The cladding issue: what you need to know

How did this start?

Following the Grenfell Tower fire in June 2017, it was recognised that the aluminium composite material (ACM) used in the building’s cladding had contributed to the spread of flames and should be removed from all similarly affected buildings.

What has happened since?

The government has launched an inquiry that has been examining the testing, marketing and sale of the combustible plastic materials, which were attached to the walls of the tower. It is ongoing.

How has this affected the housing market?

Although initially focused on ACM, other cladding has come under the spotlight and leaseholders in flats without any cladding have found themselves inadvertently affected by the issue. The Public Accounts Committee said in September that only a third (155 out of 455) of high-rise buildings identified with flammable cladding had been made safe.

According to government data published in January 2021 progress has been made. Of the 462 buildings identified as of December 2020 with ACM cladding systems, remediation has either completed or started on 417 buildings (90% of identified buildings). 

However, The End Our Cladding Scandal campaign group says that another 2,957 buildings have registered with the government for funding to remove a range of other materials from their walls (separate to ACM). It claims that together this represents 28% of all high-rise buildings in England and an estimated 700,000 homes.

External Wall Survey (EWS1)

The initial focus on buildings over 18 metres was broadened to include other types of combustible cladding, with the government issuing a note to building owners on how to tackle this in December 2018.

Soon after mortgage providers began requiring assurances about the safety of external wall systems as a condition of approving mortgage applications. Surveyors adopted the position that flats in blocks without a certificate had a £0 value and sales began to fall through. In response, RICS and other stakeholders agreed the EWS1 process in December 2019 to address this.

However, following the release of further government guidance in January of last year lenders picked up on the line “the need to assess and manage the risk of external fire spread applies to buildings of any height”.

This saw an estimated 450,000 flat owners in blocks without cladding suddenly requiring an EWS1 certificate to re-mortgage or sell as lenders applied the rule to all blocks. This has caused significant delays to the sales process due to a shortage of qualified professionals to carry out assessments.

What next?

In November 2020 the government stated that buildings without cladding should be removed from the requirement to have an EWS1 form. Following consultation with members, RICS has now issued new guidance in response.

The government also made available £700,000 to train more assessors to tackle the backlog in the EWS1 process. RICS is due to begin the training process this month (January 2021). 

What else has the government done?

The government launched a £1bn safety fund to remove dangerous cladding from high-rise buildings in May 2020. The buildings must be over 18 metres tall to qualify.

This fund is predominately targeted at supporting leaseholders in the private sector facing significant bills. However, the government says that for leaseholders living in buildings owned by providers in the social sector, it will fund the provider’s costs, which would otherwise have been borne by leaseholders. The government expects landlords to cover these costs without increasing rent for their tenants. The submission deadline for landlords to apply for funding has been extended until 30 June 2021.

It has already provided £600 million for the replacement of ACM cladding systems and in December 2020 announced a £30m fund to pay for fire wardens to watch the exterior of affected buildings. 

In July 2021, the government said that £16.5m of the fund for fire wardens, known as a waking watch, had been allocated. This covers 191 buildings.

In February 2020 the government said it would fully fund the cost of replacing unsafe cladding for leaseholders in residential buildings 18 metres (six storeys) and over in England, making an additional £3.5bn available to do so. However, for buildings under 18 metres it has offered a loan scheme instead.

The government has also launched a consultation on the introduction of a new tax for the UK residential property development sector, in a bid to raise "at least £2 billion over a decade" to help pay for cladding remediation costs. The tax is due to be introduced in 2022 and apply to "the largest" residential property developers in England.

It is seeking views on two options for the basis for calculating the levy, either:

• a charge per square metre of the entire internal floor area, subject to certain exclusions, or
• a fee per residential unit in scope of the levy.

The government was reported to have held talks at the start of July 2021 with lenders to discuss the provision of a government guarantee on mortgages for flats that could be identified as dangerous in a bid to unlock the market. Estimates suggest as many as 2 million people may be unable to sell their homes due to the need to acquire an EWS1 certificate.

July 2021 EWS1 announcement

The government has effectively reversed its previous guidance and stated that EWS1 forms will no longer be required for buildings under 18 metres in height, following advice from experts that concluded there is no systemic risk of fire spreading in these structures. HSBC, Barclays and Lloyds Banking Group have welcomed the announcement and stated that once the guidance is removed and the appropriate RICS guidance updated they expect to be able to resume lending to affected properties without the requirement for an EWS1 form. This should help to unlock this part of the market. 

Scotland

The Scottish Government is considering free building assessments to establish the extent of the cladding issue in the country. Although a proposal at present, the Single Building Assessment programme is pencilled in to start this summer. It would remove the need for homeowners to pay for an EWS1 and pave the way for £97m of public money to be spent on remediation for affected buildings. 

Guide to the EWS form and process.

January 2022 announcement

In a significant shift in policy, levelling up minister Michael Gove has given developers two months to agree to a plan to fund remediation costs, estimated at £4bn, or face legislation.

As part of this, the minister has said leaseholders living in their own flats will not face any costs to fix dangerous cladding, with developers and cladding companies paying instead.

The move is in addition to the forthcoming developers' levy, which is set to raise £2bn over a decade to pay for cladding remediation costs.

Separately, the minister has now written to the Construction Products Association setting out that product suppliers will be expected to contribute alongside developers, too.