Ministers have announced an extra £3.5bn in funding to fix dangerous cladding on highrises in England and a scheme to offer loans to fix similar problems in some lowrise buildings. What does the announcement entail?
What will the funding cover?
The new money will go into the government’s building safety fund, a pot which is designed to pay for work removing unsafe cladding for blocks of 18 metres (59ft) and higher – typically buildings with more than six storeys. The money does not fund other aspects of fire safety work and covers England only.
What will it not cover?
Cladding removal work on lowrise buildings; internal work; problems with balconies; the cost of “waking watches” by guards to raise the alarm if a fire starts; and increased insurance premiums – although some of these costs should come down once work has been done.
How much will leaseholders have to pay?
No one in buildings above 18 metres tall will have to pay anything towards removing dangerous cladding. Those in lowrise blocks, between four and six storeys, will have costs capped at £50 a month per property. There is nothing in place for buildings below that height.
This, however, only covers the cost of removing cladding, not other fire safety work.
The work on buildings between four and six storeys will be funded through what was described as a “long-term, low-interest, government-backed financing arrangement”. No detail has been released, so it is not clear whether the freeholder or the leaseholder would apply, what the interest rate will be or how long it will take to repay the loans.
The £50 monthly cap seems to be linked only to cladding loans, so it looks like the cost of other works can be passed on, meaning service charges can still rise by more.
Can I sell my property now?
Many flats have been deemed unsellable because lenders have been worried about two risks: the possibility of them being unsafe and the potential cost of work needed to make them safe. Both have been reduced, and several banks and building societies have put out statements welcoming the announcement.
However, UK Finance and the Building Societies Association which represent mortgage lenders said they had not yet seen the full details of the plans, which means their members could still be hesitant about financing new purchases.
There is a consultation going on about the need for EWS1 forms, showing that a building has been inspected and is safe. Lenders say they are hopeful that new guidance on that “will provide greater certainty to home movers, leaseholders and building owners and reduce the number of buildings requiring an EWS1”.
The cost of other work could still hit the price of highrise flats, and homeowners in smaller buildings may get lower offers for their properties because of the monthly loan repayments the buyer will face.
Lenders will factor in the higher service charges when working out what a borrower can afford to repay as a mortgage, so an extra monthly cost could affect a remortgage, as well as a new buyer.
Who will pay for the extra £3.5bn in funding?
The government is planning to recoup some of the money from developers through a new tax on builders from 2022 which it says will raise £2bn over 10 years. Separately, it plans to introduce a levy when developers seek planning permission to build highrises in England.
Is the problem solved?
No. The fund may still not be enough – some estimates have suggested that just removing cladding could cost £15bn. The other fire safety problems still need fixing, and are continuing to emerge as blocks undergo inspections. And it could be years before all of the work has been done, as grant applications need to be made and processed and enough contractors found to do all of the work.