HR0002

Written evidence submitted by Home Builders Federation

ABOUT THE HOME BUILDERS FEDERATION

The Home Builders Federation (HBF) is the representative body for home builders in England and Wales. HBF’s membership of more than 300 companies contributes around 80% of the private new homes completed in England and Wales and encompasses private developers and Registered Providers. The majority of home builder members of the HBF are small and medium sized companies.

SUMMARY

HBF welcomes the opportunity to contribute to the Public Accounts Committee call for evidence into the housing crisis and cladding remediation. 

This submission starts by setting out the key factors that have contributed to the housing crisis and the progress made in recent years by the home building industry to increase housing delivery. It also examines some of the Government’s key housing policies in the context boosting housing supply, as well as the factors which are undermining housing delivery.

We consider that while policies such as reviewing the mortgage market and reform of the planning system have a role to play in resolving the housing crisis, ultimately a clear and coherent roadmap does not exist with competing policy objectives making it less clear than at any time in the past 15 years that the Government fundamentally sees housing supply growth as a priority. Without this, the crisis is unlikely to be resolved any time soon. In the shorter-term, blockages in the planning process and the continued heaping of additional taxes on the sector is making investment in future housing delivery increasingly risky.

On cladding remediation, this submission summarises the engagement HBF and its members have had with Government since the announcement by ministers of a new approach to building safety early this year. This has seen UK home builders supplement existing commitments to self-remediation with the Building Safety Pledge announced in April which will bring at least £2bn in commitments from builders in addition to the £3bn that will be raised via the new industry-specific tax on UK home builders. While our members have consistently maintained that leaseholders should not be left to fund remediation programmes that have been made necessary as a result of failures of building regulations, building safety defects or failures of building products and materials, home builders should not be shouldering all of the responsibility alone.

As such, we strongly urge the Government to continue its engagement with the other relevant stakeholders including construction product manufacturers and overseas developers.

BACKGROUND: HOUSING CRISIS - SUPPLY AND OWNERSHIP

Increasing the supply of housing is critical if the UK’s housing crisis is to be resolved. While expanding housing delivery is not a panacea and needs to be considered alongside other relevant issues it is the single most important action that can be taken in response to the housing affordability crisis.

While delivery has increased substantially with almost 1.2 million new homes built in the past five years, this progress came off the back of a prolonged period of under-delivery. In the years following the financial crisis, net additions to the housing stock fell to 124,000 new homes per annum, the lowest peacetime figure ever recorded. This came at the end of a longer period of undersupply during which the long-term consequences of failing to build enough homes became ever more apparent. Despite often high levels of population growth, in the 15 years preceding 2006, net housing supply averaged just 158,000 additional homes per year.

 

 

Considerable progress has been made in recent years to increase supply and solve the country’s housing supply crisis. From the aforementioned low of 124,720 new homes delivered in 2012-13, net housing supply has increased year-on-year to a peak of 242,700 in 2019-20, exceeding the net housing supply numbers seen even in the housing boom years of the 1950s and 1960s.

The latest annual housing supply statistics, published in November 2021, did demonstrate a dip in completions due to a period in which sites were closed during the early months of the coronavirus pandemic, however they still remained at historically high levels: in the 12 months to the end of March 2021, there were 216,490 net additions to housing supply in England.

 

 

More recent figures provided by Energy Performance of Buildings Certificates (EPC) data, shows that housing supply has rebounded strongly since the early stages of the Covid-19 pandemic. In the 12 months to March 2022, 238,500 EPCs were lodged for new build dwellings in England, an increase of 8% on the previous year[1].

Crucially, planning permissions, an indicator of future housing supply, also continued to be granted at high levels. As of the end of Q3 2021, the Moving Annual Total (MAT) for England showed that 319,438 planning approvals for the previous 12 months.  However, it is important to note that these figures are for outline planning consents rather than detailed planning permissions. Some will represent new and replacement planning permissions obtained on sites with a previous outline consent and in the majority of cases it will take considerable time to turn these consents into implementable planning permissions. In recent years, owing to under-resourcing of local authority planning departments, the end-to-end planning process has become increasingly difficult, risky and costly.

The role of Help to Buy in increasing housing supply

Many factors have led to the rapid increases in housing supply seen in recent years, but a key driver was the introduction of the Help to Buy Equity Loan scheme.

As well as addressing deposit and affordability issues, Help to Buy has provided a stimulus to the house building industry and the housing market by encouraging developers to build more new homes through an increase in effective demand. It has also boosted confidence amongst consumer and lenders (as well as developers) and has helped ensure much stronger lender support for the new build market.  By the time the scheme closes later this year, it will have supported around 380,000 households to purchase a new build property, including more than 330,000 first-time buyers getting onto the housing ladder with just a five per cent deposit.

As such, despite criticisms of its cost and perceived impact on house prices, the scheme has been an extremely successful home ownership policy. An HBF report from 2018 found that it has achieved all three of its objectives set at launch[2]:

Over the period since the launch of the Help to Buy scheme (1 April 2013 to 31 December 2021) for which statistics are available, more than 355,000 properties were bought with an equity loan[3]. Even before the introduction of the new iteration of the scheme which is restricted to First Time Buyers (FTBs), the vast majority of purchasers were FTBs, accounting for around 82 per cent of total purchases. Government statistics show that in London the typical household using Help to Buy in 2021 had a combined household income of around £65,000 and purchased a home with an average purchase price of £435,000. Outside of the capital, the average household income was lower at £48,500 with buyers, on average, purchasing a property with a value of £242,500.

Note: Data from Q2 2021 onwards is for transaction completed under the new Help to Buy scheme

 

Help to Buy has also delivered not just for FTBs, but for the taxpayer. The Government’s figures on repayments of Help to Buy Equity Loans shows that the scheme has seen homeowners repay their government equity loans with an average uplift of 10% when compared with the original loan value[4].

 

Further findings include:

Home ownership

While considerable progress has been made in reversing the decline in home ownership, there is still a considerable way to go to resolve the problems caused by the undersupply of housing.

While measures such as Help to Buy have meant that the number of young people joining the property ladder is increasing again (In 2020-21, 47% of those aged 25-34 were owner occupiers, up from 41% in 2019-20[5]), ownership levels remain far lower than they were in 2003-04 when 59% of 25-34-year olds were owner occupiers.

More broadly, owner occupation rates have increased slightly with 65% of households in England estimated to be owner-occupiers in 2020-21, unchanged from 2019-20 but an increase from 63% in 2015-16[6]. However, this is still considerably lower than the peak of 71% in in 2003.

Affordability also remains a concern. Since 1997, housing affordability has worsened overall, with the England and Wales average affordability ratio moving from around 3.5 to 9.1. As such, in 2021 full-time employees in England could typically expect to spend around 9.1 times their workplace-based annual earnings on purchasing a home; a significant increase from 2020, when it was 7.9 times their workplace-based annual earnings[7].

External factors undermining housing supply

The remainder of this submission will examine the measures and policies the Government is taking to address the UK’s housing crisis from the perspective of the home building industry. However, these must be viewed in the context of the wide range of external factors that also have the potential to impact housing delivery and supply.

Since the onset of the Covid-19 pandemic, developers have experienced difficulties concerning material and labour shortages and the associated impacts of cost inflation which have, of course, been exacerbated by Brexit and most recently the war in Ukraine. The consequences of materials cost pressures are varied. Some developers have found that the increases could be absorbed by higher house prices, but this is not always possible as materials were running out before houses could be completed and they therefore could not be sold. Furthermore, house price inflation is regionally patchy, but all regions are experiencing these cost increases.

Earlier this year, HBF published the results of a survey it produced in collaboration with Close Brothers Property Finance and Travis Perkins, which examined the barriers to housing delivery from the perspective of SME developers. 78% of respondents believe the supply and cost of materials is a major barrier to housing delivery, compared to just 20% in 2020[8].

These factors combined with interest rate rises, and the cost of living, finance and regulatory compliance mean that all home builders are operating in an extremely challenging environment, with the difficulties being felt most acutely by SMEs.

Energy efficiency and recycling of housing stock

Because of the crisis in housing affordability and the difficulties the number of demolitions recorded in England on an annual basis has fallen to historically record lows. In 2020/21, just 5,760 dwellings were demolished. Up until the mid-2000s, the annual number was typically around 20,000. Therefore, as a proportion of the overall dwelling stock, we are replacing just 0.02% of the stock of homes each year, compared with around 0.1% of homes in the mid-2000s, a rate that would see the entire stock recycled every 3,000 years rather than every 950 years. While this is not necessarily a bad thing, it does present a considerable challenge to the country’s Net Zero challenges and obligations. Older housing stock is typically far less energy efficient than newer homes. In addition to the environmental impact, the failure to replace less efficient, older properties also necessitates far higher household expenditure on energy.

Chart, line chart

Description automatically generated

Measures undertaken by the UK government to address the housing crisis

In this submission to the PAC’s inquiry, we will consider some of the Government’s policies to address the housing crisis in turn, before highlighting the measures we consider to be undermining housing supply. We will conclude by outlining a series of measures the home building industry believes the Government should take if it is to address housing need effectively. 

Mortgage Reform

With the share of mortgages advanced in Q4 2021 with loan to value (LTV) ratios exceeding 90% at just 4.2%, HBF fully supports the Government’s ambition to assist more aspiring FTBs on to the property ladder by undertaking a review of the mortgage market to find ways of providing better access to low-deposit mortgages. This is particularly important to support sustained levels of high housing supply. Mortgage lenders often discriminate against new build by lending at lower LTVs on new build properties, usually five to 10 percentage points lower than what is available on second hand properties. This is because of a perceived ‘new build premium’ but fails to reflect the significantly lower running costs that come with owning a newer property. Indeed, most mortgage lenders base mortgage affordability checks on a range of factors, including a national average household figure for energy costs. This means that a purchased of a super-efficient new build home with projected energy bills of, say, £400 per year will see no affordability benefit in their mortgage calculation compared with if they were purchasing an older property that may cost three times or more to heat. If lenders are to support homebuyers to make environmentally conscious decisions, they should provide the incentives to make this a reality.

Gross advances by loan to value (LTV) ratios MLAR Q4 2021

Category

Over 90%

Over 75%, up to 90%

75% or less

Q1 2020

5.20%

32.80%

62%

Q2 2020

4.90%

31.60%

63.60%

Q3 2020

3.50%

36.10%

60.40%

Q4 2020

1.20%

38.80%

60%

Q1 2021

1.10%

35.70%

63.20%

Q2 2021

2.10%

37.70%

60.30%

Q3 2021

4.20%

36.10%

59.70%

Q4 2021

4.20%

32.50%

63.30%

Source: FCA, Commentary on Mortgage lending statistics Q4 2022

While the availability of high LTV mortgages has improved since the withdrawal of many products during the height of the pandemic, the number of 90%+ LTV loans advanced is still considerably lower than the 5.9% share of lending reached in Q3 2019 (the highest share achieved since Q4 2008)[9]. As such, the Government’s review is both important and timely, particularly as the Help to Buy scheme comes to a close in March 2023.

Prior to the scheme’s introduction, mortgage availability was deemed by home builders to be the predominant barrier to housing delivery. In a survey of builders at the end of 2012, 8 in 10 developers considered mortgage availability and terms to be a major constraint on investment. With the introduction of Help to Buy, there was a clear shift away from an emphasis on the demand constraints that preoccupied house builders and influenced investment decisions, and the proportion of developers reporting mortgage availability as a major constraint had dropped to 10% by the start of 2014.

In a post-Help to Buy world, with average FTB deposits currently in excess of £44,000[10] and 29% of FTBs receiving help from friends and family or inheritance to fund their deposits, increasing the provision of low deposit mortgages is important not just for fulfilling the Government’s home ownership ambitions, but for assisting those who are in a less privileged financial situation.

HBF also welcomes the Prime Minister’s confirmation that the Government’s mortgage review will look at the different ways mortgage lending occurs globally, for example through mortgage insurance and wider availability of long-term fixed-rate mortgages, and we look forward to learning the outcome of the review in the autumn.

However, the home building industry is not relying on the Government alone to find solutions to the mortgage challenges facing FTBs. HBF in conjunction with its members has developed an industry funded 95% LTV mortgage indemnity scheme, Deposit Unlock, which launched in November 2021. It was devised in collaboration with the lending industry and allows both FTBs and existing home buyers the opportunity to purchase a new build home with just a 5% deposit.

The scheme sees participating developers de-risk lending for mortgage lenders via a combination of cash held on account for a period of seven years and an indemnity. The protection for lenders is significant and estimated to be capable of protecting against an impact worse than the late 2000s or even the early 1990s recessions. Deposit Unlock initially started with 17 participating developers and two lenders but continues to grow and products offered by the lenders are competitive in the 95% LTV space.

HBF is also working with Market Mortgage on its privately funded mortgage scheme that will provide top-up financing for new build purchasers to access 95% mortgages with participating lenders.

While neither scheme will be able to reach the impact of Help to Buy (the Government equity loan under Help to Buy allows lenders to lend at 75% LTVs and so have an effect on loan-to-income ratios and provide buyers with access to lower rates), it is hoped that some proportion of the demand may be retained once Help to Buy closes.

Levelling Up and Regeneration Bill

Although much of the detail concerning the polices outlined in the Government’s Levelling Up and Regeneration Bill (LURB) is yet to be confirmed, there are a number of measures which could have a positive impact on housing delivery and thus the housing crisis.

On planning, for example, we support the Government’s intention to speed up local plan making by updating regulations to set clear timetables for plan production – with the expectation that they are produced within 30 months and updated at least every five years. The proposal to give local plans more weight when decisions are made on applications so that there must be strong reasons to override the plan, providing communities with more certainty, is also to be welcomed.

These measures are important as despite England working to a plan led system, as of January 2022 only 72% of local authorities had adopted a National Planning Policy Framework (NPPF) compliant local plan and 42% of these were over five years old[11]. Furthermore, over the past few months 11 local authorities have either stalled, delayed or withdrawn their local plans[12]. Local Plans are vital for unlocking land and ensuring the right number of homes are built in the right places. Therefore, we support Government’s ambition to ensure the plan development process is speedier and more efficient.

However, we are concerned at the proposal outlined in the Bill’s supporting policy paper that would allow local authorities with an up-to-date local plan not to have a five-year land supply policy. Given the variable performance of Local Authorities in developing, implementing and updating local plans, the five-year land supply consideration under the NPPF has been a key determinant in ensuring housing continues to be delivered and that development can react flexibly to local needs.

While the industry understands that the Government intends this policy to be the ‘carrot’ with which to speed up local plan making, given the complexities and sensitivities involved in local plan development, it is questionable as to whether the ambition for all Local Authorities to have an up-to-date local plan is realistic.

In addition, any removal of the five-year land supply requirement will disproportionately impact SMEs who struggle to secure allocation for small sites in local plans.  As such, housing delivery could be seriously undermined unless the Government is equipped with tools to ensure the diversification of sites in local plans.

The policy paper accompanying the Bill also included a proposal to improve capacity in the local planning system, by increasing planning fees for major and minor applications by 35% and 25% respectively, subject to consultation. In principle, this is a measure that the home building industry could potentially support in the interests of increasing housing delivery.

The lack of resources within Local Authority planning departments is a concern to housebuilders of all sizes but its effects are particularly harmful for SMEs and their ability to deliver new housing. Our research found:

Therefore, developers may accept a modest increase in planning fees in exchange for timely decision-making and discharge of conditions, particularly if the money is ring-fenced.

Regarding the Infrastructure Levy, its potential impact on housing is hard to ascertain prior to additional details being published by the Government. However, it is important that the new Levy is designed and implemented in a way that doesn’t undermine the supply of affordable housing, deter the development new housing in areas where it is most needed or disadvantage SME developers.

Measures that are undermining housing supply

While the above measures may provide some modest steps forward with regards to resolving the housing crisis, the Government is also undermining the industry’s attempts to increasing housing delivery at pace in a number of ways. A number of these measures are examined in the remainder of this submission.

Unfavourable business environment for SMEs

While the home building sector in its entirety has flourished in recent years, SME developers have continued to face a number of challenges and obstacles which have impeded their ability to grow. In turn, this has hindered the industry’s ability to meet the Government’s target of delivering 300,000 new homes per annum.

Although there has been a significant increase in housing supply in recent years, this has mainly been due to the contributions of the largest house builders. However, this has not always been the case. In 1988, small developers were responsible for four in every ten new build homes, compared to around just 10% today.

The number of SMEs in the home building sector has declined consistently since the beginning of the 1990s. While their diminution was exacerbated by the financial crisis, it has also been due to:

Following the coronavirus pandemic, the position of SME developers is increasingly precarious. If we are to make further significant increases to housing supply, it is vital that SME builders are not only supported to survive, but to grow, expand and thrive. For example, HBF’s report Reversing the decline of Small House Builders found that returning to the number of home builders operational in 2007 could help boost housing supply by around 25,000 homes per year[14].

One of the solutions HBF has put forward to mitigate the challenges faced by small builders is the introduction of a Government guarantee for development finance lenders of up to 20% of development costs. We consider that by underpinning private lending with a Government-backed guarantee, this could enable home builders to secure more favourable terms and higher effective loan-to-cost ratios. Further information about our proposal can be found in our report, Reversing the decline of small house builders.

A housing delivery policy vacuum and a wavering commitment to housing targets

Since 2017, the ambition to build 300,000 new homes every year by the mid-2020s has been the cornerstone of each Conservative Government’s housing policy. However, five years on, there is still no defined road map in place for how the Government plans to achieve this goal.

This is demonstrated by the fact that the target wasn’t mentioned at all in either the Queen’s Speech itself or the accompanying briefing notes. In addition, the rhetoric of the Housing Secretary has raised questions as to whether the Government remains committed to the 300,000 ambition following its defeat last year in two by-elections largely blamed on the Government’s Planning for the Future white paper. For example, in an interview with BBC Radio Four’s Today programme in May, Mr Gove said: "It is no kind of success if, simply to hit a target, the homes that are built are shoddy, in the wrong place, don't have the infrastructure required and are not contributing to beautiful communities. I am not bound by one criterion alone when it comes to development. Arithmetic is important but so is beauty, so is belonging, so is democracy and so is making sure that we are building communities."

While the Government (including the Housing Secretary) has subsequently reiterated its commitment to both the target and increasing home ownership, it remains the case that policies designed to increase the supply and delivery of new homes are still lacking.

The impact of nutrient neutrality, water neutrality and recreational mitigation zones

At present, the development of at least 100,000 new homes across 74 Local Authorities are unable to proceed because of a requirement imposed by Natural England to evidence ‘nutrient neutrality’ on new housing schemes.

While the home building industry is supportive of the need to protect water habitats, developers are being disproportionately impacted by the mitigation measures introduced by Natural England, despite the sector’s contribution to the issue being marginal in comparison to that of agriculture (it is estimated that less than 4% of nutrient pollution is due to residential development).

While home builders make hundreds of millions of pounds worth of contributions to water companies each year, it is new developments which are being targeted as a means of addressing the pollution from another sector and the failings in wastewater treatment processes to filter out nutrients before entering water courses.

It is also important to note that in addition to nutrient neutrality stipulations, Natural England have also imposed the additional following restrictions on housing delivery in some areas:

Water neutrality, Sussex (3,000 new homes delayed) – Interventions have been introduced in Sussex to prevent new homes being built because of the perceived impact of new homes on water use and, potentially, the habitats for an aquatic snail.

Recreation mitigation, New Forest (20,000 new homes delayed) - Natural England moved to block development in a number of local authority areas around the New Forest in Hampshire in 2020. It has since expanded this intervention to the Beechwoods in the Chilterns too. The justification for this intervention follows the results of a telephone survey conducted by Natural England’s consultants which found that homes built in nearby local authorities will result in residents wishing to use the New Forest or the Beechwoods, for recreational purposes, thus supposedly creating pressure on the area. Where mitigation is available, the costs typically run to thousands of pounds per new home

Combined, these measures are delaying the delivery of many new homes and more worryingly still, the measures could yet spread to other parts of the country.

Unless a solution can be found, not only will the supply of much needed new homes be severely impacted, but the broader economic consequences of under-delivery will have significant implications across many regions of England. Smaller developers will be the most affected as they lack alternative development options.

Ever increasing burden of tax and regulation on home builders

At a time when the planning process is creaking and building materials costs are increasing at nearly unprecedented levels, the increased burden of tax and regulation that the Government is imposing on UK home builders could not be timed more badly. The next 12 to 36 months marks the biggest overhaul of policy and regulation in the house building environment at the same time that the Government is seeking to extract billions more from the sector in new taxes.

  1. RPDT (HM Treasury): Ahead of the economy-wide six percentage point increase in Corporation Tax planned for 2023, a new industry-specific tax on UK home builders came into force in April 2022. This four percentage point surcharge, under the guise of the Residential Property Developer Tax, is unlikely to be paid by foreign developers. The estimated £300m per year that will be raised through RPDT is intended to fund the remediation of cladding on 18 metre+ buildings developed by overseas developers and other untraceable actors.
  2. Building Safety Levy (DLUHC): This new levy will be consulted on shortly and is intended to raise another £300m per year from UK builders to fund cladding remediation on 11-18 metre buildings developed by foreign developers and other untraceable actors
  3. Energy efficiency regulations (DLUHC): A new Part L of building regulations necessitate an increase in fabric efficiency of 31% for new build properties and is expected to represent a total combined cost to the industry of at least £750m per year
  4. Electric Vehicle charging points (Department for Transport): A new Part S of building regulations will require all new homes are equipped with EV charging infrastructure. The Government’s own Impact Assessments estimate that this will lead to more than £200m in additional costs to industry each year
  5. Biodiversity Net Gain (Defra): New requirements for sites to provide for at least a 10% uplift in biodiversity will create an additional cost of just over £250m per year for the industry, according to Government analysis. These costs fall disproportionately on regions like Yorkshire and the North West where average costs for new homes on greenfield developments are estimated to be around £1,300 to £1,500, compared with around £550 in London

In addition to the above examples, other new regulations, including a revised Part F (ventilation) and Part M (accessibility), the funding of a New Homes Ombudsman and the plethora of costs imposed as a result of Natural England’s numerous interventions represent additional costs to the industry of around £4.4bn per year by 2025.

It is common for the introduction of these new taxes and regulations to be accompanied by arguments that land values and landowner returns will adjust to cover the costs rather than affect viability or reduce supply. At the margins these arguments are sound, but the cumulative weight of these additional costs will challenge the industry, particularly in a period where little house price inflation is expected. The first adjustments will be seen in land values (although at some point landowners will hold back from entering the market) and also in the value of Section 106, CIL and other developer contributions that is affordable on sites. In 2019/20, the industry provided local authorities with more than £7bn in infrastructure and affordable housing contributions. It remains to be seen whether Government itself intends to replace the funding from developers to communities that may be lost as a result of its policies elsewhere.

Within this S106 envelope, the proportion of monies dedicated to Affordable Housing has increased in recent years as direct funding for Affordable Housing delivery from Government has been constrained. At present, private cross-subsidy from private development is the principal source of new Affordable Housing Supply, including around 25,000 new homes last year.

Energy efficiency and overheating regulations: lack of Government preparedness

HBF members have spent several years planning for the adaptations to construction processes and new materials and products that will be required to deliver on the very ambitious enhancements to the fabric efficiency of new homes that have recently come into effect.

 

The new Approved Document L of building regulations, Conservation of fuel and power, sees an improvement in the energy efficiency of new homes of around one-third. New homes are already significantly less costly to run and typically use less than half of the energy of an equivalent older property, so these further improvements are challenging to achieve.

 

To allow the industry to adequately measure energy use and carbon emissions of dwellings and ensure compliance with the new Approved Document L, house builders are reliant on Government-approved software and tools. Last July, HBF wrote to DLUHC and to BEIS to express the industry’s concerns around the lack of necessary ‘SAP’ software to assess future Part L compliance. Despite assurances given by officials at the time, the new software was made available mere days before the introduction of the new Approved Document L.

 

While all developers have been impacted by the SAP delay, it is the smaller house builders and supply chain firms that have been particularly affected by the inability of Government to prepare adequately. These challenges become even more pronounced as we look to the Future Homes Standard from 2025, and the major changes that that standard will bring in the look and feel of new build homes, including changes to heating systems.

 

Similarly, just two weeks’ ahead of the introduction of a new Building Regulations Approved Document O relating to issues of overheating in buildings, it became apparent that the new regulations contained many impracticalities and may require tens of thousands of permissioned homes to go back through the planning process at a time when local planning resources are extremely strained. Moreover, the new regulations may unnecessarily leave a legacy of poorer visual design and liveability for homeowners, increasing costs and in some cases, simply being impossible to follow the letter of the regulations.

 

As such, a lack of Government preparedness is having a substantial impact on the ability of the industry to deliver the much-needed new homes this country needs.

 

Conclusions and recommendations

In light of our submission above, HBF puts forward the below recommendations to the Government with the aim of increasing housing supply:

Housing delivery

 

SME Finance

 

Planning process

 

Nutrient neutrality/environmental

Burden of tax and regulation

Cladding remediation

HBF would like to thank the Committee for the opportunity to submit evidence on cladding remediation. Our members have consistently maintained that leaseholders should not be left to fund remediation programmes that have been made necessary as a result of failures of building regulations, building safety defects or failures of building products and materials.

While HBF and its members have committed to working with the Government to find a solution since the first weeks after the Grenfell Tower, this submission will focus solely on activities taken since the Housing Secretary’s announcement on 10 January 2022 of DLUHC’s new approach to building safety and cladding remediation.

However, a summary of our engagement and work in this area since 2017 is available in our submission to the LUHC Committee, published earlier this year.

Building Safety Pledge

Since the Government's announcement of its new approach to building safety on 10 January, HBF and its members have engaged constructively with ministers and officials to agree a way forward.

 

Following a series of detailed negotiations, HBF and DLUHC agreed the basis of a Building Safety Pledge and accompanying principles which was published on 13 April 2022. The pledge commits signatories to:

The latest data released by DLUHC shows that 47 developers have signed the pledge to date. The list can be viewed in full here. This negotiation is a significant development in our collective efforts to solve the building safety crisis and demonstrates developers’ commitment to play their part in the solution.

 

It should be noted that the UK home building industry is the only industry to have voluntarily committed funding for historic building safety works. The pledge brings the total committed by national house builders on self-remediation to over £2 billion. This is on top of the Residential Property Developer Tax (RPDT), which is expected to raise up to £3bn over the next 10 years. This new 4% surcharge on Corporation Tax for house builders was consulted on during 2021 and became payable by dozens of the largest UK house builders from 1 April.

 

Building Safety Levy

 

While the pledge will see all the buildings developed by signatory UK builders in the past 30 years remediated, this only covers a minority of the total affected buildings. As such, the Government now plans to introduce a new Building Safety Levy on all new development in England to fund remediation of older buildings and buildings that have been developed by overseas developers, other developers such as the large landowner developers in London and those blocks which were built in the decades before the 1990s.

 

This levy will affect all UK home builders, including small and medium-sized firms, and is on top of funding already spent or committed through the pledge and RPDT.

 

The continued extraction of funds from the industry, whilst other responsible industries, overseas developers and wider property sector actors do not contribute, will have far reaching impacts on the viability of businesses, on investment in future housing delivery, particularly Affordable Housing, and on the estimated 800,000 jobs sustained and supported by the home building industry.

 

Recent research by WPI Strategy has suggested that another new levy on UK house builders could lead to 72,000 fewer affordable homes being completed over the next 10 years.

 

It is also not entirely clear that the additional funding is required, leading to some concerns that the introduction of another new Levy represents a form of stealth tax on an industry and on house building as a means to raise revenue and deter housing delivery in the face of increasing anti-development sentiment among the political classes. The Building Safety Fund has been allocated £5.1bn to remediate 18m+ buildings. Originally this was intended to fund all high-rise buildings regardless of when and by whom they were developed. Following the agreement between industry and Government of the Building Safety Pledge, funds are already being repaid by signatory UK home builders and moving forward buildings that they have developed will not have access to the Fund.

 

According to DLUHC figures, up to March 2022, just £200m in private sector building ACM remediation funding had been allocated with around £136m spent up until then. A significant proportion of these sums will be reduced or reimbursed as a result of the pledge.

 

Importance of engaging more widely with all those involved

While we have always acknowledged that home builders have a role to play in fixing the safety issues and will endeavour to continue working constructively with the government to this end, we have also consistently questioned why the government has not gone further to engage other stakeholders to ensure they are also playing their part in resolving matters for leaseholders.

While UK home builders are already paying new taxes and levies and have pre-existing commitments to remediation projects, to date no other industries, sectors or sub-sectors have made a contribution.

As such, we continue to encourage the Government to engage with:

 

June 2022

 

 

 

 

 

 

 

 

 

 

 

 

 


[1] DLUHC, Energy Performance of Buildings Certificates in England and Wales: January to March 2022, April 2022

[2] HBF, Bringing home ownership back into reach, September 2018

[3] DLUHC, Help to Buy: equity loan scheme: data to 31 December 2021, May 2022

[4] HBF, Road to Redemption, Analysing taxpayer returns on help to buy equity loans, May 2021

[5] DLUHC, English Housing Survey Headline Report, 2020-21

[6] DLUHC, English Housing Survey Headline Report, 2020-21

[7] ONS, Housing affordability in England and Wales: 2021, March 2022

[8] HBF, State of play: Challenges and opportunities facing SME home builders, January 2022

[9] FCA, Commentary on Mortgage lending statistics, December 2019

[10] DLUHC, English Housing Survey Headline Report, 2020-21

[11] Savills, Planning Data Update, January 2022

[12] Lichfields, Counting the cost of delay: The economic impact of Local Plan delay to housing delivery, 26 April 2022

[13] HBF, State of play: Challenges and opportunities facing SME homebuilders, January 2022

[14] HBF, Reversing the decline of small house builders, 2017