16 February 2021
The Housing Secretary, Robert Jenrick, has announced plans to introduce a new levy and tax on the UK residential property development sector as part of a range of funding measures designed to pay for the costs of removal of unsafe cladding in residential buildings in England.
The proposed developer tax and levy forms part of a "comprehensive" plan to deal with the funding and removal of unsafe cladding. In brief, the package of measures includes:
There is scant detail around how these proposals are intended to operate. The Government is to consult "in due course" on the developer levy and tax but the intent is for largest property developers make a fair contribution to the remediation programme.
The "Gateway 2" levy is likely to be implemented through the proposed gateway system under the Draft Building Safety Bill. The type of high-rise building to which the levy is to apply has not yet been specified.
Details about the application process for the government funding and the way in which the loans are intended to work still need to be published. For the loans, it is anticipated that these are likely to be taken out by the building owner and will then be re-charged to the leaseholders through service charges.
For both the loans and the new funds, in addition to details about the application process, more clarity around what works will be covered is needed. The announcement refers to the "cost of replacing unsafe cladding" which suggests that other fire safety remediation works not directly related to the unsafe cladding, such as work to defective balconies, are excluded from the available funds. This will leave open the issue of whether leaseholders will bear these other costs through service charge payments, or whether amendments to the Fire Safety Bill as currently tabled in Parliament will prevent owners from seeking to recover any historic remediation costs from leaseholders.