Chancellor Rishi Sunak has reiterated plans for a levy for property developers to help create a fund to remove unsafe cladding.
Speaking at the Budget, Sunak said property developers with profits over £25m will face a levy at a rate of 4 per cent. This will be used to help create a £5bn fund to remove unsafe cladding.
The tax will be introduced from April 2022, following its announcement in February 2021.
Build to Rent and student accommodation developers will be excluded.
The Chancellor also pledged a £24bn multi-year housing settlement and said £11.5bn would go towards building new affordable homes.
£1.8bn will be put towards working on brownfield land, with plans for up to 180,000 affordable homes to built there.
Campaigners have said the government needs to make funding for remediation works easier and cheaper for residents to access. Irwin Mitchell said a pot of at least £15bn was needed.
It comes as the government has suggested the removal of dangerous cladding will take more than seven years after the Grenfell Tower tragedy. 72 residents lost their lives in the fire.
Providing work continues at the current rate, it will take a while to complete work on high-risk buildings, the Department for Levelling Up, Housing and Communities (DLHC)’s latest figures suggested.
Accountancy group UHY Hacker Young said the new tax would impose “further costs on an industry that already has to deal with multiple targeted taxes” such as Section 106 and the Community Infrastructure Levy.”
“When property developers are already facing rising raw material costs, a skills shortage driving up wages and spiralling energy prices, introducing another tax is going to be a tough pill to swallow,” Phil Kinzett-Evans, partner at UHY Hacker Young, added.
“The pain will be felt particularly keenly by large corporate developers who focus on affordable housing where margins are already thinner. It could well trigger more developers to look to higher-margin markets like prime residential property.”