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Cladding loan scheme should be abolished and paid for by industry and state, say MPs

  • 29/04/2021
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Cladding loan scheme should be abolished and paid for by industry and state, say MPs
The government should get rid of the cladding loan scheme which requires leaseholders to pay for remediating buildings with unsafe aluminium composite material (ACM), MPs have recommended.


The cladding remediation report by the Housing, Communities and Local Government Committee (HCLGC) called for a Comprehensive Building Safety Fund to be set up, to cover the costs for all buildings, irrespective of height and tenure. 

The HCLGC said: “The government should abolish the loan scheme. We reiterate our call on the government to re-establish the principle that leaseholders should not pay anything towards the cost of remediating historical building safety defects.” 

It said the £5.1bn that had been made available to fix cladding so far was not enough and suggested the cost would be closer to £15m. 


Leaseholder burden 

The HCLGC said a lack of details around the length of the debt for leaseholders living in buildings under 18 metres high was “concerning”. 

Further, it was surprised that capping the loan at £50 a month was considered an affordable cost by the government. 

HCLGC said it was “disappointing” there was no information about how the loan scheme would be operated and questioned who would be liable for the debt. 

The committee suggested it was difficult to make a loan to a legal entity corresponding to a building but added: “lending to freeholders is also problematic, since freeholders cannot take out a separate loan if they have a charge on their interest in the building”. 

Concerns were also raised over the lack of progress in making building insurance costs reasonable for leaseholders while their buildings underwent remediation. 

The committee said: “The government has been engaging with the insurance industry for months, and all the while leaseholders are seeing their premiums skyrocket — yet another cost they are facing for a problem not of their making — or worse, living in uninsured buildings.  

“The time has come for the government to consider setting a deadline for the insurance industry to act. If that deadline is not met, the government should intervene to require industry to resolve the problem of eye-watering building insurance premiums.” 

Warnings were also made around the lack of financial support for leaseholders to address construction that would be required before cladding issues were fixed, and said that this could make tenants “hostage to the situation”. 

It suggested that although developers such as Persimmon had dedicated money to pay for cladding construction, the firm’s pre-tax profits would enable it to provide more money. 

However, it welcomed plans to introduce a developer levy and tax. 


Wider impacts and delays 

The report said there were only so many qualified professionals available to fix cladding issues, and warned the works could take between five and 15 years to complete. 

It claimed there was a lack of data on full scale and extent of remediation needed for buildings both below and above 18m high, including how long it would take and whether the industry had the capacity to carry out works. 

The government was asked to produce an assessment of the impact on the wider housing market as the committee said the EWS form did not do enough to address this.  

Additionally, it requested the Prudential Regulation Authority to evaluate the effect of fire safety remediation on banking capital ratios. 

The implication of the situation on leaseholder’s mental health was also raised in the report. 

The committee said it did not think the government was doing all it could and recommended the state to work with local authorities to give affected residents access to physical and mental health support. 

It was also suggested that the government publish monthly data on the number of buildings with non-ACM cladding and other serious fire safety defects awaiting remediation. 

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