Following the Grenfell Tower tragedy on 14 June 2017 the Government launched a program to identify and fund the remediation of unsafe cladding on residential buildings. The program initially focussed on funding remediation of high-rise buildings (defined as 18m+) and was subsequently expanded to include medium-rise buildings (11m – 18m).
The Government department with ultimate responsibility for the remediation program is the Ministry of Housing, Communities & Local Government (the "MHCLG"). The MHCLG's role is to introduce programmes to fund and oversee cladding remediation works, as well as supporting enforcement activity to drive rectification works.
On 4 November 2024 the National Audit Office (the "NAO") published a report entitled "Dangerous cladding: the government’s remediation portfolio" which reviewed the progress made to date and the challenges faced. It also provided a number of key facts, figures and estimates.
Timescale
When the remediation programme began, the MHCLG estimated that the cladding remediation works within the scope of the portfolio would be completed by 2035. However, the NAO report indicates that this objective will not be met at the current rate of works. In order to meet the 2035 date it seems likely that substantially more money will need to be spent, and new strategies to bring buildings into the portfolio will need to be developed. The NAO report calls for the Government to set a target date by which all remediation works should be completed.
Cost
The remediation works are estimated at a total cost of £16.6 billion (within a range of £12.6 billion to £22.4 billion) with a cap of £5.1 billion of this being taxpayer contributions. The MHCLG says it intends to recoup £700 million from Developers who have already accepted responsibility under the Developers Remediation Contract and Responsible Actors Scheme. The remaining £3.4 billion will be recouped in the form of the Building Safety Levy which will be applied over the next 10 years or more. The Levy will be paid by developers on new developments, though the MHCLG is yet to confirm the payment mechanisms. Collections will not start until autumn 2025, and funding has been agreed with HM Treasury to allow remediation works to continue. The goal of the Levy is to recoup these amounts to ensure that the £5.1 billion cap for taxpayer contributions is not exceeded. How this will work in practice remains to be seen.
How many buildings?
The range of the estimated cost and challenges in meeting the 2035 target is partially explained by a lack of clarity as to the number of medium-rise buildings with unsafe cladding that exist in the England. As of August 2024, 4,771 buildings were within the MHCLG's remediation portfolio, but with an estimated total of 9,000 – 12,000 buildings requiring remediation. 98% of estimated high-rise buildings are in the portfolio, meaning that the range of the estimate is driven by the medium-rise buildings. In July 2024, the MHCLG reported it was behind where it expected to be in respect of medium-rise buildings falling within the portfolio. The report went on to say that some of these buildings "may never" be identified.
Unknown buildings
It is important to note that the estimate of 9,000 – 12,000 is a wide range and that some of these buildings, while unknown to the MHCLG, are not necessarily unknown to involved parties. The report notes that some building owners may be reluctant to come forward out of fear that problems will be discovered that are not within the scope of the remediation program, and so would be ineligible for funding. The MHCLG is developing a strategy to get to grips with this issue to "incentivise, encourage and compel" engagement from relevant parties, which will be essential if the 2035 timescale is to be met.
Commentary
The NAO report contains several surprising statistics. In particular, the sheer number of unsafe buildings which are yet to be identified and remediated, especially those in the 11m – 18m range. Of the 4,771 buildings earmarked for remediation only 1,392 have had remedial works completed and a further 985 schemes have started. In a response to the NAO report, Alex Norris MP, Under Secretary of State responsible for Building Safety at MHCLG recognised that "The pace of remediation to make homes safe has been unacceptably slow" and that they intend to implement a 'Remediation Acceleration Plan'. Details of that plan are yet to be provided.
The NAO's recommendation is that MHCLG and Homes England should consider other actions to incentivise responsible entities to apply to its programmes, and therefore increase the pace of remediation. For example, it could consider mandatory registration for buildings 11m –18m (as it has for high-rise buildings 18m +) and tougher enforcement activity and action to help resolve or avoid protracted disputes between stakeholders over the scope of works.
A real challenge in achieving the aim of increasing the pace at which buildings are brought into the scheme has been protracted discussions between developers and freeholders over what constitutes ‘proportionate’ remediation works or ‘tolerable’ risk. Whilst the MHCLG recognises that it must help to resolve these disputes, this is unlikely to be straightforward. Developers and others in the construction industry who will be expected to fund these works in accordance with the 'polluter pays' principle (by way of claims and/or the Building Safety Levy) will be acutely aware of the tension between the need to balance the 'proportionality' of remedial schemes against the need to increase the pace. The hope is for resolution in a manner which ultimately keeps costs as low as reasonably possible.
The number of unsafe buildings yet to be identified leaves an uncertain picture as to the extent of potential future liabilities for those involved in the residential construction industry (as well as their insurers). As buildings are identified and brought within the portfolio, the potential for future disputes and claims increases. It is of course possible that these unidentified buildings have already been notified to insurers, though no doubt some new notifications will be made. As such, the full picture is still emerging and the construction industry and its insurers are not out of the woods yet.
