Social Housing Speed Read – Housing Associations respond to cladding updates

Click here for the full review.

Background

Following the Grenfell Tower disaster on 14 June 2017 the issue of external cladding fitted on tower blocks throughout the UK has been of particular prominence. This has led to great public discussion about the adequacy of building regulations and fire safety policies and procedures, with an inquiry into the disaster still ongoing.

Residents in high-rise buildings with external cladding similar to that on Grenfell Tower have found that the value of their properties has effectively been reduced to zero, with buyers not wanting to purchase such properties with the ongoing safety concerns and, perhaps more importantly, lenders unwilling to grant mortgages. This had led to property owners effectively being trapped and unable to sell their homes, leading to stress and anxiety in a number of cases, and has contributed to a high level of publicity for the campaign to have such cladding removed.

On 17 October 2018 the Government set up a fund of £400m for the removal and replacement of unsafe cladding on high-rise social housing, with a further £200m made available on 9 May 2019 for private tower blocks. However, these funds are unlikely to cover the full cost of the remediation works required to remove the cladding from every affected tower block, with 158 social housing and 175 private sector blocks requiring works.

As a result, much of the debate has been around who should pay for the works, with private landlords generally reticent to cover the costs themselves and instead looking to pass the costs onto their tenants. Meanwhile, following the 2014 introduction of Government regulations, known as ‘Florrie’s law’, councils and housing associations can only recover a maximum of £10,000 (or £15,000 in London) over any 5 year period for repair, maintenance or improvement works which are funded wholly or in part by the Government.

The Government has also been in the process of testing the safety of various different types of cladding to ascertain whether it is safe to remain on high-rise buildings or should be removed.

Action by Housing Associations

A number of housing associations have decided to begin their own remediation works regardless of the outcome of the Government’s tests. Various housing associations have confirmed that they are undertaking remediation works which they have budgeted for from internal resources. However, in an attempt to recover the costs involved they have issued legal proceedings against contractors which undertook the original works to fit the cladding which is now believed to be faulty.

Elaine Bailey, chief executive of Hyde, stated that they “are pursuing legal action where the original contractors are still in existence, where we have to do major remediation works.” Hyde has budgeted for approximately £50m to cover the works, but believes the final amount could exceed this.

L&Q confirmed that they are also pursuing legal action but confirmed that “this will not delay works as our residents’ safety is non-negotiable,” with group finance director Waqar Ahmed disclosing the discovery of “issues that shouldn’t have been there” behind cladding already removed from some buildings.

Catalyst said that it “is and will be taking all reasonable legal steps to recover the losses it has incurred as a result of breaches of the building regulations that have led to remediation or recladding works at its properties”.

However, parties involved in the original installation of cladding have previously argued that the works they completed were in line with existing building regulations and were signed off by building control, so it remains to be seen whether these associations will be successful with their legal actions.

Perhaps with this in mind, other associations have committed to or have already carried out remediation works without attempting to recover the costs from contractors. One Manchester confirmed that it has re-clad 12 out of 16 of its cladded blocks, with over half of the funding for the remediation works coming from internal resources and the rest from Government funding; a spokesperson confirmed that legal action would not be brought against contractors to recover these costs.

A number of housing associations have confirmed that they will await the results of the Government’s tests before deciding whether to remove cladding on the buildings they manage, and would look to take action to comply with any Government recommendations or requirements once these are announced.

What’s next?

Following the Grenfell Tower disaster, the Government commissioned an independent review of building regulations and fire safety, led by Dame Judith Hackitt. The Hackitt Review included various recommendations, including the introduction of a building safety regulator with whom all high-rise buildings would be registered and who would dictate the work required to ensure these buildings were safe.

Also introduced would be a defined ‘dutyholder’ who would be the individual responsible for a building’s safety – usually the person entitled to receive funds, including rent and service charge, which contribute to the maintenance of the building – and would usually be the building’s owner or management company. The intention is that owners will be prevented from delegating responsibility for building safety to contractors undertaking works, in an attempt to ensure safety standards were maintained as highly as possible.

It is expected that the new regulations will lead to greater costs for building owners and managers, including housing associations. Victoria Moffett, Grenfell programme lead at the National Housing Federation, said that “the Government needs to ensure the implementation of the new system is fully funded so that housing associations can ensure existing residents are safe in their homes, and continue their other essential work to tackle the housing crisis.”

Part of the additional costs is likely to be from the need to hire new managers or create new roles, with Moffett suggesting housing associations will need to create a ‘building safety manager’ role, who would be “the person who will bring together that information from different parts of the organisation, making sure that there is a strategic view of the new regulations”. Any allocation of responsibility will have to be managed extremely precisely as the accountability of the dutyholder will not be removed where responsibility is delegated.

Housing associations will need to ensure that they are ready to deal with the anticipated new regulations, with relevant internal policies and any necessary hires to ensure compliance. Contingency plans should also be made in relation to costs for remediation works which may not be covered by Government funding or recoverable from tenants.

If you have any questions on the above and how it will affect social housing providers, or any other questions as a social housing provider, please do not hesitate to contact John Murray or a member of our expert Social Housing Team.