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Fire safety pledges cost housing developers further millions after Grenfell Tower

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The cost of carrying out further fire safety works on tall buildings in the wake of the Grenfell Tower tragedy has added millions of pounds more to previous charges already imposed on major housebuilding firms.

Development company Crest Nicholson announced today that it would be signing up to the government’s new 'Building Safety Pledge', which commits developers to new guidelines for work on potentially unsafe cladding on buildings between 36ft (11m) and 59ft (18m) high. The firm became the first builder to commit to signing the pledge to fund retrofit works on buildings over 11m in height.

Levelling-up minister Michael Gove had given house builders until today, April 5, to sign the pledge. He had previously warned of dire commercial and financial consequences - including blocking planning permission and even a potential ban on trading - for any company that failed to fix historical fire safety problems, such as dangerous cladding similar to that which caused the devastating fire at Grenfell.

Crest said it expects a further charge from the commitments of between £80m and £120m, though it said this is only its “best estimate” at this stage. This comes on top of a £47.8m bill for the firm so far for cladding works since the year to the end of October 2019, including a £29m charge announced in January.

It is also contributing to the new residential property developer tax, which came into force on April 1 to support the fire safety works programme on buildings taller than 18 metres.

Fellow building giant Persimmon also confirmed it has signed up to the new building safety guidelines, but said it believes the £75m already set aside by the group will be enough to cover the costs.

The government dropped its own demands yesterday for housebuilders to contribute towards a £4bn cladding remediation fund, following talks with the industry.

Instead, developers must commit to carrying out work on the medium-rise buildings they have built over the past 30 years and pay for it themselves without claiming on the government’s building safety fund. Additional funding talks have been put off until later in the year.

The housebuilding sector is facing a ballooning bill following the Grenfell Tower fire, which killed 72 people in 2017. The government announced in January that all leaseholders in high-rise blocks should not have to pay for remediation works on dangerous cladding, including those in properties between 36ft (11m) and 59ft (18m) tall.

This followed several years of high anxiety and stress for leaseholder residents, who suddenly found themselves being hit with bills totalling tens of thousands of pounds to pay for the obligatory repair work necessary to bring their homes up to code.

The government has been in discussions with the building sector over new guidelines.

Crest said it believes signing the Building Safety Pledge is “in the best interests of the group, taking further steps to support those living in affected buildings”.

It said that “failing to agree to these new guidelines would carry further consequences, implemented by DLUHC (Department for Levelling Up, Housing and Communities), that would impact the group’s ability to operate and trade normally within the housing market”.

Crest added: “The cash outflows required to remediate the affected buildings will occur over several years. Given the group’s well capitalised financial position and strong current trading performance, the board does not consider this to present a risk to current or future operations.”

Dean Finch, group chief executive at Persimmon, said: “Over a year ago we said that leaseholders in multi-storey buildings Persimmon constructed should not have to pay for the remediation of cladding and fire-related issues. We are pleased to reaffirm this commitment today and sign the government’s developer pledge.”

Many properties across England, housing tens of thousands of people, are affected by cladding concerns, including some new developments built within the last five years, in towns and cities such as Bristol, Birmingham, Manchester, Cambridge and London.

Many of the housing development giants - the only firms who can afford to build the kind of large residential blocks now under cladding scrutiny - are still on the government's VIP priority list with exclusive access to prime public land, a Sunday Mirror probe revealed last year.

16 firms on the "preferred partners list" for Homes England – the government’s housing agency – had previously built flats where safety issues have now been flagged.

The probe also noted that property developers routinely contribute approximately 37 per cent of annual company donations to the Conservative Party. Electoral Commission data shows that building firms gave £6.6m to the Conservatives in the year to June 2020.

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