By Paul Smith, Associate
Cladding and Climate change are intertwined in the housing sector. I remember in the 1990s Bristol Council cladding concrete-built homes to increase their thermal efficiency. Many of these homes built after the war were almost impossible to heat. The cladding, which resembled polystyrene, did make a real difference to peoples lives.
The latest Sector Risk Profile, published by the Regulator of Social Housing, recognises that these issues combined have an impact upon the sector:
“Weaker operating margins and increased spending on existing stock due to remedial safety works, catch up on repairs, and energy efficiency improvements have seen the sector’s interest cover deteriorate in latest forecasts.”
The costs of climate change and cladding (and other safety issues) are the sword of Damocles hanging over the social housing sector. The financial implications are huge. For most housing associations if they plugged the costs of moving to net zero into their financial plans they would be completely broken and to avoid this this, they are just not doing it. This is justified on the basis that there are not clear rules or expectations yet and public finance is starting to be dripped into the sector mitigating the risk to association finances, especially if the investment increases.
The issues around building safety are also rumbling on. As more and more tests of cladding are untaken, other issues are also exposed, including an astonishing number of non-existent fire breaks. Meaning that many homes would have failed the building regulations when they were built, not just in the aftermath of Grenfell.
There are clear opportunities to coordinate climate adaptation with building safety, combining works needed to reduce both costs and the disruption to residents. However, money is not the only impediment. The skill shortage in the construction sector predates the pandemic and BREXIT, however both have made it worse. There is currently not a workforce available which can deal with the needs of the sector. That is not everything, there is also a supply shortage and material costs are rising at around 10% per annum.
As demand for labour and materials outstrips supply prices are likely to rise even further. The question of who pays for the cladding crisis has dogged the government and overwhelmed many flat owners and leaseholders for several years now. The papers are full of stories of people with worthless properties and huge bills. The treasury has moved at a glacial pace towards coming up with the funds to solve this problem. With Michael Gove now at the Department for Levelling Up things may shift. Earlier in November he told a select committee “I am still unhappy with leaseholders having to pay it all, no matter how effective a scheme might be in capping their costs. Why do they have to pay at all?”
Housing associations are generally positive organisations which want to be seen as part of the solution. I read many articles about how we are going to lead on climate change (to be honest I hear a lot which makes the scientist in me wince). What shouldn’t be forgotten is that housing associations have one main source of funds. The rents of their tenants, many of them of low incomes. Unless the Government comes forward with more money for social housing the costs of climate change and building safety will fall upon the heads of the low paid. People who have little or no responsibility for the problems they paying to fix.
Another group of people on low incomes are also likely to lose out. There are over 1m households on local authority waiting lists. It is inevitable that the twin pressures of building safety repairs, and energy efficiency works will reduce the capacity of housing associations (and local authorities) to build new homes. Ultimately the neither the social housing sector nor the Government can have both the penny and the bun.