Government to raise taxes on housebuilders to fund cladding removal

The government has now launched a consultation on the tax increase, which it hopes will raise £2 billion over the next decade. The measure, first floated in February, will be joined by a new levy on future tower projects.

By Will Ing

It comes as MPs voted through the Fire Safety Bill, which clarifies responsibility for reducing risk in multi-occupancy residential buildings in England and Wales, last week. The government was criticised for voting against an amendment which would have protected leaseholders from the crippling costs of making their homes fire-safe.

The consultation has not suggested what the increased rate of tax for residential developers’ profits should be but seeks views on whether the tax should be levied solely on residential development activity, or on all profits of companies that are substantially involved in building homes.

The UK’s largest housebuilders make significantly more than £25 million a year, with Persimmon, Taylor Wimpey and Barratt Homes reporting pre-tax profits of £784 million, £430 million and £264 million respectively for 2020.

Housing Secretary Robert Jenrick said the tax would ‘strike the right balance between developers making a contribution and ensuring fairness for the taxpayer’, while consultation documents note that developers are benefiting from public investment in cladding remediation.

Jenrick added: ‘We’re making the biggest improvements to building safety standards in a generation, investing over £5 billion helping to protect leaseholders from the cost of replacing unsafe cladding on their homes and ensuring industry is held to account for the wrongs of the past.’

However, the government is facing growing calls to fully protect leaseholders from the costs of removing unsafe cladding from their homes – something which it has previously said it supported in principle.

Last week, the cross-party Housing, Communities and Local Government Committee said the government should establish a Comprehensive Building Safety Fund, with finance provided by the government and the building industry.

Clive Betts, the committee’s chair, said: ‘While the extra funding for cladding removal is welcome, it will be swamped by the sheer scale of fire safety issues in multi-occupancy buildings.

‘In the years since the Grenfell tragedy, we have been shocked by the reality of the danger that flammable cladding poses, by how pervasive these materials are in modern buildings and by the frequency with which fundamental fire safety measures, including fire breaks and sprinkler systems, are simply not there.

‘£5 billion in funding is significant, but just cannot match the ongoing legacy of these fire safety failings […] the government’s recent proposals fail to adhere to the fundamental principle that leaseholders should not have to pay to fix these problems.’

Responding to the consultation on increasing taxes on residential developers, Labour’s shadow housing secretary, Thangam Debbonaire, accused the government of ‘dragging their feet at every stage since the Grenfell tragedy’ and noted that ‘hundreds of thousands of people still live in dangerous flats’.

‘Even with this levy, the burden would still overwhelmingly be on blameless leaseholders – while many of those that caused this crisis will get off lightly,’ she said. ‘Labour will keep fighting to protect leaseholders form unfair costs. This fight is not over.’

The government has also pledged to introduce The Gateway 2 Developer Levy, which will charge developers seeking planning permission for new towers. The levy will be brought forward as part of the Building Safety Bill.