Safety costs will slow new supply unless government steps in, sector leaders warn

News28 Nov 2019Luke Cross

Escalating fire safety costs among larger London housing associations are set to bear down on their capacity to deliver new homes unless the next government steps in with funding, sector leaders have warned.

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Escalating fire safety costs among larger London housing associations are set to bear down on their capacity to deliver new homes unless the next government steps in with funding, sector leaders have warned #ukhousing #socialhousingfinance

Two weeks ahead of #GE2019, the G15 has called for grant funding to subsidise the costs of fire safety and remedial work #ukhousing #socialhousingfinance

The message comes a fortnight ahead of the general election and as London’s largest housing associations also call for clarity on safety guidance, which it says is preventing 650 people in their properties from accessing a mortgage.

The G15 group of London’s largest housing associations – which own and manage around 600,000 homes across the capital – has submitted central asks to civil servants in what they hope will form a key part of its engagement with the new government.

It includes a call for grant funding to subsidise the costs of safety and remedial work, which it hopes will in turn maintain or boost the group’s financial capacity to invest in new build.

The associations are also asking for clarity on government guidance on safety, which they say has exacerbated efforts to carry out remedial works and further inflated costs.

Their warnings were this week echoed by Lord Bob Kerslake – who was formerly head of the Civil Service and is currently chair of Peabody and president of the Local Government Association. Lord Kerslake has called on government to contribute to the costs of building that were previously compliant or “signed off”.

need to respond will impact on our capacity to deliver on our priorities, including new supply, and we should be honest about that.”

Running through key priorities for the social housing sector – including safety, service, supply and sustainability – Lord Kerslake said the building regulatory system is in need of fundamental reform and is “simply not fit for purpose”.

This reform needs to be an urgent priority for government and done in partnership with the sector, he said, adding that government can do more to make buildings safe in the meantime.

The challenge facing leaseholders in terms of mortgage availability and the values of their properties was also addressed throughout the seminar, and Lord Kerslake said that the sheer number of guidance notes from government had “exacerbated” the situation.

Lord Kerslake’s message was echoed by Helen Evans, chief executive of Network Homes and chair of the G15, at the seminar.

She said that the G15 is currently trying to assess how much the remediation of defective buildings built over the past 10 to 15 years is likely to cost, following its initial estimate of between £1.8bn to £6.87bn over 10 years.

Ms Evans said that “safety will always trump other obligations”.

In a separate statement, Ms Evans referred to the issue facing leaseholders who have not been able to show to lenders that their properties meet government safety guidance and comply with Advice Note 14.

She said: “We are calling on government to help unstick this process, provide urgently needed clarity to their confusing guidance and explore funding as costs associated with building safety will otherwise leave many leaseholders with unaffordable bills and reduce the capacity of housing associations to build new affordable homes.”

The G15 is continuing to work on the figures behind its claim of a £6.87bn hit to its balance sheet, which it is thought could in turn impact financial ratios, such as EBITDA-MRI interest cover, which is used by lenders and the regulator as a key measure of liquidity and investment capacity.

The G15 said in terms of financial impact, this is “more the planned effect” than what is seen in the latest sets of financial results.

The figures are based on 1,145 buildings over 18m with external wall systems, with costs between £1.8m to £6m per block. They then apply a best and worst-case scenario for the proportion of works needed, from 60 to 100 per cent.

Earlier in the year, the sector’s biggest tower block owner, L&Q, said it is planning a five-fold increase on its original £50m of safety spend as it continues to refocus on quality and investing in existing homes.

Network Homes has revealed that a waking watch on one specific development is costing £29,800 per week. It also faced aluminium composite material remedial works of £20m on a tower that cost £18m to build. However in this instance the bill was covered by government.

*Investing in safety and quality will be a major theme at the Social Housing Annual Conference on 4th December 2019, both on the main programme and with a dedicated afternoon stream. Click here for details.