Sky News reports that housing secretary Michael Gove is to give a speech later today in which he will act against housebuilders that have failed to fix dangerous cladding.

A draft of his upcoming Commons statement, according to Sky News, sets out a warning to developers that if they don’t agree to a £4bn plan to replace cladding, new laws will force them to do so.

It is believed that Gove will also announce that leaseholders in buildings 11 to 18 meters tall will no longer have to contribute funds to replace cladding.

No public money will go towards this initiative, however.

The draft says: “I am putting them on notice. If you mis-sold dangerous products like cladding or insulation, if you cut corners to save cash as you developed or refurbished homes, we are coming for you.”

Gove said to Sky News: “We want to say to developers and indeed all those who have a role to play in recognising their responsibility that we want to work with them.

“But if it’s the case that it’s necessary to do so, then we will use legal means and ultimately, if necessary, the tax system in order to ensure that those who have deep pockets, those who are responsible for the upkeep of these buildings, pay rather than the leaseholders, the individuals, who in the past were being asked to pay with money they didn’t have for a problem that they did not cause.”

Quilter Cheviot head of property research Oli Creasey says: “Progress on this issue is extremely welcome. Far too many leaseholders remain trapped in flats that are potentially unsafe and which they are unable to sell or borrow against. There will be little public sympathy for housebuilders, which have made exceptional profits during the pandemic and will be unable to push responsibility back on the government.

“Property developers are already expected to pay a 4% residential property developer tax (RPDT) from 2023 onwards, which will aim to raise around £2bn over the next decade to cover the cost of re-cladding buildings over 18 metres tall. Gove’s new policy is aimed at remedying problems in lower rise buildings between 11 and 18 metres high.

“This could either be in the same form as the RPDT, which would be a further 8% tax on top of the existing bill, taking the total tax bill to around 37%, or it could be a one-off hit equating to around 10% of the house building industry’s current market cap.

“Despite the government admitting some fault in the run up to the events of 2017, they will not be contributing any further funds to the work required and all costs unaccounted for will be covered by industry. It is understood at this stage that the £4bn cost will be put to the house building sector as a ‘voluntary’ expense, so it remains to be seen how effective this will be.

“A number of house builders have made provisions to cover such costs, for example Persimmon and Taylor Wimpey have provisions of £75m and £125m, respectively, for these lower-rise buildings, but their willingness to pay a substantially higher amount on a voluntary basis is probably very low. We would expect this to evolve into a more enforceable tax or similar in due course.

“Publicly traded house builders are not the only companies on the hook. They represent around 40% of the residential development market, with the remainder being built by privately help businesses, large and small. The indication is that large private businesses will be held accountable, although smaller businesses may slip through the net.

“The other players are the material manufacturers, who have so far not been discussed as on the hook for these additional costs. If existing provisions or other sectors are in scope the impact on the housebuilders could reduce substantially.

“There may also be unintended consequences for the government’s own housebuilding targets, should the higher tax reduce the output of housebuilders, particularly at lower margin sites. All else being equal, this could put further upward pressure on property price. However, the government will no doubt consider this a price worth paying.

“Ultimately, we expect this additional cost to stay with the housebuilders, though the government may need to enforce contributions rather than ask for volunteers. ]

“However, the entire £4bn cost should be spread across private and public companies, and we would expect the publicly-traded companies to cover around half of this sum between them. The sector is down circa 5% year-to-date, which is a broadly fair response.”