Budget 2021: cladding tax exemption confirmed for HAs, but no new remediation funding offered

A statement on the autumn Budget from the G15, the group of London’s largest housing associations, said: “Today is a missed opportunity to have put in place a comprehensive solution to the building safety crisis. G15 members are expecting to spend £3.6bn on building safety works, which is the equivalent to the investment needed to deliver 72,000 new affordable homes.

“We urgently need access to an expanded Building Safety Fund on the same terms as private for-profit companies, and the removal of VAT from remediation works would support works to be delivered more quickly. This systemic crisis can only be tackled by the government giving leaseholders the full protection from costs they need, and by recovering costs from the developers and contractors responsible for the failures that have led us to this point.”

Further criticism has been levelled at the government’s cladding policy as smaller social landlords that are unable to develop their own homes could be taxed as they rely on developers to build homes.

Triya Maicha, partner at law firm Devonshires, said: “Whilst the government’s announcement earlier this month that not-for-profit RPs, including their wholly owned subsidiaries, would be exempt from the tax was widely welcomed, many small to medium-sized RPs do not have the capacity to develop themselves.

“They rely heavily on Section 106 deals and partnerships with house builders to deliver affordable housing and whether the ‘cladding tax’ will have a knock-on effect on the viability of Section 106 and package deals is something we will need to keep a close eye on over the course of the next 12 to 18 months.”

Among the housing funding policies in the budget, the chancellor referred to a “multi-year housing settlement totalling nearly £24bn” covering the period to 2025-26. The majority of this relates to previously announced funding, including the new £11.5bn Affordable Homes Programme. According to the Treasury, the £23.8bn breaks down as:

• £1.8bn to build on brownfield sites, where 161,000 homes are expected to be built
• £10bn for the Affordable Homes Programme
• £3bn for the Help to Buy programme
• £3bn for the Building Safety Fund
• £6bn for “existing housing supply”

Social Housing has asked the Treasury to confirm what the £6bn for “existing housing supply” relates to.

In his Budget speech, Mr Sunak said: “We’re investing an extra £1.8bn: enough to bring 1,500 hectares of brownfield land into use… meet our commitment to invest £10bn in new housing and unlock one million new homes… £11.5bn to build up to 180,000 new affordable homes – the largest cash investment in a decade, 20 per cent larger than the previous programme.”

Mr Sunak also announced that the government plans to spend £640m per year in tackling homelessness and rough sleeping until 2024/25.

This would represent an 85 per cent increase compared to 2019/20, before the COVID-19 pandemic, but compared to the current financial year it is a cut of £110m.

Rick Henderson, chief executive at Homeless Link, the national membership charity for frontline homelessness organisations in England, said: “We are pleased that Rishi Sunak has clearly listened to the concerns and needs of our members in the homelessness sector, giving them the stability of funding to provide meaningful support to people experiencing homelessness as we leave the pandemic behind, with many of our members reporting that rough sleeping is rising again.

“While the £640m per annum announced towards tackling homelessness and rough sleeping is £110m less than the spend for this year, it is still a marked rise on pre-pandemic levels of investment.”

Another announcement made by the chancellor that will have an impact on the social housing sector was the Universal Credit taper rate. This is the rate that dictates how much Universal Credit a claimant can apply for once they begin earning over a certain threshold. The rate currently stands at 63 per cent, meaning that for every pound earned by a claimant, their Universal Credit is reduced by 63p.

Mr Sunak announced that the rate would be cut to 55 per cent, or 55p for every pound earned.

Commenting on the announcement, Duncan Brown, chief finance officer at housing association Vivid, said: “We were pleased to hear about the change to the Universal Credit taper rate. We have seen the number of our customers on Universal Credit more than double since the start of the pandemic so we know the difference this will make for people in low-paid jobs. But we’re disappointed the government didn’t help more with rising household costs like food prices, energy and fuel costs.”