Seventh Report - Building Safety: Remediation and Funding

We repeat our previous calls for further mental health support for those affected by the building safety crisis.

In the absence of PAS-79 guidance which was withdrawn in August 2021, it is imperative that the British Standards Institute publish its new standard as soon as possible. We urge the Government to report on its consultation on Personal Emergency Evacuation Plans at the earliest opportunity. (Paragraph 6) Protecting leaseholders from future costs

The Secretary of State said the Government would protect leaseholders from remediation costs, but too many leaseholders will fall through the cracks of the Government’s piecemeal measures. As the Government’s proposals currently stand, the only leaseholders who will not pay for building safety remediation are those who have already not paid anything, who either live in their flats or only own one other property, whose flats do not also have any non-cladding defects, and whose flats are in blocks at least 11m high.

Leaseholders are no more to blame for non-cladding defects than they are for faulty cladding on homes they bought in good faith. Buy-to-let landlords are no more to blame than other leaseholders for historic building safety defects, and landing them with potentially unaffordable bills will only slow down or prevent works to make buildings safe. Leaseholders of buildings under 11m in height are no more to blame than other leaseholders.

Our longstanding view is that leaseholders should not pay a penny to rectify faults not of their doing and to make their homes safe. The amendments tabled to the Building Safety Bill show that the Government does not share that view. The Government should scrap the cap on non-cladding costs for leaseholders.

We do not agree with the Government’s proposal that only buy-to-let landlords with one other property should be included in the statutory protections for leaseholders. Should the Government continue to treat buy-to-let landlords differently to other leaseholders there are other options available to exclude wealthy property tycoons from the protections without making landlords of more modest means liable, such as basing eligibility on the value of the company that owns the properties, or on the landlord owning a higher number of rental properties. We recommend that the Government publish an impact assessment of these options before undertaking a course of action. The Government should also publish an impact assessment on how its current proposals to exclude buy-to-let landlords with fewer than one other property could affect the progress of remediation. (Paragraph 15) 32 Building Safety: Remediation and Funding

Our preferred option would be for the Government to table amendments to the Building Safety Bill to ensure that all leaseholders in buildings of any height have statutory protection from future costs for remediating historic building safety defects, both cladding and non-cladding.

Instead of its piecemeal method of funding remediation according to building height and type of defect, the Government should implement our previously recommended Comprehensive Building Safety Fund. The fund should cover the costs of remediating all building safety defects on buildings of any height where the original “polluter(s)” cannot be traced. Overseas owners of affected properties should not be eligible for any funds for remediation. (Paragraph 17) Data

It is completely unacceptable that, nearly five years after the Grenfell tragedy, the Government still does not seem to know how many buildings have unsafe cladding or other historic building safety defects. We commend the Secretary of State for finally seeking information from developers and manufacturers, and commend industry for now working at pace to provide this information. The Government must publish, within two months, all available data on the number of buildings of all heights with historic building safety defects—cladding and non-cladding—including data it has received from developers and manufacturers. (Paragraph 21) Who should pay?

We commend the Government for finally taking action to require industry players to remediate and pay for faults of their own doing, and we commend those organisations who have already done so. However, developers and manufacturers are not the only sectors that contributed to the building safety crisis, and we appreciate the Secretary of State’s openness to pursuing other sectors. The whole industry must take collective responsibility for remediation funding: while some organisations may feel they are more innocent than others, no party in this crisis is more innocent than the leaseholders whom such funding is supposed to protect. Government should identify all relevant parties who played a role in the building safety crisis, such as product suppliers, installers, contractors, and subcontractors. It should legally require them, as it has done for developers, to (i) contribute payment to put right any individual faults in which they played a part and (ii) contribute to collective funding for building safety remediation—ideally our recommended Comprehensive Building Safety Fund. So that efforts to identify responsible parties do not delay remediation works, the Government should, where necessary, fund works upfront and recoup its costs.

Governments share responsibility for the building safety crisis on account of their regulatory failings. Everyone involved would instantly have more funds to spend on remediation if the Government played its part by removing VAT on building safety activity, which would enable homes to be made safer. The Government should remove VAT on building safety activity. (Paragraph 30) Building Safety: Remediation and Funding 33

While insurance premiums for leaseholders have gone up, buildings have become safer as a result of remediation works that have been carried out. The risk to insurers has reduced as a result. Insurers should be required to contribute to funds for remediation as they covered the actions of developers who failed to comply with building safety and have since received increased premiums despite remediation works being undertaken. The Government should ask the Financial Conduct Authority to publish an analysis to illustrate on an annual basis since the Grenfell fire how the level of pay-outs by insurers for fire safety claims in medium and high-rise buildings compares with the increase in premiums for buildings insurance for medium and high-rise buildings.

Product manufacturers found to have been criminally responsible for defective products extending back 30 years must be legally required to automatically replace faulty materials free of charge, including compensating others who have already paid to replace the materials in question.

The Government rightly proposes to take strong action against UK firms, however its options against overseas firms who have also contributed to the building safety crisis are more limited. The Secretary of State told us that to reveal its options would be showing too much of the Government’s hand. The Government must take steps to hold overseas developers and other relevant foreign firms to account. When it is appropriate to do so, the Government should set out the actions it has taken. (Paragraph 33) Costs already paid out

As they stand, the Government’s proposals create a bizarre lucky dip in which some leaseholders may see their costs capped at £10,000 (£15,000 in London); some, because they have not yet paid for cladding remediation, may pay nothing at all; and others, who have already paid for cladding remediation, will have paid well in excess of the proposed non-cladding cap. Leaseholders who have already paid for remediation and other interim measures to make their homes safe are no more responsible for the crisis than leaseholders who will now be protected in law from such costs. The Government should collect and publish data on the costs paid out by leaseholders since the Grenfell fire and the costs that leaseholders have not yet been billed for. It would have had to collect data on the amount paid out for its proposed cap on non-cladding costs, so the administrative burden is not a reason not to.

The Government should table new amendments to the Building Safety Bill to ensure that, where the “polluter(s)” still exist, industry players must compensate leaseholders for remediation and interim costs already paid out and must pay for works that have been started or specified. In line with principles already set out by Government, where the original polluter no longer exists or cannot be identified, funding for building safety remediation—ideally our recommended Comprehensive Building Safety Fund—should cover the costs of compensating leaseholders for costs already paid out, including interim measures and exorbitant rises in insurance premiums. The additional costs for leaseholders generated by increases in insurance premiums are another reason why insurers should be required to contribute to funds for building 34 Building Safety: Remediation and Funding safety remediation. (Paragraph 40) Impact on social housing

The Government must stop pitting the building safety crisis against the housing crisis. Without access to funds for remediation where social tenants live, residents of social housing are paying the price through the diversion of funds from maintaining their homes and other vital services provided by housing associations and councils. Those on waiting lists and those who are homeless are paying the price through the decimation of planned new builds for affordable homes, with one in 10 planned developments axed. The principle that a leaseholder should be protected from costs, while a tenant, perhaps a neighbour in the same block, should contribute through their rent, is deeply unfair. Social landlords must have full access to funds for building safety remediation—ideally our recommended Comprehensive Building Safety Fund.

Social housing providers must be exempt from the Building Safety Levy and any other taxes or levies connected to building safety remediation. Social housing providers must be exempt from requirements to fund and undertake necessary remediation on buildings they played a role in developing where they were the customer of a developer.

The Government must commit to protecting the Affordable Homes Programme at its current level should it fail to recover sufficient funds from industry. (Paragraph 51) Guidance on building safety

Given that the introduction of the PAS 9980 will not result in the elimination of EWS1 forms, we remain concerned that uncertainty will remain about the safety of buildings and will continue to stymie those trying to sell their homes. We welcome the work being done with lenders to try to share information and reduce the demand for EWS1 forms. We also welcome the funding that has been provided to the Royal Institution of Chartered Surveyors to train assessors. However, we are concerned that these assessors are still in training and will not be able to undertake surveys for some time. This raises questions about how quickly the backlog of buildings requiring assessments can be cleared. Furthermore it is uncertain whether their work in respect of PAS 9980 assessments will be covered by the professional indemnity insurance scheme that has been established. In addition to the Secretary of State’s commitment to update us on the coverage of the professional indemnity insurance scheme, the Government must ensure that there is professional indemnity insurance cover for those conducting PAS 9980 assessments—whether as an extension of the scheme for external wall assessors or as a separate scheme. We ask the Government to monitor and report back to this Committee with its assessment of the impact of the introduction of PAS 9980 on the numbers of buildings that need to be inspected and remediated. We also ask the Government to report back to the Committee with its estimate of the number of currently qualified fire risk assessors and how this will increase in the coming months. (Paragraph 60) Building Safety: Remediation and Funding 35

The evidence we received clearly indicates that it should be the regulator—and not building owners—who decides whether a building needs a fire risk assessment. As such, we recommend that the Building Safety Regulator decides whether a building needs a fire risk assessment; sets the standard that a building need to meet; sets out the methodology for undertaking assessments; and provides a review process which enables consistency of decisions. (Paragraph 63) 36 Building Safety: Remediation and Funding