In this post, we’ll talk about how the government’s building safety reforms shield leaseholders from unfair cladding charges, Turner & Townsend predicts that inflation in UK construction could be on the rise, the construction industry will require roughly a quarter of a million additional jobs by 2026 and it’s been announced that BDO has hired a new director for real estate and construction.
Building safety reforms safeguard leaseholders from unfair cladding charges
The Building Safety Act 2022 will safeguard leaseholders from unjustified bills to make their homes safe.
Today, the Building Safety Act 2022 protects leaseholders against unjustified bills to make their homes safe (28 June 2022).
Owners and those responsible for prior safety flaws must fund repairs.
45 of the UK’s major homebuilders have agreed to address life-critical fire-safety flaws on all 11-metre-plus properties they have developed or refurbished in the last 30 years.
The legislation gives the Secretary of State new authority to restrict reckless developers’ capacity to build new homes, extends the Building Safety levy by an estimated £3 billion, and improves building owners’ rights to sue developers.
Michael Gove said:
“Today marks a major turning point for building safety in this country, as we introduce a tough new regime to make homes safe and help rid the sector of bad practice once and for all.
“Hundreds of thousands of innocent leaseholders now have the legal protection they rightly deserve, freeing them from a financial burden they should never have faced.
“I’m pleased that most of the largest developers have agreed to play their part in solving this.
“But there is more to do – we are focusing intensively on work with lenders to unlock the mortgage market and empower leaseholders to take their next step on the property ladder, and we will remain vigilant if anyone fails to act on the pledges they have made.”
We are working with lenders to open the mortgage market and allow leaseholders to take their next step on the housing ladder, and we will stay alert if anyone fails to act on their assurances.
The Secretary of State has written to freeholders to announce that leaseholders would no longer be charged for building safety maintenance. The letter reminds freeholders that qualifying leaseholders now have legal cost safeguards and that circumventing them is illegal.
The letter reminded them of their new responsibilities under the Act, including updating fire risk assessments to incorporate proportionality recommendations.
Freeholders or owners of buildings over 18m with cladding issues must have full evaluations ready to submit to the Building Safety Fund, which will reopen for new applications soon, helping to guarantee applications can be addressed in good time, minimising leaseholder disturbance and stress.
Leaseholders must be kept informed. If they don’t, authorities can force them to remediate their buildings and pay the costs.
A new Professional Insurance Indemnity Scheme has also been signed. This will assist assessors undertake EWS1 evaluations to identify fire safety hazards, allowing professionals to make informed decisions and restore common sense and proportionality to the market.
Today, the following Act protections will go into effect to safeguard leaseholders:
Leaseholders in buildings over 11 metres tall or 5 stories will be safeguarded from exorbitant building safety charges for the first time.
Leaseholders with up to 3 UK properties will be safeguarded from the costs of removing hazardous cladding. They will also be protected from non-cladding defect costs, including waking watches.
Freeholders cannot pass on the expense of historical building repairs or cladding removal to leaseholders, including non-qualifying leaseholders, if they are or are associated to the building’s developer.
Freeholders who pass the wealth criteria can’t pass on historical building safety expenditures to eligible leaseholders.
Where a developer cannot be held accountable and the building owner is not compelled to cover all costs, leaseholders with non-cladding related issues will be safeguarded by a cost cap. The cap only applies to non-cladding related work for properties worth more than £325,000 (London) and £175,000 outside London (owners of properties below this ceiling will pay nothing). Shared ownership leaseholders’ caps reflect their property ownership.
Building owners and landlords must cover any expenditures not recovered from lessees.
Under a new initiative from the New Homes Ombudsman, homebuyers may hold developers accountable for safety and quality issues.
Act provisions include:
New powers for the Secretary of State to restrict irresponsible developers’ capacity to build new houses, including if they fail to rectify life-critical fire safety problems on all 11-metre-plus buildings they developed or refurbished in the last 30 years.
All new residential buildings should pay the Building Safety Levy. This will fund a new government scheme to remove dangerous cladding from 11-18m buildings if the developer cannot be found or refuses to pay upfront.
Enhanced civil liability for building owners, allowing them to sue developers, contractors, and manufacturers for faulty construction and defective items that made residences uninhabitable in the past 30 years.
Extra rights to go against affiliated corporations in England and Wales. Businesses hiding behind shell corporations can now be pursued for payment.
These new legislation will empower the government to pursue these corporations through a new Recovery Unit in the Department for Leveling Up, Housing and Communities.
Building standards and common sense
New laws will enforce higher building standards, making houses safer and ensuring a proportionate approach to safety.
A new Building Safety Regulator will enforce a stricter regulatory regime on the safety and performance of high-rise buildings in England. A new Residents’ Panel will respond to residents’ safety concerns.
A National Regulator for Construction Products will strengthen UK producers’ standards. This new regulator will perform market monitoring to discover and eliminate harmful materials faster and take action against rulebreakers.
Turner & Townsend warns of UK construction inflation
Turner & Townsend warns developers that UK construction inflation may harm planned projects due to workforce shortages, Brexit, and the Ukraine crisis.
The International Construction Market Survey (ICMS) for 2022 cautions that inflation is unlikely to abate in most of the 88 locations surveyed.
London is the most costly city to develop in the UK and tenth globally, down from third in 2019. Costs are $3,910 (£2,973) per sqm.
The report shows rising UK building inflation in regional cities, which could undermine government efforts to balance the country through public and private investment.
Leeds’ cost escalation is expected to reach 10% this year, up from 5% in 2021. Significant investment in build-to-rent and student accommodation are driving this expansion.
London, Manchester, and Birmingham all forecast inflation of 9.0% in 2022, somewhat behind Leeds.
Edinburgh and Glasgow are expected to have the lowest cost escalation of the UK’s big cities, but both face 7.5% inflation this year.
UK labour shortages persist
In March to May 2022, the ONS recorded 1.3 million job openings, up from 765,000 a year earlier.
Turner & Townsend data reveals average UK labour expenses are $44.19 (£33.60) per hour and $52.28 (£39.75) in London.
High demand for ‘green collar’ employees as government and corporations chase net zero targets makes solar power, heat pumps, and insulation installation expensive. In London, their hourly rate is $68.39 (£52.00).
The crisis in Ukraine and the difficulties of coordinating cross-border trade with the EU continue to complicate supply chain challenges following the outbreak.
In Manchester, the cost of brick has risen 11.3% to $789 (£600) per 1,000 units, while in Leeds the price of structural steel has risen 43.3% to $3,946 (£3,000) per tonne.
Brexit and the Ukraine war have exacerbated supply chain strains
London still has the highest construction prices in the UK, according to Turner & Townsend’s Martin Sudweeks.
This reflects significant demand for new commercial and public sector development after the epidemic and continued supply chain pressures from Brexit and the Ukraine crisis.
Regional cities also suffer price hikes. This is especially noticeable in Leeds due to build-to-rent buildings and student housing investment.
“With inflation anticipated to grow in all major UK markets this year, firms will need to focus on cautious planning, ensuring contracts are pragmatically constructed to take into account potential price rises and share risk when appropriate. In-depth supply chain analysis and good supplier relationships will help mitigate inflation.
Supply chain disruption affects costs and plans
Neil Bullen, global managing director of Real Estate Turner & Townsend, said, “We confront headwinds in the global construction business and the international economy.”
“The interconnectedness of markets is apparent than ever as labour shortages, demand surpassing availability, and supply chain disruptions damage costs and plans.
Companies must develop a global view of their construction supply chains to manage unpredictability in upcoming months.
“Clients must also manage other critical concerns, such as the push to net zero, as expectations and standards for green capabilities and sustainably produced products increase. Unplanned and poorly handled relocation might exacerbate stress. Success in handling global challenges will depend on enterprises innovating in procurement, delivery, and project management.
Construction requires roughly a quarter-million extra workers by 2026
Original Source: Construction needs over a quarter of a million extra workers by 2026
More than a quarter-million extra construction employees would be needed by 2026, a CSN analysis says.
The research shows that the built environment needs 266,000 new workers over the next four years, or 53,000 every year.
Carpenters, joiners, and construction managers are in demand, as are technicians and office personnel.
If industry growth projections hold, 2.78m construction workers would be needed by 2026.
Tim Balcon, chief executive of the Construction Industry Training Board (CITB), says the sector must “attract and retain top people” but admits meeting the skills demand will be a “big problem.”
The construction workforce expanded by 1.2% between January and March, from 2.16m (October-December 2021) to 2.18m workers.
CITB’s annual projection predicts growing demand in private homes, infrastructure, and repair and maintenance. This would require more personnel, it claimed.
Greater London will need 26,000 additional workers by 2026, while the South East will need 23,000. These two regions have the highest predicted construction outputs in the UK. To meet demand, the South West must hire 41,950 people, or over 8,000 every year.
Balcon added, “Construction is the UK’s backbone.” After the pandemic’s slowdown, these growth estimates are positive.
Higher energy costs, supply shortages, and inflation are hurting companies across the sector.
He said the sector had a lot to offer potential recruits, with professions ranging from trainee to CEO.
Balcon: “Training paths into the sector will be a focus, and we must recruit and retain under-represented groups, especially women and ethnic minorities.” The industry must evolve to fulfil its untapped potential for the national economy and our global competitiveness.
The research notes that a “pickup” in construction work in 2021 increased job vacancies and skills shortages. With fewer EU nationals in construction, the research proposed enterprises boost their teams by:
Attracting new recruits into the workforce from individuals leaving school, further education, apprenticeships, or higher education improves worker retention.
The CITB’s Business Plan promises “more accessible routes” into construction. It will focus on apprenticeships, onsite experience, and occupational traineeships in FE.
BDO appoints real estate and construction new head
Original Source: BDO names new head of real estate and construction
Hira Sharma will become BDO’s national head of real estate on 4 July.
Geraint Jones is leaving after two years.
London real estate and construction tax partner Sharma. He advises institutional funds, REITs, and sovereign wealth investors.
Sharma: “While many of our real estate and construction clients have been extremely robust during the epidemic, quickly changing macro-economic conditions provide distinct and difficult problems.”
I look forward to leading our team to help real estate and construction clients manage these problems and seize new investment possibilities.
BDO’s real estate team comprises over 300 professionals advising on UK and worldwide assurance, tax, and transactional concerns. The firm works with worldwide investors and privately held, entrepreneurial real estate and construction enterprises.
Overall, we have discussed the protection of leaseholders from unfair cladding charges as the government’s building safety standards take effect and the possibility of a spike in UK construction inflation, according to Turner & Townsend. By 2026, the construction industry will require roughly a quarter of a million additional jobs. Hira Sharma has been named as the new real estate and construction head of BDO. Keep checking back for additional updates on construction news.