Clause 57 - Levy on applications for building control approval in respect of higher-risk buildings

Building Safety Bill – in a Public Bill Committee at 3:15 pm on 23rd September 2021.

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Photo of Rachel Hopkins Rachel Hopkins Labour, Luton South 3:15 pm, 23rd September 2021

I beg to move amendment 9, in clause 57, page 78, line 12, at end insert—

“(4A) The regulations must exempt applications or specified descriptions of relevant applications made by or on behalf of registered social landlords for the provision of social housing as defined by the Housing and Regeneration Act 2008.”

This amendment would seek to remove the levy as introduced by Clause 57 from social housing.

Photo of Clive Efford Clive Efford Labour, Eltham

With this it will be convenient to discuss clause stand part.

Photo of Rachel Hopkins Rachel Hopkins Labour, Luton South

It is appropriate that I mention my entry in the Register of Members’ Financial Interests; I am a vice-president of the Local Government Association.

I welcome the opportunity to move this amendment. The Minister will recognise my deep interest in housing and in ensuring that everyone can live in a good-quality, secure, safe home that they can afford to live in. The amendment would place in the Bill, rather than in regulations, an exemption for social housing from the levy introduced by the clause.

The levy is designed to meet building safety expenditure. That expenditure is not the ongoing cost of the new building safety regime, which is met through the building safety charge; it is designed to cover the cost of Government support for the remediation of unsafe cladding. That support is provided to leaseholders in buildings with unsafe cladding systems, either through the Building Safety Fund or through a system of low-cost loans for buildings under 18 metres, the details of which are yet to be announced.

For the most part, that support is not available to social landlords, other than to alleviate costs that they may otherwise have to pass on to leaseholders. With the exception of buildings with aluminium composite material cladding, social landlords have been denied access to those funds. For councils, remediation costs therefore fall on the housing revenue account and must be recouped either through rent increases or by diverting funds away from improvements to council housing or the provision of new council housing.

In contrast to many private developers and freeholders, social and council housing providers were the quickest to react post Grenfell. Analysis has shown that housing associations have paid six times more than developers to remediate dangerous cladding. According to G15, the group of London’s largest housing associations, overall, associations have set aside nearly £3 billion for historical remediation costs, far more than the half a billion pounds that the private sector has provided.

Photo of Ruth Cadbury Ruth Cadbury Shadow Minister (Housing, Communities and Local Government) (Planning)

My hon. Friend is making really powerful points. I have a number of blocks in my constituency managed by housing associations, but they were generally built by volume house builders, and the housing associations are having to deal with the costs that she mentions. Ultimately, as she says, those costs are falling on leaseholders, many of whom are shared owners and people on fixed incomes, and on the future social tenants of the housing association, because the costs impact the association’s capital programme. Does she agree that that means a slowdown in what is already a very slow social housing new build programme, and concerns about other repairs and capital works to existing social rent homes in the portfolios of the housing associations?

Photo of Rachel Hopkins Rachel Hopkins Labour, Luton South

I thank my hon. Friend for making those key points so well. I will reiterate them: the Local Government Association and housing associations have warned that building safety costs will put at risk their ability to build much more affordable housing, as she pointed out. The required subsidy per affordable home currently sits at approximately £50,000; £3 million spent on remediation costs would mean 58,000 fewer homes over the next 10 years. Shelter also estimates that we need 90,000 new social homes a year to fix our housing crisis, and that does not go into what is needed to get social homes to a decent standard or reach our net zero targets, which the Minister will know we discussed in the Housing, Communities and Local Government Committee earlier this week.

The Local Government Association—or should I say the Conservative-led Local Government Association—stated in its written evidence:

“Imposing the developer levy on councils would leave council tenants paying for the failings of private developers. If the Levy is imposed on social providers, their ability to deliver the improvements and additions to the housing stock that the Government requires will be put at risk.”

Photo of Daisy Cooper Daisy Cooper Liberal Democrat Spokesperson (Education)

Has the hon. Lady received any estimates of the cost of the levy for social providers? If not, does she agree that it might be helpful if the Minister could tell us what estimates the Government have made?

Photo of Rachel Hopkins Rachel Hopkins Labour, Luton South

I thank the hon. Lady for her important contributions. There are different levels, because this is such a complex area, but research that the LGA commissioned, which just looked at the total cost to deliver compliance with the high safety standards, the installation of sprinklers and compartmentation across the entire housing revenue account council housing stock, would be more than £8 billion over a 10-year period, with the majority of the investment taking place in the first five years.

There is so much at stake here that will have an impact on social housing and the likelihood of being able to build good social housing. The conclusion is that the levy, if imposed on councils and social landlords, will increase the cost of building or refurbishing social housing, or increase the rents, yet the benefits to funds will not be available to the tenants who would otherwise have benefited from lower rents or better housing.

Finally, imposing the levy on councils means council tenants will be subsidising the failings of private developers and paying the costs of both remediating council housing and private housing. I am pleased to move this amendment; I hope the Minister will accept it, and I look forward to hearing his comments.

Photo of Christopher Pincher Christopher Pincher Minister of State (Department for Levelling Up, Housing and Communities)

I am grateful to the hon. Lady for her amendment. In parenthesis, let me say that the Government are committed to increasing affordable housing and socially rented homes as a component of that. She will know, as an articulate and committed member of the HCLG Committee, that we have made available in the present 2021 to 2026 cycle more than £12 billion, £11.5 billion of which is new money, to build some 180,000 new homes, economic conditions permitting, of which 32,000, or double the number in the present cycle, will be for social rent. We have also made it easier for councils and local authorities to build social homes if they wish, but I will not go into the detail of that, because it is a separate matter and does not apply to this clause.

I had a conversation only last night with the Financial Secretary to the Treasury on our approach to the levy and exemptions, and I am pleased to inform the hon. Member for Luton South that we have already proposed —not as a direct result of that conversation, but more broadly—an exemption from the levy for affordable housing as a whole. That includes social housing, as well as housing for rent or sale at least 20% below market value, shared ownership and rent to buy. We recognise that applying a levy to affordable housing, which includes social housing, would increase the cost of developing affordable housing and is likely to be a disincentive to supply.

We presently have a public consultation in flight, seeking views and evidence on how the exemption would work in practice. The consultation will conclude on 15 October. We would not want to pre-empt the outcome of that consultation, although I think the hon. Member for Luton South can see the way our thoughts are progressing, but neither do we want to write such a matter on to the face of the Bill, because we think that it is more appropriate in secondary legislation. We are consulting on it and we do want to ensure that the exemption applies, so I hope that she will agree that her amendment is unnecessary and therefore withdraw it.

Photo of Ian Byrne Ian Byrne Labour, Liverpool, West Derby

It is really good to hear the Minister talk about social housing, because when the Housing, Communities and Local Government Committee has taken evidence on this we have heard only about affordable housing; we could not get the social housing element drawn out. Just to clarify, will social housing associations be exempt from the charge?

Photo of Christopher Pincher Christopher Pincher Minister of State (Department for Levelling Up, Housing and Communities)

Our proposal is that social housing be exempted from the levy. We are consulting on how to do it, but that is our proposal, so the Committee can see the flight trajectory that the Government are on. I therefore hope that the hon. Member for Luton South, when she has an opportunity to make her views plain, will withdraw her amendment.

Photo of Shaun Bailey Shaun Bailey Conservative, West Bromwich West

I very much concur with the sentiment behind the amendment, as someone who is very passionate about social housing, as my right hon. Friend knows. Will he ensure that the consultation is as broad as possible, because social housing providers, as I am sure we all know, come in many different forms—it is a complex landscape? Can he reassure me that we will see the broadest possible consultation, to ensure that this works as effectively as possible?

Photo of Christopher Pincher Christopher Pincher Minister of State (Department for Levelling Up, Housing and Communities)

I am happy to give my hon. Friend that assurance. We consult a wide variety of statutory stakeholders, but we do not include only the usual suspects in Government consultations, so it is possible for anybody to respond. We usually expect a wide variety of inputs, in order that we may reach a sensible conclusion. I therefore hope that the hon. Member for Luton South will agree to withdraw her amendment.

Mr Efford, is it your wish that I should speak to clause 57 itself before we decide on the amendment?

Photo of Christopher Pincher Christopher Pincher Minister of State (Department for Levelling Up, Housing and Communities)

Then I shall do so.

Clause 57 introduces powers to create a levy on developers who seek regulatory permission to build certain high-rise residential buildings at the gateway 2 stage of the new building safety regime. This building safety levy will be used for the purposes of meeting the Government’s building safety expenditure, such as providing assistance for the purpose of removing unsafe cladding. Residential developers who construct new high-rise buildings will gain from the restoration of confidence in the housing market, so it is right that they should help fund the significant costs associated with fixing buildings when they are unsafe.

The Government have already set up a £1 billion safety fund, with grants to help leaseholders pay for the removal and replacement of unsafe non-ACM cladding on their high-rise buildings. That is in addition to the £600 million for replacement of ACM cladding, bringing the total remediation funding to £1.6 billion. An additional £3.5 billion was announced in February 2021, so we are now providing over £5 billion, plus a waking watch fund, to support in-scope high-rise buildings to be remediated.

Our funding will protect leaseholders from the costs of the highest risks. However, the levy funding does not absolve building owners of their responsibility to ensure that their buildings are safe. They should consider all routes to meet costs, protecting leaseholders wherever they can—for example, through warranties and recovering costs from contractors for incorrect or poor work. Some developers are already taking steps to remediate historical building safety defects. Of course, some are not, and we say that they should do so.

Taylor Wimpey has set aside £165 million for remediation purposes, Barratts has set aside £82 million, and Persimmon £75 million. Bellway is reported to have provided over £130 million for remediation of historical building defects. We continue to encourage developers to step up and ensure that the costs of remediation do not fall on leaseholders, because they did not cause the problems. As I mentioned to the hon. Member for Luton South earlier, we have launched a consultation on the design of the levy, which will help shape secondary legislation on the rate and how the levy is calculated.

I will not speak to the developer tax, because that is not part of the Bill. It is a Treasury matter and is presently being consulted on, but we reckon that it will raise £2 billion over 10 years. With that, I commend the clause to the Committee.

Photo of Mike Amesbury Mike Amesbury Shadow Minister (Housing, Communities and Local Government) 3:30 pm, 23rd September 2021

I thank the Minister and my hon. Friend the Member for Luton South, and I welcome the direction of travel, which demonstrates how this place can work most effectively for the good of the affordable housing sector as a whole.

On clause 57, the principle of the levy is most welcome. Campaigners up and down the country have been pushing for a levy—sometimes under the polluter pays principle. There is a history of failure and deregulation in the construction industry, and resident leaseholders are certainly not responsible for the mess. Then we get to some of the details. The principle of polluter pays is a good thing. Looking at the evidence from the Select Committee—we have colleagues present who are key members of that—the cost of remediation is estimated to be some £15 billion. The Minister referred to conversations with his good friends in the Treasury, who are referring to a levy of £2 billion—a fraction of that.

On the scope of the levy, I understand some of the practicalities of gateway 2, but to whom will that money be directed to provide support? Will it be by way of grants? I notice another reference in clause 57 to the provision of loans, but loans to who? The principle is good and we welcome a levy, but it is nowhere near sufficient to deal with the building safety scandal, which is exactly what it is. We urge the Minister to look again at the size and scope of that with his good friends in the Treasury. Of course, voices outside this place will continue over and over and get louder and louder until justice is done.

On other potential exclusions, looking at the Department—I am not on top of its new name, by the way, so excuse me—

Photo of Mike Amesbury Mike Amesbury Shadow Minister (Housing, Communities and Local Government)

It just rolls off the tongue, doesn’t it? According to the Government’s own figures, 274 hospitals of 18 metres and above are in scope at the moment, as well as 10 care homes. For the hospitals, that will affect capital spending in other Departments. I am sure that we all have ambitions to get renewed hospital facilities in our constituencies via capital spending. Drawing on the previous amendment, I am sure that that is something that Ministers are strongly considering. Of course, the Opposition—or Members across the piece, actually—would urge them to look at those exclusions.

Photo of Shaun Bailey Shaun Bailey Conservative, West Bromwich West

I am really pleased to speak both to the clause and to the amendment tabled by the hon. Member for Luton South. As someone who probably would not be here were it not for social housing, I completely agree with the sentiment behind her amendment and with most, if not all, of what she said about the need to build more social housing, and in particular, her point about improving the quality of existing stock. I am sure that the biggest issue we both deal with is the quality of the existing stock in which people currently live. I do not disagree with the sentiment behind the amendment, which seeks to enable social housing providers to retain their limited resources—I am sure she would agree that they need more—to improve their stock.

I am heartened to hear from my right hon. Friend the Minister about the positivity that appears to be coming from Her Majesty’s Treasury on this matter. It is fantastic to hear that those deliberations and conversations have been positive. I will probably not articulate it very well—apologies, this is a bit personal for me—but I am really pleased to hear that. It is important, and I was probably struggling with the issue a bit given my background and experiences. I am glad to hear that the Treasury have heard that point, and I thank the hon. Lady for tabling the amendment.

The clause is the right move in respect of developers and the levy. As Dame Judith Hackitt pointed out, we will ultimately ensure that our system works and is financially robust. As the hon. Member for Weaver Vale pointed out in his contribution, the regulations will be the meat of the legislation. I note the exemptions listed. I listened with real interest to the point the hon. Gentleman made about hospitals and care homes. Many of us, across the piece, can have discussions about that and perhaps work on it. We have talked about unintended consequences all day, and what we do not want to see is any sort of inhibition of the Government’s agenda of building more hospitals, improving social care, and doing what we know needs to be done in our communities. The hon. Gentleman made an important point. I do not necessarily expect an answer from my right hon. Friend the Minister today; I appreciate that the conversations are ongoing, and I am sure he agrees that they are important.

We have heard some well-articulated speeches, and it is always a bit of a nightmare speaking after them because we tend to say what everyone else has said. To keep my comments as brief and to the point as possible, the sentiment behind the hon. Lady’s amendment is absolutely spot on, and I am really heartened to hear the response from my right hon. Friend the Minister. The levy is right, but we will need to scrutinise the accompanying regulations, particularly on exemptions, which I will consider with interest. The principle underpinning clause 57 is right and has my wholehearted support.

Photo of Rachel Hopkins Rachel Hopkins Labour, Luton South

I am grateful to the Minister for his comments. On the basis of his assurances about the outcome of the consultation, the direction of travel that he indicated, and the fact that we will keep a close eye on the progress of that consultation, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 57 ordered to stand part of the Bill.

Ordered, That further consideration be now adjourned. —(Scott Mann.)

Adjourned till Tuesday 19 October at twenty-five minutes past Nine o’clock.

Written evidence reported to the House

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