On 24th February 2022, the House of Lords debated the Building Safety Bill in the second day of committee. The Bishop of St Albans spoke in favour of a number of amendments relating to leaseholder protections and the proposed building safety levy:
The Lord Bishop of St Albans: My Lords, I shall speak to Amendment 35. I was expecting others to speak to it first, but I shall address it briefly. I declare my interest as a vice-president of the Local Government Association. I, too, am an enthusiastic amateur and rise with great hesitation. I also apologise for arriving fractionally late and going in and out, but I have amendments about to run on the Judicial Review and Courts Bill, so I have been trying to balance things in two places.
Whenever a new tax is applied to an industry or business, it is extremely rare that a given organisation simply chooses to absorb that additional cost. In the overwhelming majority of instances, the tax will be passed on to the consumer as a price rise. Businesses rarely undermine their own bottom line when there is little competitive advantage for doing so and where the cost can be simply passed on to the consumer without hurting the demand for their product.
The market is such that there is a massive, chronic shortage of supply of homes in the UK. This undersupply means that, in reality, developers know that demand will not greatly suffer as a result of the building safety levy. They will not absorb the tax. I fear it will simply be priced on top of the cost of new properties. After all, this is the free market, and we cannot escape the fact that that is likely to be the consequence of the levy.
I am not at all opposed to the levy in itself. The aim as outlined by the Government is to recoup money from the industry to part fund the hugely welcome grants that the Government have provided to fund cladding remediation. It is morally right that developers contribute via this charge for their past mistakes. What I am concerned about and object to, which is why I put my name to this amendment, is the idea that social housing providers will also have to shoulder the building safety levy, if I have understood it correctly.
As I said, taxes rarely get simply absorbed. The majority of social housing providers, as in housing associations, are non-profit, so the question is: where will they shift the cost to? As they do not make a profit, they are unlikely to tap into their capital reserves to subsidise the tax. Even those for-profit social housing providers are unlikely to allow it to eat up their presumably slimmer profits compared to those of private developers. So where will it go? As already alluded to by previous speakers, it could be passed on to tenants in the form of increased rents, which would somewhat undermine the purpose of social housing—to have an affordable place to live. Although that alone is a worrying prospect, what concerns me is the effect it could have on the supply of social housing. We already have a major social housing deficit. The homeless charity, Shelter, estimates that more than 1 million households are waiting for social homes. A building safety levy will leave social housing providers with the option of building fewer homes, due to the increased construction costs, or building out at the same rate with the same costs, but shifting the burden of the levy on to construction costs, the result being a lower quality of social housing.
Imposing this levy on councils means council tenants could, in effect, be subsiding the failure of private developers and paying the cost of remediating both council housing and private housing. We desperately need more social housing, and we need it now, which is why we ask the Government: what assessment have they made of the impact of this levy on social housing providers, the supply of social housing and the rental costs faced by social housing tenants?
Finally, I add my support to Amendment 118 proposed by the noble Earl, Lord Lytton, and Amendment 24 in the name of the noble Lord, Lord Young, both of which are supported by the noble Lord, Lord Blencathra, along with the corresponding Amendments 115, 119 and 130, which aim to solve the issue of leaseholder remediation to ensure that the polluter indeed pays. I would also like to pay a huge tribute to Steve Day, whom many of the Committee know. It has been partly down to his tireless campaigning, as well as people from other cladding groups, that the debate has entirely shifted to there being almost unanimous agreement that the polluter must pay, to such a point where we have two amendments aiming at this end. If I may say so, I know the Minister has also been instrumental in shifting the Government’s position in the huge progress made since last year on this matter. I am grateful to him for his tireless efforts in delivering the Government’s much improved and very welcome offer to leaseholders.
I know both “polluter pays” amendments are highly technical and do not pretend to be a legal expert, which is why I felt it prudent not to explicitly add my name to either. I do, however, understand the general thrust of what they are trying to achieve. I hope the Minister can assure me that the Government’s lawyers are looking carefully at these amendments with a view, I hope, to bringing forward their own amendment that captures the essence of these proposals. In the meantime, I thank him very much for what he is doing. I am glad to think that everybody, from all sides of the House, is trying to work to move this forward with urgency.
Extracts from the speeches that followed:
Baroness Hayman of Ullock (Lab): I will speak first to my Amendment 35 and I thank the noble Baroness, Lady Pinnock, and the right reverend Prelate the Bishop of St Albans for their support.
Clause 57 gives the Secretary of State powers to impose a new building safety levy in England that will contribute towards the Government’s costs for remediating historical building safety defects. This will apply to developers making an application to the building safety regulator for building control approval, which of course is the new gateway 2 process that we have debated throughout discussion on the Bill. The problem we have, which is why I tabled this amendment, is that it will also be imposed on councils—the social landlords. Councils of course already face additional financial pressures, due to the Covid-19 pandemic.
We should not forget that the key role of local government is to serve communities—the Minister will completely understand this—and provide essential services. They are not the same as developers, so the purpose of this amendment is to make social housing providers exempt from the additional financial burden of the Government’s proposed levy, to prevent council and social housing tenants subsiding the failures of private developers and paying the cost of remediating both council housing and private housing. We are concerned about what may be the unintended consequences of the Bill as it stands, because if the levy is imposed on local authorities, it will increase the cost of building or refurbishing social housing, or increase rents, as the right reverend Prelate said. Yet the benefits to funds will not be available to the tenants, who would otherwise have benefited from lower rents or better housing.
The money to fund remediation must come from somewhere. Inevitably, it will be at the expense of another critical service, either in housing or through increased rents. To ask for that does not seem the right way forward. Does the Minister recognise the potential impact of the levy on social housing supply? Again, the right reverend Prelate the Bishop of St Albans talked about our desperate shortage of housing in this area. We do not want anything that will negatively impact that. It is important that we do not pit the objective of providing for those in housing need against the objective of making buildings safe, when both must be delivered.
Lord Greenhalgh (Con): As a proportion of housing, social housing stayed broadly the same over the last 10 years. We have seen a massive increase in private rented housing, which is effectively providing a lot of the housing that would otherwise be social housing today. There has also been a decline in home ownership so we need more housing, including social rented housing. Supply is important for all types and tenures. I am sure that the noble Baroness would agree with that.
It will be difficult to do that when we have such a mess to fix. I do not want to resile from the fact that it will be difficult but we are asking the people out there who manage their assets, and who wanted to build new homes to meet the demand, to walk and chew gum. We have to think about doing those two things together.
I love the right reverend Prelate the Bishop of St Albans because he is so passionate. He has been a massive campaigner on this, and I appreciate that. But I just do not agree about the sanctity of social housing providers that have built rubbish—and I will give an example. A registered social landlord who owns a piece of land will have, to use the phrase in the amendment,
“designed, specified … or supervised the works”,
and they will have brought in a construction company. There are examples of that in the area where I used to be council leader. They will have done exactly what the noble Baroness, Lady Hayman, said when she described a developer, and got a construction company to build on their land. In this case they built homes of various sizes, wrapped in aluminium composite material or high-pressure laminates, without compartmentalisation. Then they are going to people with narrow shoulders and saying, “You pay for the mistakes that we oversaw if we can’t get the funding from government”. That is just wrong.
The Church of England in Parliament 
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