UK house building shares hit as govt seeks £4bn for cladding removal

UK housebuilding stocks fell on Monday after the government ordered them to pay £4bn in cladding removal costs in the wake of the 2017 Grenfell apartment tower fire that killed 72 people.

Developers, apartment owners and ministers have been embroiled in a row over who should foot the bill after investigations revealed that 477 high-rise residential and publicly- owned buildings were found to covered in flammable cladding.

The government had already committed £5bn for repairs to date in addition to a £2bn levy on housebuilders towards costs over the next decade.

Monday’s announcement will cover the removal of cladding on buildings between 11 and 18 metres high. Tenants had faced massive bills, making their properties unsaleable.

Shares in Barratt Developments, Redrow, Taylor Wimpey and Persimmon were all lower in early trade on Monday.

"It is neither fair nor decent that innocent leaseholders, many of whom have worked hard and made sacrifices to get a foot on the housing ladder, should be landed with bills they cannot afford to fix problems they did not cause," said housing minister Michael Gove.

Under the leasehold home-ownership laws in England and Wales, costs are often met by individual flat owners, leaving many with spiralling insurance costs, service charges, and exorbitant for 24-hour fire patrols.

After the Grenfell fire, government ministers said building owners had to pay for the required fire safety measures, including the replacement of dangerous cladding. The government said it would meet the reasonable cost of the removal and replacement of unsafe cladding by councils and housing associations.

However, according to a leaked Treasury letter, approval for funding applies only to fixing cladding, meaning that leaseholders face bills for defective fire compartmentation, fire doors and other non-cladding faults.