Should Property Developers be Taxed for Cladding Replacement?

Posted by Aprao Development Appraisal Tool on 3rd November 2021 -

What are your thoughts on the recent budget announcement that property developers will help fuel a £5 billion fund to remove dangerous cladding?

Chancellor Rishi Sunak has announced The Residential Property Developer Tax in today's budget, amongst other measures of economic reform. The Tax is set to be placed on those UK property developers that make profits of over £25 million a year at a rate of 4%.

So while many campaigners say the levy is insufficient, many property developers are against the levy targeted at the real estate industry. To illustrate this, one notable developer told Inside Housing earlier this year that "taxing developers, most of whom weren't responsible for the cladding crisis, is just laughable". Do you agree?

Background

The growing pressure on the government to respond to unsafe cladding arose from the Grenfell Tower fire which killed 72 people in 2017. Since then, according to the Association of Residential Managing Agents, it is estimated that 274,000 flats have been discovered to be fitted with unsafe cladding, which directly impacts 650,000 people living in high and medium-rise buildings.

According to the government’s findings of October last year, 462 buildings over 18 metres are in need of remediation after being discovered to have ACM cladding with 1,700 buildings over 18 metres fitted with dangerous non-ACM cladding. The government estimated at the time that between £3 billion and £3.5 billion would be needed to carry out the remediation work.

Earlier this year, the government also faced backlash from MPs that its plan tackling the issue was not doing enough, as the fund amount was limited and the plan negated other safety issues outside of cladding-related remediation and didn't sufficiently address low-rise buildings with severe cladding issues.

Today's budget

There are many factors that will have been considered since then. Fast-forward to today, the budget announcement will mean that property developers will essentially be creating a pot of funding to replace flammable cladding on buildings in the UK. Corporations that undertake residential property development (the building, managing and selling of dwellings, excluding student accommodation) will be taxed. The tax will come into effect from April next year. 

Let us know your thoughts!

With a lot at stake for property developers, we're always keen to know what our Aprao community thinks on this news. Do you agree with the levy? We'll be updating this blog after the official announcement and will include some of the opinions you might have, so join in the discussion by leaving a comment or writing in to [email protected] with the subject 'Budget discussion'!