Building Safety Bill

Written evidence submitted by the London Borough of Camden (BSB42)

1.0 Financial Impacts

1.1 There are serious financial implications for local authorities arising directly from implementation of prospective new fire and building safety legislation. The immediate implementation of the Fire Safety Act and the truncated transitional period proposed for the implementation of the prospective Building Safety Act will exacerbate the current negative impact of Covid 19 on local authority financial reserves and income.

1.2 Camden has more than 200 of its own high-rise buildings within scope of forthcoming Building Safety legislation. As a local authority Camden also has private sector housing enforcement duties and the prospect under Building Safety Bill proposals of an expanded Building Control responsibility for fire and building safety regulation and inspection. Without New Burdens funding the new regulatory regime will create unsustainable pressure on revenue and capital budgets

1.3 Budgetary Capacity – the Council has a statutory obligation to set a balanced budget each year (i.e. all expenditure to be covered by income (mainly rents from our social homes). These costs represent additional costs to the HRA which we will have to fund either through future rent increases or through efficiency savings within current budgets. Rent increases are limited by law, through the Rent Standard set out by the Regulator for Social Housing, at CPI +1%. This gives limited flexibility to generate increased revenue to cover substantial new burdens.

1.4 The Housing Revenue Account (HRA) is already stretched. From 2016/17-2019/20, the Rent Standard mandated that councils reduce social housing rents by 1% per annum. This equated to a loss of rental income of £69m during that time. Going into the pandemic, this meant that Camden’s HRA was already suffering from significant lost income.

1.5 The impact on the HRA has been exacerbated by the pandemic as rent arrears have increased, particularly social housing tenants who are not able to pay (many go into arrears when they transfer to Universal Credit, during the initial five week period before the first benefit payment is received).

1.6 The requirements of the new Fire Safety Act and the prospective building safety regime introduce enhanced duties for the mitigation and remediation of external fire safety risk at high-rise stock. These will also have impact on the HRA, planned (non-essential) maintenance, and our ability of Camden to deliver targets set out in our local plans.

Financial Pressures

1.7 We know the financial pressures for the Housing Revenue Account are mainly driven by expected bad debts. This has been offset, in part, by applying some of the COVID grants received from central government to offset one-off related expenses in the HRA. However, unlike the General Fund no specific HRA grants have been made available to alleviate the financial pressures in the HRA resulting from the pandemic

1.8 During 2020/21 the direct financial impact of COVID-19 has been:

· £68m - additional financial pressures on General Fund services - a result of lost income & redeployed spending to enable delivery of pandemic food parcels and support packages

· £2.21m - costs of building alterations and cleaning

· £1.24m - additional Public Health and Social Care

· £8.66m - Communications

· £0.33m – new IT Costs

· £0.92m – additional administrative costs

· £0.51m - Capital - Public Realm costs

· £2.97m - ICT Costs

· £26.2m - Lost Income

· £3.32m - Housing Covid costs

· £21.98m - Council Tax & Business Rates losses

2.0 Fire and Building Safety

2.1 Following our 2019 Fire Risk Assessment (FRA) cycle, £32m of works items were identified and these have been added to the planned fire safety programme; £12m of funding was reallocated from existing revenue FRA budgets and the remainder diverted from our condition work budgets. We obtained estimates of the costs for the remediation of unsafe non-ACM cladding in Housing Rent Account (HRA) residential buildings over 17.7m in height and determined that those costs could not be met from within the housing revenue account.

2.2 We have registered several eligible buildings with the Building Safety Fund and applied for remediation grant but we are still left with a significant funding requirement for buildings below 18 metres in height.

Future Costs

2.3 The housing capital programme currently has budgets of c. £320m to address an estimated investment need of £516m over the next five years. This does not allow for any future requirements that are identified through Camden’s on-going programme of intrusive FRAs and façade checks. The work identified in paragraph 2.1 increased our overall fire safety budgets to £59m, but this is not new money. As described above, the funding for FRA works has been allocated from our existing capital programme. The effect of this is to divert expenditure away from investment in the main building elements such as windows, heating and roofs and without extra burdens funding will have a negative impact on the quality of Council homes and resident’s lives.

New Burdens Funding Requirement

2.5 New Burdens funding must be made available on a ’fully funded model’ derived from a comprehensive and realistic impact assessment of the on-going revenue and capital cost implications of the new regulatory regime. Camden is carrying out a cross - service impact assessment based on what we know now about the implications of the Fire Safety Act and prospective Building Safety legislation, we anticipate the on-going costs could run to several million pounds per annum after initial capital outlay.

2.6 Capital Investment will be required to fund initial investment in remediation and refurbishment/redesign of residential housing stock, a range of specialist surveys, scanning and data collection and investment in IT and Asset Management systems.

2.8 Revenue support will be required to provide for the on-going operational costs of:

- new competence, compliance, inspection regime

- the development and administration of building safety cases

- maintenance of Golden Thread requirements

- administration of Building Safety Regulation scheme work

- training and support for staff and residents

- new building control and enforcement duties

2.9 The staffing costs of administering the new safety regime are significant. For example, if the Building Safety Bill requirement continues to be for named individual Building Safety Managers at a ratio of one BSM’s for every five high-rise buildings we think that for Camden this would be c. 40 staff covering c. 200-250 buildings at an inclusive cost of c. £70k each/£2.8m per annum.

2.10 New burdens funding must be part of base local authority funding if an effective and enforceable building safety regime is to be delivered in a way that honours the people who died in the Grenfell fire.

3.0 Leaseholders

3.1 Leaseholders in building of all heights are being seriously affected by the limitations of the government’s approach to remediating historic construction issues in both high and low rise buildings. External wall system guidance and the introduction of the EWS1 certification regime mean that many leaseholders are trapped in their homes. They are facing large bills for construction defects for which they have no responsibilities and are unable to re-mortgage or sell their homes.

Building Safety Charge

3.2 Camden supports the proposals that the Building Safety Charge paid by leaseholder should fund the on-going costs of the new building safety regulatory regime and exclude historic remediation costs that should be eligible for grant funding. Many existing leases allow historic remediation costs to be passed onto leaseholders, but the Building Safety Fund covers the remediation only of dangerous cladding in some high-rise buildings.

3.3 This constitutes *inequitable treatment of leaseholders’ dependent on the height of the building they live in and the drafting of their lease – and is reinforced by the requirement that leaseholders in lower rise buildings take out loans to pay for the costs of their contribution to remediation costs.

3.4 *Inequitable treatment is not restricted to leaseholders – tenants of high-rise blocks that would otherwise be eligible for the limited Building Safety Fund grant regime are also disadvantaged since the BSF excludes buildings where there is no leaseholder occupation, and over the long-term remediation cost fall to the HRA and the debt servicing of council borrowing serviced through rents.

Alternative Funding - Exploration Process

3.5 Proposals that buildings owners be required to explore alternative funding cost recovery routes and demonstrate that these have exhausted before charging leaseholders is another administrative burden that will require new burdens funding. It is unclear how owners would demonstrate due diligence, and over what period such an exploration would have to be carried out, or the level of proof required.

3.6 Local authority landlords regularly face land tribunal cases and legal challenge from leaseholders for routine capital planned maintenance and day-to revenue repairs - the proposed ‘exploration’ process exacerbates the risk of such challenge and is likely to become routine given the high cost of historic building safety remediation measures.

Potential to Delay Remediation Programme

3.7 In addition to the serious risk to cost recovery there is also the likelihood that remediation works programmes will be delayed whilst the due diligence/exploration process is undertaken. Once building owners have demonstrated that the exploration process has been exhausted, or if funding sources are identified, there is likely to be further delay whilst funds are secured so that works can be carried out and paid for within contractual timescales.

3.8 The ‘exploration’ process has the potential to delay remediation projects through a negative impact on cash flows for remediation work. This would have the effects of continuing building safety risks to residents that in turn need to be mitigated during delay and generate revenue or capital costs.

Breach of Accountable Person Duty

3.9 Local authorities are likely to find themselves at risk of breaching Accountable Persons duties if mitigation and/or remediation measures are not carried out a quickly as reasonably practicable or if mitigation and remediation works are undertaken breaching the Local Government and Housing Act 1989 Part VI statutory duty detailed in paragraph 1.3.

3.10 It is difficult to see how the new ‘exploration’ duty would benefit leaseholders without an expansion of Building Safety Fund parameters or another source of external find to meet costs of the full range of building safety defects. Leaseholders should be exempt from the costs of historic defects that should be a charge to construction industry/state funding.

Powers to Access Leaseholder Properties

3.11 We understand that leaseholders (and indeed tenants are entitled to quiet enjoyment of their homes. However diligent landlords/freeholders also have a duty to keep these residents, their neighbours, visitors and contractors safe. Leases do often require leaseholders to give access to their freeholder with reasonable notice but leave responsibility for safety checks largely with lessees and access can be very difficult and time consuming to enforce.

3.12 The Bill should recognise this reality and provide for a specific legal responsibility for leaseholders to give access to freeholder for safety checks and works to gas, water, electrical fire safety installations and enhance the court access process.

4.0 Building Safety Levy Funding Proposals

4.1 The developer levy for HRBs with payment proposed at Gateway 2 regulatory approval stage is a step in the right direction in providing a dedicated funding source for historic remediation and is welcome provided that social housing is exempted. Public sector mixed developments where a tranche of housing for market sale helps to fund new social housing, must also be included in the exemption if the existing housing crisis and shortage of housing affordable to those on low incomes is not to be exacerbated.

5.0 Building Safety Act Specific Measures

Buildings in Scope of Legislation

5.1 The Bill seems to reinforce different and (for low-rise buildings) lower safety standards with a cut-off point of 18 metre for the higher standard. This clearly penalises residents of lower-rise buildings, particularly leaseholders of property below 18m in height who will have to take out loans for remedial work.

5.2 Leaseholders bought their homes in good faith, they had no say in the construction methods or materials used in the construction, but lower rise, properties are not eligible for Building Safety Fund Grant.

5.3 This is inequitable and in addition mortgage lenders and insurance industry are clearly confused by this higher and lower standard approach and are hedging their bets by continuing to demand EWS1 certificate on buildings of all heights and construction types.

Building Safety Managers

5.4 It remains unclear whether the Building Safety Manager is an individual with a role of a team function. It is difficult to see how a property owner or freeholder might be diligent without that clarification.

Implications of New 15-year limitation period Defective Premises claims

5.5 Building Safety Bill clauses 125 & 126 propose to amend the Defective Premises Ac so that that the limitation period to bring claims for e construction will be extended from six to fifteen years. This to apply to the refurbishment or remediation of existing buildings.

5.6 It is not clear who would make claims under the amended Act or how they would fund legal costs if they were individual tenants or leaseholders. There would need to be a legal aid scheme for this otherwise this right is meaningless for ordinary people.

Transitional Period for Implementation of Building Safety Act

5.7 We understand that it is proposed to accelerate the implementation of the provision of the Building Safety Act reducing what we had understood to be a transitional period of perhaps 3 to 5 years down to perhaps 12-18 months, such a short transitional period is simply not ‘reasonably practicable’.

5.8 Uncertainty about future public sector funding settlements and the need to recover from the pandemic make it very unlikely that Camden could meet the Housing Act 1989 duty to maintain a surplus on the housing revenue account and fund the requirements/meet the new duties of the regulatory regime that the Building Safety Act will introduce.

5.9 A realist transition into the new regime and matching new burdens funding will be required to make a success of the new building safety regime and embed best practice by building owners and regulators alike. A five-year transitional programme with a phased, controlled implementation based on building risk prioritisation would enable a clear and controlled approach to delivering a successful regime and ensure that the competence and capacity of landlord organisations, fire and construction industry is there to underpin it.

October 2021