Britain’s large listed housebuilders, including Barratt Developments PLC (LSE:BDEV), Bellway PLC (LSE:BWY) and Persimmon PLC (LSE:PSN), should fund the work needed to fix all cladding repairs needed on their buildings built over the past three decades, according to one of London’s largest investors.
Abrdn, the former Standard Life Aberdeen, sent a letter to the housebuilders calling for them to “carefully consider providing additional financing for all affected buildings built by [you] in the last 30 years".
Shares in FTSE 100-listed Barratt were down 2.4% to 524p and Persimmon was down 1.1% at 2201.5p, following a Sky News report on the letter, which was sent just over a month ago, while fellow blue chips Taylor Wimpey PLC (LSE:TW.) and Berkeley Group Holdings PLC were both down less than 1%.
Of the mid-cap builders, Crest Nicholson (LSE:CRST) Holdings PLC was down almost 4%., Vistry Group PLC (LSE:VTY) was 2.4% lower, Bellway fell 1.8% and Redrow PLC (LSE:RDW) by 1.1%.
Andrew Millington, head of UK equities at Abrdn, said today that the group remains “concerned that delays in implementing remediation work leave leaseholders living under huge strains, with many being unable to sell or let their properties, incurring substantial ongoing costs, or living in potentially unsafe conditions".
He said the letter called for listed housebuilders to consider providing the extra financing for all affected buildings "regardless of their height or current ownership, to accelerate remediation work to remove the burden on leaseholders.
"While this may extend well beyond the company’s legal responsibilities, we believe it would demonstrate a positive and proactive approach, comprehensively addressing any reasonable interpretation of the company’s moral responsibilities as well.”
Pressure from the investment company comes alongside comments made by Michael Gove this year, which have included calling for the industry to pay £4bn to repair the properties across the country that required improved cladding, not to mention accusing the industry of essentially being a commercial cartel.
A paper commissioned by PwC earlier this month, however, estimated the bill to come in at less than £1bn which boosted the property developers at the time.
The PwC report also noted that the government and private companies would be expected to chip in, with the former to contribute because of regulatory failing that allowed the housebuilders to cut corners in the name of profits in the first place.
Buildings over 18m high are already covered by a £3bn contribution from the government and a £2bn contribution from a tax surcharge on the listed housebuilders (4% from April 2022).
In response to the outcry over occupants of flats in a low-rise building bearing the brunt of the cost of replacing the cladding (or essentially making their property unsellable), the government intervened and suggested the housebuilding industry should pay its fair share.
Also in its letter, ABrdn called for "enhanced transparency" from the builders about their cladding reparation activities, which it said "should assist in demonstrating the remediation actions being taken by companies, while also supporting the investment community in understanding how individual companies are managing their exposure to these issues".