Political tensions enmeshed in the cladding crisis have raised their ugly heads again this week, as developers have come out and argued they won’t be able to build enough affordable homes if they’re made to pay even more for cladding remediation.
Levelling Up Secretary Michael Gove has secured his first real win, with a deal which will make developers pay £2bn to resolve fire safety issues on buildings they helped construct. Previous plans would have foisted the burden onto leaseholders.
From this month, developers will have to start paying the “cladding tax” to remediate some of the economic pain felt by affected leaseholders. But the deal has not come without blowback, with developers’ ruffled feathers turning into a threat that fewer affordable homes would be built as a result.
Gove wanted developers to pay £4bn, but the Home Builders Federation fought back, saying that fee was inflated. The £2bn deal comes on top of a £3bn bill developers will have to contribute to where the original developers are impossible to trace. HBF has pushed back against plans to fix cladding built by international or defunct companies – they are the ones who should be footing the bill.
“If ministers are genuinely interested in the ‘polluter pays’ principle, that seems fair”, HBF executive chairman Stewart Baseley said.
The scale of the problem is vast – so much so that it has become one of those sticking points in politics that seemed “too big to deal with”. Gove’s department estimates there are 8,000 buildings with the cladding, rather than the 3,500 figure HBF has pushed.
A spokeswoman for the Department for Levelling Up insisted the £2bn figure is floating, and if more developers sign up to the pledge, that number will climb closer to the £4bn they initially wanted.
Nonetheless, the quiet, but firm affordable housing threat indicates we’ve reached yet another inflection point in the fight between government and developers.
In a research paper, HBF advises the government to “consider mitigating the outturn impact on Affordable Housing, given we face a critical shortage of this stock nationally”. The HBF is right: at the end of 2021, there were more than 1.1. million people on local councils waiting lists in England, while only 52,000 new affordable homes were available. But their claim that the cladding tax will soak up the money for affordable housing only reveals how, unchecked for years, the industry has been left free to unravel. It is “a political statement as opposed to necessarily the reality”, according to Mary Anne Bowring, group managing director at property consultant Ringley Group.
To be clear, if smaller developers want to stay solvent while paying for cladding remediation, something has to give. The big names are largely likely to survive the adjustment, making it to the other side with some digestible losses. SMEs will be in bigger trouble. But the idea that what has to give is affordable housing shows developers are now willing to use all the tools available to get the government to capitulate on some of the details of reparations. They feel they don’t have the upper hand in their battle with Gove, so they’re trying anew.
Some of the big developers – Persimmon, Berkeley Group and Taylor Wimpey among them – have pledged to ratchet up their funding for repair work by more than £1bn. In other words, they are prepared to be on the front foot. They know contributing to the narrative of developers being evil entities won’t help them – and it won’t help solve the impasse.
Ultimately, government and developers will fight until a compromise is reached. Policy changes might play a role in this saga in the months ahead – unlocking more land opportunities with planning reform could, for instance, enable affordable housing providers and SMEs to win more work. It’s them who deliver a higher proportion of affordable housing than majors anyways, according to Rico Wojtulewicz, Head of housing and planning policy at the National Federation of Builders. Affordable housing and a competitive housing supply market “make good bedfellows”, he says.
There is compromise to be found. Finally, after years of relentless campaigning, affected leaseholders have made sure that cladding is an issue that’s not going away. But developers will have to share their burden without making further threats.
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