The government’s decision to introduce new taxes for property developers to pay for unsafe cladding removal post-Grenfell could have unintended consequences for affordable new homes, according to a leading tax and advisory firm. 

Housing secretary Robert Jenrick last week announced two new taxes on property developers to help pay for the government’s efforts to remove unsafe cladding from high rise buildings following the Grenfell tragedy.

Jenrick said the government is “introducing a levy and tax on developers to contribute to righting the wrongs of the past”.

While some will welcome the new taxes for property developers, including major firms such as Taylor Wimpey, Barratt, and Berkeley, there is a serious concern that the building of new homes could be adversely affected if developers and planning permission taxes being introduced by the government, to pay for the removal of cladding are not administered fairly, say Blick Rothenberg.

Heather Powell, a partner at the firm, commented: “Extreme care needs to be taken when devising these taxes, to ensure that they do not kill off the development pipeline of affordable quality new homes for first time buyers and families, as well as those who want to rent.

“The housing minister has announced that developers will face two new taxes to contribute to cladding remediation works. Details of the proposed taxes, due to be introduced in 2022, have not yet been announced.”

The new tax will be payable by the largest property developers, but Powell is concerned.

She continued: “Squeezing the profits earned by these companies could mean the mothballing of schemes delivering affordable homes, if profits fall below a level acceptable to the development company.”

The second tax announced, a levy payable by developers seeking planning permission for ‘some’ high rise buildings, also needs care in implementation, according to the tax expert.

Powell added: “Careless implementation could bring to a halt the rapid expansion of the ‘Build to Rent’ sector which is delivering new high-quality homes – many in high rise buildings.

“A levy payable to get permission to build could make these schemes unviable – diverting investment away from the delivery of new homes.”

“Some developers have undertaken the cladding remediation work required on high rise blocks built by them. These ethical developers should not be forgotten and should be exempt from paying these taxes, otherwise where is the incentive to do the right thing in the future?”

“The government must ensure the delivery of homes for families and individuals with average incomes can rent or buy is not going to falter due to the introduction of these new taxes. Care, and commercial insight into how the industry operates will be required.”