Written evidence submitted by the Home Builders Federation (RDC0006)
December 2024
Contents
3. Building Safety Fund and other government schemes
4. Government data and assessments of likely remediation programmes
7. The role of the Building Safety Regulator
8. Other actors: product manufacturers shirking responsibilities
9. Other actors: Insurers taking advantage of leaseholders
10. Unanswered questions of government
The Home Builders Federation represents home builders in England and Wales. HBF’s members build the majority of new homes built in England and Wales each year. Its membership includes national developers and hundreds of SME builders.
1.1 HBF welcomes the opportunity to make a submission to the Public Accounts Committee on this matter. HBF has requested information from government relating to building safety matters on multiple occasions over the past three years but key data remains unavailable despite many of these important estimates representing the opaque justifications for two new taxes on UK home building companies.
1.2 To date, UK home builders have committed:
1.3 Government maintains that additional funding is required to support further remediation and that the only possible source of additional contributions is, again, UK home builders. On 2 December 2024, MHCLG announced that it will be proceeding with a new £3.4bn tax on by all new homes built in England. HBF opposes this further tax on an industry with existing commitments that will likely surpass £6 billion. Expecting one sector to fund more than £9.4billion worth of remediation costs without extracting any commitments from other sectors is unfair and will constrain housing supply in the years to come.
1.4 The cost controls for government remediation schemes, its presentation of data and MHCLG’s estimates of future costs which are based on guesswork but being used to justify swathing new taxes on home building require urgent attention. This inquiry could not be more timely.
1.5 Our submission sets out the commitments to remediation funding from UK home builders, the experience of engaging with government over the past years and our understanding of the relevant programmes and how certain key estimates have been arrived at by MHCLG. We also explore current challenges developers are experiencing as they pursue self-remediation projects. Finally, we offer 15 questions that government has avoided answering in recent times but which are undoubtedly in the public interest.
2.1 HBF engaged extensively with the Ministry of Housing, Communities and Local Government in the months following the Grenfell Tower disaster as ministers and officials sought to understand the scale of the problems and the extent of the regulatory failings. It was as part of these conversations that HBF proposed a small levy on building control application fees through which the industry in its widest sense could contribute to cladding remediation costs. This proposal was not taken forward by government at the time and engagement with officials gradually ceased.
2.2 In 2020, the then Housing Secretary, Robert Jenrick announced that a new £2bn Residential Property Developer Tax (RPDT), paid for by larger UK home builders (but not foreign developers in the UK) through a Corporation Tax surcharge of 4 percentage points, would “represent a fair contribution” from the home building sector to assist with the costs of remediating affected buildings. HBF worked constructively with HMT through the design and implementation of this unprecedented, industry-specific, tax. This £2bn would be the UK home building industry’s contribution to the £5.1bn Building Safety Fund scheme. On behalf of UK home builders, HBF expressed concern that foreign developers building in the UK would not be liable for the new tax and that the product manufacturers whose failings were evidently a major contributing factor to the Grenfell Tower disaster, were not being asked to make a contribution.
2.3 Following the implementation of RPDT, but before it had become payable, a new Housing Secretary, Michael Gove, opened negotiations with UK home builders in early 2022, under the threat of expulsion from the market, on an extensive set of self-remediation commitments. The government had initially approached the industry threatening to issue ad hoc invoices to raise revenue – effectively an open-ended tax with no regime around it to fund a ‘remediation fund’. This approach, proposed in a letter from Director General, Richard Goodman along with an accompanying draft contract, would have been legally questionable and resulted in a major flight of capital from the UK, covering all sectors.[1]
2.4 The approach agreed eventually involved extensive negotiation throughout 2022 between UK home builders, represented by HBF and MHCLG (DLUHC as it was at the time). The voluntary self-remediation commitments which were signed by 54 UK home builders in 2023 commit these businesses to:
2.5 However, despite two significant contributions to the building safety remediation programme in the form of a new profits-based tax on developers and an unprecedented voluntary commitment, the government has proceeded with plans to introduce another new tax on home building – this time to be paid by SME builders too – in the form of the Building Safety Levy. First consulted on in 2022 with minimal details of how it would operate, a second consultation took place in early 2024. In its recent announcements on building safety, ministers revealed that the initial targeted collection of £3bn would be increased to £3.4bn.
3.1 HBF considers that there has been relatively little robust oversight of the allocations, expenditure and management of the Building Safety Fund and other government schemes. Information published by the government is often extensive, but difficult to synthesise or comprehend with multiple categories of information.
3.2 Financial information on government schemes that was, up until 2023, included in the MHCLG monthly data releases, is now available only amongst a compendium of 58 management data tables published alongside the monthly releases.
3.3 Examination of the Building Safety Fund (BSF) financial data begs many questions as to the necessity of raising additional resources via taxes on business to support more government remediation scheme funding. As of November 2024, £2.38bn of BSF’s £5.1bn had been allocated.[2] Furthermore, the government has confirmed recently that it expects to recoup around £700m in reimbursements from UK home builders as a result of commitments in the Developer Self-Remediation contract. If MHCLG recovers all of the funding it expects to do so via reimbursements, the total BSF expenditure is likely to settle at a figure below £2bn, leaving more than £3bn unallocated. The need to impose further taxes on home building to obtain more funding is not understood by industry and leads many to conclude that the motivations are elsewhere.
3.4 The contract between developers and government does give signatory builders the opportunity to challenge expenditure on remediation which has been funded by the BSF where it is considered unnecessary, spurious or wasteful. Having first intended to issue invoices for reimbursements before summer 2024, developers continue to wait. Based on anecdotal evidence and conversations with members who have monitored BSF awards on buildings they have developed, HBF expects a significant number of challenges to the appropriateness of some BSF expenditure and the necessity of and quality of works carried out using BSF awards. HBF would therefore encourage the Committee to seek further details of BSF reimbursements and of BSF allocations and expenditure in general.
3.5 The BSF was established in 2020 and 809 buildings are in the BSF portfolio. This number has been largely unchanged for at least 12 months so it can reasonably be concluded that the required funding for the BSF is unlikely to increase significantly.[3]
3.6 Meanwhile, the Cladding Safety Scheme (CSS) had seen total expenditure of £92m to remediate 298 buildings up until the end of October 2024 with a further £251m in allocations made to date to cover another 280 buildings.[4]
3.7 Across both of the main government-funded schemes, therefore, it would appear that expenditure and existing allocations amount to around £2.7bn, but with £700m in developer reimbursements expected, it would appear that only £2bn of the £5.1bn for building safety has been allocated.[5]
3.8 Transparency over the workings and financial status of the relevant funds and schemes matters not only for the sake of good governance and openness, but also because the supposed shortfall in existing funding is being used as the justification for a second tax on home building and the third major contribution to the remediation efforts by the home building industry taking the total to £4bn in self-remediation and £5.4bn in taxes to fund remediation of buildings developed by others including public bodies, foreign developers and now defunct firms.
4.1 HBF has long questioned the government’s estimates of the likely number of buildings in need of remediation. MHCLG’s estimates are based on assumptions that are long outdated and highly questionable.
4.2 Government has persistently refused to update its estimates of the number of residential buildings of 11-18 metres that may require remediation. The current estimate of 6,200 to 8,900 11-18m buildings with defects is based on a series of guesstimates layering assumption on assumption and was established in 2020 or 2021. Because definitive data does not exist, MHCLG estimated the number of residential buildings of 11-18m at 78,000. Then, based on the results of a small sample survey, consultants for the government assumed that between 8% and 11% of the entire cohort may need remediating.
4.3 No revision has been made despite far greater access to information on these buildings since they were deemed to be within scope of the building safety remediation programme. Furthermore, the 2020 estimate was made before introduction of PAS9980 guidance which created a new and more proportionate approach to assessing life-critical building safety when instituted by the BSI in 2022. It is these estimates and guesswork which has provided the justification and calculation of the now £3.4bn new tax on home building through the Building Safety Levy due for implementation during 2025.
4.4 Around four years on from this estimate being compiled by MHCLG, there are around 2,000 buildings of 11-18m in remediation programmes, including just over 800 which are covered by the developer self-remediation contract.[6] We have little confidence that the £3bn estimated BSL requirement is in any way accurate.
5.1 The commitments made by 54 UK home builders in respect of self-remediation are unprecedented. Buildings that were fully compliant with building regulations of the time and which have subsequently deemed to be unsafe due to what the Grenfell Tower Inquiry report called the “dishonesty” of materials providers are now being remediated by the original developers at no cost to leaseholders or taxpayers. These commitments alone cover buildings occupied by more than 100,000 households and are worth an estimated £4bn.
5.2 On 2 December 2024, many of the signatories to the contract agreed a joint plan with government which aims to accelerate remediation projects. Developers will seek to increase the pace of assessments of buildings and commencement of any works that are deemed necessary.
5.3 In signing up to the requests of the government, builders have been clear that they will not accelerate processes in a way that compromises the quality of the assessments or the works themselves. Although all parties are frustrated at the pace of the remediation programmes, ensuring that assessments and works are conducted appropriately and effectively will be the best approach in the long-run.
5.4 Remediation projects have been delayed by a range of issues, including difficulties in gaining access to buildings for inspections. Developers and government are party to the self-remediation contract, but freeholders and/or management companies for buildings are crucial partners in being able to make determinations as to whether works are necessary. In many cases, freeholders, management companies and leaseholders have had expectations for works set by previous, disproportionate government advice. Several years on from the superseding of such advice, it can be challenging to engage building owners on the safety regime set according to the independent PAS 9980 guidance.
5.5 It should also be noted that while the identification and remediation of buildings over 18 metres with unsafe cladding materials began after the Grenfell Tower tragedy, action to address issues with buildings of 11-18 metres was only initiated by government in more recent years. As part of its commitments via the Joint Plan with developers, government has stated that it will impose sanctions on freeholders who obstruct reasonable efforts to remediate buildings. We await details of how government intends to do this, but three years on from the thrust of the negotiations with developers over self-remediation and parallel negotiations with product manufacturers which eventually saw ministers and officials cave in to those businesses, freeholder behaviours are not significantly different.
5.6 One crunch point in determining how much the remediation programme can be accelerated will be the availability of qualified professionals, including experienced fire engineers. Some home builders with remediation portfolios have taken the decision to have relevant building assessments conducted only by Chartered Fire Engineers. The government panel of assessors, on the other hand, which MHCLG assures the industry has adequate capacity, includes non-Chartered Fire Engineers, often with less public indemnity cover than Chartered professionals. We estimate that only around one-third of the 60 or so assessors on the government panel are Chartered Fire Engineers.
5.7 The approach from government in recent years has caused consternation among developers as ministers have shown an interest in the subject only in fits and starts, in the practical issues holding back remediation projects. To this end, it remains a concern that 18 months on from the signing of the self-remediation contract, government has failed to deliver on one of its commitments to provide a dispute resolution scheme through which developers can break any deadlocks in negotiations with freeholders or managing agents.
6.1 The government has consulted on another new Levy on home builders to raise a further £3.4 billion which will supplement the £2bn expected to be received through the Residential Property Developer Tax (RPDT) and be additional to the sums being spent to remediate buildings UK home builders have developed over the past 30 years (currently estimated by government at £4bn).
6.2 RPDT was described by ministers at the time of its consultation in 2021 as ‘a fair contribution’ to addressing the building safety crisis.[7]
6.3 In December 2024, the government announced that the Building Safety Levy will be implemented in 2025 and will raise a further £3.4bn from UK home building. This is in addition to the £2bn from RPDT and the £4bn committed by the same group of companies via the developer self-remediation commitments.
6.4 The new tax will be levied on all new homes built by any developer regardless of size, profitability or type of home being built. It will mean that builders beyond the largest and those which had developed medium- and high-rise housing, will now also contribute to the building safety programme. Home builders will be contributing almost £10bn across the three sources.
6.5 Once the government has recovered the £700m it expects to recoup from self-remediation contract signatories, it is expected that only between one-third and half of the £5.1bn Building Safety Fund will have been committed. Although difficult to decipher, it appears that the Cladding Safety Scheme and ACM programme have only a committed between them a few hundred million. However, the government’s calculations and its statements regarding the new Building Safety Levy implies that there is a funding shortfall of billions of pounds. HBF has tried on countless occasions through communications with officials and ministers and via Freedom of Information requests to obtain further information on this matter, but to no avail.
6.6 The Building Safety Levy is acknowledged by government as being likely to have a suppressive effect on new housing delivery. Based on what we know of the specific design of the tax so far and in the absence of the detailed levy rates which are not expected to be published until well into 2025 and just months before its implementation, we expect that it will particularly impact output in Southern England where housing affordability is most stretched. At the time of the detailed consultation on the levy, HBF contested that it was highly political as it appeared designed to drive investment on new housing away from politically sensitive South Eastern constituencies. Given its significance to our sector and the likely impact it will have on the supply of new homes, especially Affordable Housing, in the years ahead, MHCLG’s reluctance to challenge on the subject is concerning.
6.7 Before another new tax is introduced, HBF has sought from MHCLG more information on its estimates for how many buildings may need to be remediated. We understand that these estimates were made using a desktop study in around 2021 and that they may do not take account of the new regime for assessing building safety which was endorsed by government as the key standard for building safety in 2022.
7.1 The Building Safety Regulator (BSR) now plays a crucial role in overseeing the safety performance of new buildings and works to existing buildings designated as being High Risk Buildings (HRBs). The BSR assumed the full scope of its responsibilities in spring 2024, two years on from the legislation that conceived of the BSR receiving Royal Assent. It is disappointing, frustrating and concerning, therefore, that with a two-year lead-in to the BSR’s ‘go-live’, Government has failed to provide adequate resourcing for this important new body.
7.2 BSR applications are typically taking four to five times as long as the targeted 12-weeks. These ongoing issues with the Building Safety Regulator’s performance are slowing down remediation and new housing projects alike. We understand that this poor performance is likely to continue until at least Quarter 2 2025. As part of the Joint Plan to Accelerate remediation, the Government has committed to ‘working with’ the BSR to improve performance. However, government has already been ‘working with’ the BSR for six months without any discernible improvement in its performance.
7.3 Although we recognise its separation from MHCLG, the BSR was established by the government through legislation originated within the Ministry and government had several years to plan for the Regulator to go live and remains responsible for the scope of its work as well as its resourcing.
7.4 We do not wish to ‘compromise regulatory oversight’ but we are told by the BSR that common issues encountered by developers, such as the lack of clarity around the status of lower-level internal remedial works are subject matters owned by MHCLG. Similarly, it cannot be argued that constructive suggestions made by developers to improve communication with the BSR and speed up its processes, for instance via a twin-track application route, would compromise regulatory oversight.
7.5 We propose that Government commits to ensuring the BSR is meeting its target performance levels by January 2025.
7.6 Government should also publish by April 2025, in a more transparent way than is currently the case, the timeframes for validating and assessing applications, and their outcomes for both (a) Category A, and (b) Category B cases dealt with by the BSR.
8.1 The Grenfell Tower Inquiry Phase 2 report confirmed that the chief causes of the building safety crisis were a litany of failures by government over many years and an approach to product testing by material manufacturers that the Inquiry Panel described as ‘systematic dishonesty’.[8]
8.2 Despite an abundance of evidence of wrongdoing, government has consistently elected not to extract funding contributions from product manufacturers to support remediation efforts and protect taxpayers and leaseholders from paying for the failings and corner-cutting of a small group of companies. More than seven years on from the Grenfell Tower tragedy and three years after UK home builders began paying the first of three punitive taxes or effective taxes to fund remediation, product manufacturers have failed to contribute a penny to remediation efforts. During this timeframe, the government has introduced legislation that could aid such a measure, but two and a half years on from the Building Safety Act receiving Royal Assent, no progress has been made.
8.3 The Building Safety Act 2022 introduced the concept of a Responsible Actors Scheme (RAS) for construction companies. Exclusion from the RAS would effectively render a company unable to operate in the UK. While the RAS has been aggressively targeted at UK home builders as a threat to ensure companies signed the self-remediation agreement and as a sanction in the event of firms not abiding by their commitments, the provisions of the Act would also have allowed officials and ministers to maintain a serious dialogue with construction product manufacturers as well as UK home builders.[9]
8.4 The RAS is underpinned by Section 126 of the Building Safety Act 2022. Section 126 empowers the Secretary of State to introduce regulations to establish such a scheme with eligibility determined by a number of potential criteria, including (a) payment of financial contributions towards remediation, expressly including buildings with which the eligible person or company has no direct connection; (b) carrying out activities in relation to construction products; and (c) the provision of information to the Secretary of State.[10]
8.5 In January 2022, government embarked on a brief campaign to obtain contributions from product manufacturers. On 22 January 2022, the Housing Secretary wrote in a letter to product manufacturers and suppliers:
‘The range of past practices in the industry – across its approach to manufacturing, marketing and testing – has rightly been a source of huge concern to Parliament and the public…
‘There are a number of cladding and insulation companies whose products or services have contributed to the need for remediation of 11m+ buildings on fire safety grounds. I am offering a window of opportunity, between now and March [2022], for the sector to work with my department through open and transparent negotiations to agree a settlement that will restore confidence and secure an appropriate contribution from the sector…
‘I expect a public funding commitment from your sector by early March [2022], which would be made available to the public and to affected leaseholders… I am prepared to do whatever it takes to deliver our objective including using our regulatory framework to limit any culpable company from operating and selling products in this country in the future; and I will pursue those individuals and firms liable for building defects who are unwilling to do the right thing now.’[11]
8.6 However, by the time of the Housing Secretary’s appearance before the Select Committee on 21 February 2022, he appeared to have conceded defeat:
‘It is just a statement of truth, and it applies to construction product manufacturers as well, that companies that are domiciled and do business in the UK are easier to engage with and it is easier to be clear with them about what the consequences of non-engagement might be’[12]
8.7 Just days later, on 24 February, Lord Greenhalgh told the House of Lords that Government would use the proposed Responsible Actors Scheme, legislated for through the Building Safety Act, to ensure product manufacturers made a commitment:
‘Regulations will set out which persons in the building industry may be members of the scheme. In the first instance, the Government are minded to focus this measure on major developers of residential buildings and manufacturers of cladding and insulation.’[13]
8.8 Following a Select Committee report in March 2022 that proposed that Government do more to obtain financial commitments from manufacturers and the closure of the ‘window of opportunity’ offered by the Government, with no meaningful engagement from the products and materials producers, Mr Gove again wrote to the industry:
‘In January, I asked property developers and construction product manufacturers to make a public funding commitment by early March. Unlike the approach taken by developers, manufacturers have failed to make any such commitment. This is simply not good enough.
‘It is unacceptable that there has been no clear acknowledgement that actions taken by cladding and insulation manufacturers have contributed to the problem, and that manufacturers have individually and collectively failed to come forward with a proposal for playing their part in addressing it. As such, I now consider our negotiations to have concluded.’[14]
9.1 Maintaining proactive communication with leaseholders and managing remediation works to minimise disruption to residents is an important part of the developer self-remediation pledge and will continue to be a feature of the MHCLG-Developer action group which the government is establishing shortly with HBF support.
9.2 However, like the government’s inability to tackle product manufacturers, MHCLG’s failure to address the unscrupulous behaviour of insurers continues to blight the residents of buildings, including where work is well underway to make the block safe, or even when it has been completed. Leaseholders continue to be ripped off by exorbitant premiums.
9.3 Some insurers have refused to accept the standards endorsed by government via PAS9980. In this respect, the frequent oscillation in government guidance and standards over the past seven years has caused immense uncertainty and led to some actors assuming their own positions. In turn, such an approach by some insurers and the premiums that come with their assessments have influenced the demands of freeholders.
9.4 Over recent years, HBF and the home building industry has frequently appealed to government to address the behaviours and profiteering of these insurers. However, the recent announcements by government of its remediation action plan failed, again, to acknowledge the importance to leaseholders of tackling these behaviours. Yet again the target of government action appears to be almost exclusively the same group of UK home builders.
10.1 We hope that this Inquiry helps to improve transparency in this area. In particular, we would encourage the Public Accounts Committee to challenge the government on areas of its approach that industry taxpayers, leaseholders and stakeholders have been unable to obtain answers on for several years:
David O’Leary
Executive Director | Home Builders Federation | December 2024
[1] https://www.gov.uk/government/publications/letter-from-dluhc-to-residential-property-developers-on-industry-negotiations
[2] ‘BSF 3 Table’, Building Safety Remediation management information tables – November 2024 (MHCLG)
[3] MHCLG Building Safety Data Release – November 2024 (19 December 2024)
[4] ‘CSS 5 Table’, Building Safety Remediation management information tables – November 2024 (MHCLG)
[5] MHCLG Building Safety Data Release – November 2024 (19 December 2024)
[6] ‘Combined 2 Table’, Building Safety Remediation management information tables – November 2024 (MHCLG)
[7] See Foreword to Residential Property Developer Tax: Consultation (HM Treasury) https://www.gov.uk/government/consultations/residential-property-developer-tax-consultation
[8] The Grenfell Tower Inquiry: Phase 2 Report: Vol. 2, page 12
[9] Guidance: Responsible Actors Scheme (MHCLG) https://www.gov.uk/government/publications/responsible-actors-scheme
[10] Building Safety Act 2022: Part 5, Section 126(4) https://www.legislation.gov.uk/ukpga/2022/30/section/126#section-126-4
[11] Letter from DLUHC Secretary of State to Construction Products Association (January 2022) https://www.gov.uk/government/publications/letter-from-the-dluhc-secretary-of-state-to-the-construction-products-association
[12] Oral Evidence: Building Safety, Remediation and Funding (HC1063): House of Commons Levelling Up, Housing and Communities Select Committee, 21 February 2022
[13] Hansard, 24 February 2022: Col.168GC
[14] Letter from DLUHC Secretary of State to Construction Products Association: 13 April 2022 https://www.gov.uk/government/publications/letter-from-the-dluhc-secretary-of-state-to-the-construction-products-association-13-april-2022