A new tax on the residential development sector will be introduced in 2022 to help pay for combustible-material remediation on tower blocks.
The tax, which will apply to the “largest property developers”, will raise “at least £2bn over a decade”, according to housing secretary Robert Jenrick, who announced the scheme today. Jenrick said the levy would “make the industry pay for its faults of the past”.
He added: “The tax will ensure the largest property developers make a fair contribution to the remediation programme in relation to the money they make from residential property, reflecting the benefit that they will derive from restoring confidence to the UK housing market.”
The government has not yet stated which developers will be included in the tax, or any details about tax brackets or how much firms could be charged. He said the government “will consult on the policy design in due course”.
The housing secretary also announced that a levy will be placed on developers seeking planning permission for some high-rise buildings. The Gateway 2 levy, which will be implemented through the Building Safety Bill, will protect SMEs from costs, Jenrick said. He added: “The proposed levy will be targeted and only apply when developers seek permission to develop certain high-rise buildings in England, helping to ensure the industry takes collective responsibility for historic building safety defects. In introducing the levy, we will continue to ensure the homes our country needs get built, and that our small and medium-sized builders are protected.”
The type of high-rise buildings that the levy will apply to have not yet been specified by the government.
Jenrick also said that the government would extend funding for cladding remediation costs on buildings 18 metres and taller in “the largest ever government investment in building safety”, but said leaseholders in buildings shorter than 18 metres may still need to contribute to costs.
The announcement follows the Labour Party forcing a vote in parliament last week to protect leaseholders from paying for the remedial works, as well as the mayor of London Sadiq Khan’s call for a levy on developers, including contractors who were not primarily housebuilders, in January.
Commenting on today’s announcement, Khan said: “These proposals fall far short of what is needed. It is shameful for ministers to tell some leaseholders that they will have to pay to fix building-safety problems they played no part in causing. Three and a half years after the Grenfell Tower fire, thousands of Londoners are still living in fear, stress and uncertainty. While further financial support is welcome, the funding proposals announced today amount to a leaseholder lottery – they are not a solution for all unsafe buildings and fail to protect many leaseholders from facing huge costs.”
Speaking prior to the official announcement of the tax, but after it was hinted at across the media this morning, Redrow chief executive Matthew Pratt told Construction News: “I’m not unsupportive of a levy if that’s the way we go, but it’s got to be proportional to the work [each builder] has done, and ultimately what it’s going to cover in terms of the [amount of] buildings themselves.”
Pratt added that the problem will not be fixed “with a silver bullet”. He said: “The thing about cladding is, I don’t think there is a very simple answer. I think it’s a very complex matter in terms of what we do with it.”
In a market statement this morning, housebuilder Persimmon announced a £75m provision for cladding remediation across 26 buildings that might need the work.