Association of Residential Managing Agents

Members' Area

The Cladding Crisis is Far From Over

‘Unprecedented’ seems to have become a Government buzzword in recent months, and for obvious reasons. Government spending to help support those impacted by COVID-19 has eclipsed all other forms of previous state intervention. And the same word was recently used to describe the recently announced additional £3.5 billion for the Building Safety Fund, put forward by the Government to help remediate buildings with unsafe cladding. The figure, which has been added on top of the £1.6 billion already earmarked is significant, but is it enough to end the current building safety crisis?

 

What is Covered

To assess its potential, we must first look at what the fund does, and does not, cover. On the positive side no-one can argue that over £5bn is not a significant involvement by the Government, only a part of which it will get back from industry levy schemes. Although not good news for the taxpayer it’s certainly good news for leaseholders living in high-rise buildings in England that are eligible for the fund.

However, buildings below 18 metres with cladding won’t benefit in the same way. Instead, a long-term loan scheme for those living in four to six storey flats means leaseholders could still face bills of up to £50 a month for cladding remediation. On the positive side this means that work can start on these buildings as the Government loan will “front-fund”, so we can get people safe. But it does cross the Rubicon that leaseholders are being asked to pay for something that happened long before they even bought their flats. Whilst the capped loan means this may be significantly less than their previous costs and it is spread out over a period (yet to be announced), it is morally wrong and in reality, these loans will likely crystallise upon the sale of a flat by means of a reduced offer. And let us not forget, for some people £50 a month is the difference between food on their kids’ tables and the foodbank. It’s hard to know how many people will be affected, but above 18m blocks it looks as if around 25% of the stock managed by ARMA members is affected. If that ratio carries over to the 20,200 blocks of 11-50 flats that ARMA members manage that’s over 4,000 blocks. For the sake of argument let’s say an average of 30 flats per block and 2.3 people per flat and that comes to 276,000 people.

A recent wrinkle is that sometimes when we take the cladding down, only then do we find works that need to be done but for which there is no funding, except from the leaseholders. A recent example is where the concrete underneath had weathered poorly and the steels had blown. The costs per leaseholder will be £2,500 (and they will need to find another £2,500 for the balconies). So we have a stripped building where we need to raise £5,000 per leaseholder before we can use the government money to remediate – and those leaseholders simply don’t have that kind of money so what on earth are we to do?

 

A Nervous Wait

Housing Secretary, the Rt Hon Robert Jenrick MP, was right to emphasise that cladding remediation on the highest risk buildings has begun. But starting and finishing are very different things when it comes to a building safety crisis affecting hundreds of thousands of people.

The serious shortage of companies that can actually remediate affected buildings has quickly become apparent, with ARMA estimating there are just 200 contractor teams able to carry out the work at a rate of one building per year, per team.  This means that talk of all buildings being made safe by mid-next year are noble in terms of intention but lacking in terms of practicality. We are probably looking at a five-to-ten-year programme - and that’s before we add in the sub-18m works that are going to be running in parallel.

Aside from the obvious safety risks, the waiting game is proving a costly one for many leaseholders. Whilst the Waking Watch Relief fund will help avoid some added costs, it won’t help with rising yearly building insurance premiums - a recent ARMA survey revealed average increases of 525%. ARMA has put forward a scheme to Government, which has been warmly received, to help reduce these increases to more manageable levels and we are working up the scheme and modelling on particular buildings.

 

The Bigger Picture

The Grenfell Tragedy has put building safety as a whole under the spotlight. Whilst the immediate danger of flammable cladding has come to the fore, now the industry and Government recognise a complete overhaul of the current buidling safety regime is needed, demonstrated by the sweeping changes which the Buidling Safety Bill will signal. The latter needs further scrutiny, if only because neither ARMA nor Cladding Action Groups are in favour of the “28-day, leaseholder must pay”, clauses that burden leaseholders with financial responsibility for faults dating back to when the building was constructed.

In the same vein, building inspectors investigating cladding are completing thorough building safety checks which incorporate insulation, compartmentation, fire breaks and inner walls. This often throws up further fire safety costs in the form of problems with compartmentation, fire doors and fire breaks. As these works progress it would seem that these costs are at least as high to flat owners as the cladding costs themselves. Admittedly stemming from a small sample of only 40 blocks, but the per flat cost for cladding was £22,500 per flat and for compartmentation etc. it was £25,500 per flat. These additional expenses are not covered by the Building Safety Fund currently, and many of these defects could exist across the entire housing stock. It is obvious that leaseholders are neither able to pay nor should be held responsible for these costs.

Almost four years after the Grenfell Tragedy, ARMA welcomes the Secretary of State’s pledge of further support for leaseholders trapped in unsellable, dangerous flats. It’s the culmination of an industry-wide effort, proving that ARMA’s extensive work with the MHCLG, industry bodies, cladding action groups, press and MPs over the years has played its own small part in ensuring that further action on cladding remediation has remained high on the Government’s agenda.

 

What’s next?

We are facing a multi-year project with limited resources, and the potential for delays and price escalations that will inevitably accompany that. Firstly, we need to know how widespread the problems are – and the Government taking a sample of, say, 300 buildings across the public and private sector to see how many are affected with internal issues would seem a sensible step, thereby giving us scale, scope and cost.

Next, and not an easy conversation to have, but at what point do we say “that doesn’t need fixing”? For example – a decorative cedar panel high up on an 18m building must be replaced under the current scope. But does that really pose a life-endangering fire risk? Does that really need costly scaffolding and replacement? Should that building really be classified as dangerous, with all the immediate financial pain to leaseholders that brings?

And finally, we need a plan. We need to approach the fixing of these buildings on a risk-to-life basis, fixing the worst first across the public and private sectors combined. That also means you need to have an open conversation with people whose blocks may, in that case, be years away in the queue.

The reality remains that the funding won’t be enough to address and remediate the hugely complex cladding and building safety crisis which remains, for want of a better word, unprecedented.

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