RDC0002

Written evidence submitted by the Association of Residential Managing Agents

ARMA is a trade association of over 300 residential block management. ARMA members manage over 1.25m homes in England and Wales. This means that circa 3m people, or 5% of the UK population, live under the management of an ARMA member.

ARMA is submitting a response on behalf of its members as block managing agents are usually the organisation tasked with organising the remediation, dealing with leaseholders and raising funds. This is already creating a huge strain on the industry in terms of capacity and workload.

Overview

ARMA welcomes the Public Accounts Committee’s inquiry into Progress into remediation dangerous cladding. We recently submitted evidence in the Housing, Communities and Government Select Committee’s inquiry into the same subject matter. Below, we reiterate the evidence submitted to that inquiry.

Our members put residents safety and wellbeing before anything else, and we will continue to work with all relevant stakeholders to ensure that all necessary remedial works are undertaken on affected buildings in a safe and timely manner

ARMA welcomes the Government’s intervention to fund cladding remediation, but it is clear that the scale of the problem is far bigger than initially expected, and this needs to be addressed immediately. The remediation fund is currently insufficient, and similarly needs to be vastly improved from an administrative perspective, if those who require access are able to proceed with the essential steps to carry out remedial works. The Government needs to develop risk criteria to prioritise those high risk buildings and make available the necessary resources.

Scale and scope of the Government fund

Scale

£1bn sends a strong message to the country that the Government is taking the matter seriously. Unfortunately, in the longer term it is likely that more funding will be required to remediate all buildings deemed unsafe in the UK. ARMA has estimated that half a million people could be living with unsafe cladding, and this is on the basis of buildings managed by their 300 member firms alone.

ARMA members have 5,446 blocks of more than 50 units (these are assumed to be in the category of 18m or higher). In a sample of 2,239 of these blocks, 555 (41%) were believed to have non-ACM type cladding. Applying this sample to the total (i.e. 41% of 5,446) gives 2,233 blocks that fall into scope. We do not yet have estimates of the cost of remediation of non-ACM (due to PII issues - see below) but it is likely that they will be of the same magnitude as the assessments made for ACM in 2017/18. In those cases, the average across ARMA members per block was £1.62m including VAT, which for 2,233 blocks gives a total of £3.6bn.

All buildings that are dangerous require remediation, but the problem that the sector faces is one of scale – as the height requirement is lowered the number of buildings that come in scope increases dramatically. ARMA members manage a total of 54,216 blocks, and currently the fund only covers 10% of the total number of blocks (albeit the larger ones).

There should also be an appreciation of the scale of the project – to remediate potentially tens of thousands of buildings could take 5-10 years and the block management sector is greatly concerned about its ability to develop the required project management capacity from current levels. This will be compounded by contractor and material supply shortages. All the while leaseholders will be left in potentially unsafe buildings, whilst facing difficulties to sell, remortgage or rent out their properties.

Scope

A significant number of buildings managed by ARMA are in the next size down, i.e. 11 to 55 units - of which there are 18,174. Buildings will need to be prioritised not just in terms of their height, but primarily in terms of their risk profile. Ideally this should not be done by an individual managing agent looking at its own portfolio, but should be looked at across all buildings, whether public or private.

This would require Government oversight of the remediation programme. Additional benefits such as economies of scale, increased project management capacity, cost oversight and optimal use of contractors would also apply to a centralised approach.

Leaseholders are also liable for additional costs not covered by the fund, such as waking watch, alarms and increased buildings insurance premiums. Depending on the number of watchers required, waking watches range in cost from £150,000 per annum, rising in many cases to over £1million per annum, all of which currently must be borne by leaseholders. Examples of buildings insurance premiums rising over 400% have come to light in multiple blocks. These can lead to the depletion of reserve funds and high service charge demands. Failure to pay for these services would likely require the evacuation of the building and collapse of leaseholder mortgages.

Once remediation works commence and cladding systems are removed, it seems not uncommon to find that the construction of the building itself in terms of internal compartmentalisation and fire breaks in communal areas and between flats also require correction. These works are not covered by the fund and the cladding cannot be replaced without such works being undertaken. This incurs a time delay as funds have to be requested from leaseholders, who may be unable to afford the additional demands.

In terms of external wall systems covered, by focussing on the term “cladding” this excludes other flammable wall systems, in particular render over expanded polystyrene (EPS). This latter system is widespread and considered very flammable, but yet is excluded. The scope should include all systems considered dangerous.

Despite multiple reviews and recognition that fire does not discriminate, government support is still only available for buildings over 18 metres. This clearly contradicts the Government’s own consolidated advice note which recommends buildings clad with HPL and ACM of all heights should be covered by the new building safety regime. Whether balconies are considered a part of the external wall system is also unclear.

Recommendation

It would be beneficial to develop risk criteria. Leaving buildings to be prioritised within an individual organisation’s portfolio, whether managing agent, Local Council or Housing Association, means that buildings cannot be correctly prioritised. This also will create pressures in the supply chain whereby buildings will not be given remediation priority in terms of their risk profile, but rather by who can organise and tie in contractors first.

It would be sensible for all buildings, whether public or private, to be centrally ranked according to their risk profile and managed accordingly.

June 2020