Those desperate for the 'detail' of the new Labour government's agenda for the current parliamentary section were perhaps left feeling slightly underwhelmed by last week's King's Speech. Although notable for the breadth of topics covered (there were some 35 draft bills referred to), it is fair to say that there was little by way of 'specifics'.
That lack of certainty is nothing new for the industry. The two years in the time since the Building Safety Act 2022 ("the Act") was enacted have been characterised by uncertainty and delay, perhaps at least exacerbated – if not caused – by the previous government's botched implementation of the Act. If landlords, tenants and investors alike were hoping for greater certainty as to the future of the Act, then they would have been disappointed by the contents of the speech. But that is not to say that significant changes and expansions might not be on the horizon. Those potential changes have perhaps been brought into sharper relief following the recent publication of phase 2 of the Grenfell Tower Report.
The Labour government, in the run-up to the election, have promised a commitment to increasing the pace of remediation of unsafe buildings; to protecting leaseholders further from costs associated with doing so; and a general widening of the powers of the Building Safety Regulator. Coupled with Labour’s proposed planning reforms, these changes will profoundly impact the property market. Here’s a deep dive into what landlords and investors might expect and how to navigate these potential changes.
Navigating these potential changes
Expansion of the Building Safety Regulator's powers
One of the most significant changes expected under Labour is the anticipated expansion of the Building Safety Regulator's ("BSR") powers. The Labour government is likely to push for more rigorous inspections and enforcement mechanisms. This move is not just about increasing oversight but about restoring public confidence in the safety of their homes, and it was notable that the King referred not only to his Government's commitment to building 1.5 million homes, but building 1.5 million "high quality homes". By broadening the scope to include lower-rise buildings and those with vulnerable occupants, Labour signals a shift towards a more inclusive and comprehensive safety framework.
They have, however, been dealt an immediate blow in that regard following the BSR's announcement that one of its privately registered 'building control approvers', AIS Surveyors, had been wound-up. That has necessitated a 'pause' on more than 50 'higher-risk' projects, until such time as the BSR can step-in and sign off the applications that AIS had previously been due to deal with.
Given that the BSR has oversight and control of which private bodies become 'registered building control approvers', it is of great concern that one of those private bodies deemed capable of providing such services as recently as April 2024 has already 'gone under' – and all the more concerning given that Companies House records indicate that AIS has been struggling with fending off creditor action for some time now.
Funding for cladding and safety remediation
The cladding crisis remains a sore point for many affected homeowners. Notwithstanding the provisions of the Act, many leaseholders continue to find themselves in unsafe buildings with remedial works consistently promised but often rarely progressed. There are a number of reasons why remediation has been slow, and in most cases it is not fair or accurate to point fingers at individual stakeholders. Labour has committed to 'unlocking' those delays, and progressing remedial works for those in unsafe buildings. But given their steadfast commitment not to 'pull the tax lever', nor to significantly increase public spending, an obvious question arises as to how the rapid increase in remedial works will be funded. Landlords may be understandably wary of yet further mechanisms by which they might be compelled to undertake remedial works at their own costs, given Labour's commitment to ensuring leaseholders are protected from costs at each turn.
That presents a significant issue for landlords and investors alike who simply cannot quantify their potential liability, because they do not know which, if any, buildings they (or connected companies) might be called upon to remediate. For those developers that have signed up to the Government 'pledge' and committed to remediate any and all unsafe buildings, this exercise is perhaps slightly easier given that the number of potentially unsafe buildings has hopefully by now been identified, but the difficulty in ascertaining the cost of remedial works remains a live one that is unlikely to go away anytime soon.
Enhanced building standards and regulation, but incentivising development
Raising building standards and ensuring rigorous regulatory oversight are crucial. Labour is likely to push for stricter building codes and third-party audits to ensure compliance. This move could face resistance from developers and builders concerned about increased costs and regulatory burdens. However, the expected Government line in response is that long-term benefits of safer buildings and increased public trust far outweigh these concerns. The key, as it has always been, will be balancing stringent safety standards with practical implementation.
It is unsurprising therefore, that tied in with a 'tightening' of regulations related to building safety, is an anticipated relaxation of the planning system related to green-belt development.
Conclusion
For landlords and investors, the Labour government’s anticipated reforms to the Act and planning policies represent both a challenge and an opportunity. While the prospect of stricter regulations and enhanced oversight may seem daunting, proactive preparation and adaptation can mitigate risks and enhance asset value. It goes without saying that in an industry now tightly constrained by regulation (and for good reason), only those who understand how to navigate those regulations quickly and efficiently will be able to thrive within it. By investing in compliance, engaging with residents, leveraging technology, and staying informed about policy changes, landlords and investors can navigate the evolving regulatory landscape successfully.
The success of these anticipated reforms will hinge on effective implementation and enforcement. The government must ensure that these policies translate into real-world improvements in building safety, and the development industry more generally. The political will on the Government's part to push through these changes must be matched by a commitment on the industry's part to transparency, accountability, and continuous improvement.
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