Aviva warns government on building safety hit to UK property market
Aviva warns the government that institutional investors could be scared away from the UK residential property market because of its new safety proposals for high-rise buildings, prompted by Grenfell.
The UK insurer asked the government to consider how its new “Building Safety Bill” would financially affect their owners last year in a letter in November 2020, according to a Bloomberg report.
Aviva manages a large portfolio of residential properties and high-rise buildings on behalf of its investors.
Legislation published last week, and expected to take at least nine months to pass into law, outlined the plans to overhaul high-rise building regulations.
The proposals will cost the building industry £731m in the first two years, as well as a further £284m annually after that, according to government estimates.
The reforms are aimed at making homes safer and at increasing accountability across the sector – but there is still uncertainty and debate about who – from homebuilders, property owners, leaseholders or taxpayers – will end up paying to fix the defects in existing properties.
The changes could make “it unviable for institutional investors to remain in the residential property market,” Aviva’s former UK chief executive officer Colm Holmes wrote in the letter to the building safety minister Stephen Greenhalgh.
Holmes said: “This would have further unintended consequences for U.K. pension savers and leaseholders, and deprive leaseholders of the benefits of an institutional landlord.”
Aviva’s warning comes as a debate about who should pay the bill to bring fix unsafe buildings – an issue brought to attention by the Grenfell Tower tragedy in 2017.
The tower caught fire because of a number of safety defects and caused the deaths of 72 people.
Lawmakers last year estimated that the overall costs of repairing unsafe blocks could eventually reach £15bn, according to a Bloomberg report.
Aviva Investors, the insurance company’s asset management arm, runs a fund that owns over 1,000 high-rise buildings across England and Wales, according to an April company statement.