Fixing dangerous cladding in Scotland: funding the shortfall

With the Scottish Government recently confirming that it is significantly short of the funds required to remediate dangerous cladding in Scotland, we recap on remediation plans in England and Scotland five years after the Grenfell tower disaster.

Five years on from Grenfell and there remains as many as 23 housing blocks in Scotland fitted with the aluminium composite material that was used on the London tower block. There remain a further 400 additional buildings fitted with high pressure laminate cladding, which advisors to the UK Government have also recommended the urgent removal of.

However, in order to remove these materials, the Scottish Government has now confirmed that it will require a further £900m on top of the £97.1m in funding it has received so far from the UK government via the Barnett formula.

UK Government plans

The UK government has announced the following ways in which it will organise and fund the remediation of buildings in England:

• £5.1 billion of government funding for residential buildings in England of 18 metres and above;
• A new Residential Property Developer Tax to help pay for cladding remediation costs (4% on developers with annual profits in excess of £25 million);
• A pledge by builders to remediate "life critical" fire safety issues on any housing blocks they have built over the last 30 years at their own cost– estimated to be around £2bn worth of work; and
• The Building Safety Levy which will be charged to developers seeking planning permission on any residential property in England. These funds will be used to remediate buildings where the developer cannot be identified or cannot pay as a result of, for example, insolvency.

However, given that building safety is a devolved matter, the funds raised from housebuilders/developers will not be used to fix buildings in Scotland, Wales or Northern Ireland. Instead, the devolved nations will receive some government funding via the Barnett formula – for Scotland, this has so far amounted to £97.1m, with the Scottish Government estimating in May 2022 that it will receive a further £300m.

The quandary for the Scottish Government is therefore how to raise the remaining funds it estimates will be required to investigate and remediate cladding in high-rise buildings in Scotland.

Scottish Safer Buildings Accord

In an attempt to close this gap, on 12 May 2022, the Scottish Government unveiled the Scottish Safer Buildings Accord (the "Accord"), a scheme where housing developers will be expected to fund works to address safety issues on properties they built.

Properties in need of remedial works will be identified through the Scottish Government’s Single Building Assessment programme. At no cost to homeowners, the Single Building Assessment is a comprehensive inspection of whole blocks of domestic residential buildings which looks at fire safety and suitability for mortgage lending, and identifies any remedial works required.

It remains to be seen whether the Accord will help to close the funding gap identified by the Scottish Government. This will likely depend on how many housing blocks have a housebuilder/developer who is (1) still in existence; and (2) signed up to the Accord.

The indication from the Scottish Government is that they will pay for any necessary remedial works which are not covered by the Accord. However, whether sufficient funds are available for them to do so is likely to depend on the success of the Accord.

Future-proofing

Looking to the future, and in an effort to prevent cladding safety issues arising in the first place, changes to regulations in Scotland have now also been implemented to prevent dangerous cladding materials from being used on residential buildings over 11m in height. For more information on these changes, see Stricter regulation for cladding in Scotland by my colleagues Eric Johnstone and Louise Shiels.