Robert Jenrick said the new cash will add to a previously announced 1.6 billion-pound “safety fund” to remove the material, which was blamed for the deaths of 72 people in a catastrophic fire at London’s Grenfell Tower in 2017.
A new tax will be introduced for U.K. residential developers in 2022 to raise at least 2 billion pounds over the next decade to ensure homebuilders “make a fair contribution” to solving the problem, Jenrick told the House of Commons on Wednesday.
“We believe in home ownership,” Jenrick said. “This exceptional intervention amounts to the largest ever government investment in building safety.”
U.K. Homebuilders Extend Declines as Cladding Plans Laid Out
But critics warned the plan does not go far enough, because grants will cover only those people living in buildings taller than 18 meters (59 feet), or above six storeys. Leaseholders in buildings between four and six storeys will get access to loans to help cover the costs.
Jenrick said these loans will be “long-term, low-interest” and mean people will never pay more than 50 pounds a month toward the removal of unsafe cladding.
‘Saddled With Debt’
U.K. house builders Crest Nicholson, Vistry, Bellway and Redrow extended declines after the plans were announced, while building materials firms Kingspan and Saint-Gobain also dropped.
But Paul Afshar, spokesman for the End Our Cladding Scandal campaign group, said the biggest housing developers had “got off lightly.”
“Many people living in buildings under 18 meters will still have to bear the cost -- for many above 30,000 pounds -- saddled with debt around their necks for 30 years,” he said in an email. “Leaseholders are the victims of this crisis and have done nothing wrong to deserve this.”
Stephen McPartland, a Conservative member of Parliament, criticized Jenrick’s announcement as “all smoke and mirrors” and “shocking incompetence” as it doesn’t include action over other fire safety defects and “excessive” insurance costs.
London Mayor Sadiq Khan also said the plans “fall far short of what is needed” and it was “shameful” for ministers to tell some leaseholders they would have to pay to fix problems they “played no part in causing.”
Pressure has been growing on the government and homebuilders to do more for people caught up in the safety scandal that has been brewing since 2017, when cladding on the Grenfell Tower in West London caught fire, killing 72 and revealing the widespread use of similar materials across Britain.
The price for the repairs could be as high as 15 billion pounds, according to a parliamentary committee last June.
So far, a large chunk of the financial burden has been placed on leaseholders, some of whom are already paying for an array of safety measures, including 24-hour security and installing fire alarm systems. Members of both the U.K.’s major political parties have called for the private sector to take more financial responsibility.
Persimmon Plc, the U.K.’s biggest homebuilder, has made a provision of 75 million pounds in its 2020 results for any necessary repair work on 26 buildings it developed that may be affected by the issue, it said in a statement Wednesday.
The Home Builders Federation, which represents the builders of 80% of new homes in England and Wales, welcomed the announcement and said it will work with government to develop the tax proposals to ensure it is “equitable” and doesn’t threaten housing supply.
“The industry has already spent or set aside over half a billion pounds to remediate buildings and is keen to play its part in developing equitable and fair solutions that reflect the responsibilities of all parties involved in the design, construction, inspection and current ownership of buildings,” the group said in a statement.
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