Guidance

The Higher-Risk Buildings (Descriptions and Supplementary Provisions) Regulations 2023: cost benefit analysis

Published 20 December 2022

Applies to England

Introduction

1. This cost benefit analysis relates to the Higher-Risk Buildings (Descriptions and Supplementary Provisions) Regulations 2023 (“the regulations”), being made under the Building Safety Act 2022 (“the Act”). The regulations are currently being laid in Parliament and are subject to the affirmative legislative procedure.

2. The Act, together with the regulations mean that the new regime applies to buildings which are at least 18 metres in height or have at least 7 storeys and have at least two residential units, as well as care homes and hospitals meeting the same height threshold when building work is being carried out. The in-occupation requirements apply to buildings which are at least 18 metres in height, or have at least 7 storeys, and have at least two residential units. The new regime will place legal responsibilities on those who commission building work, participate in the design and construction process and those who are responsible for managing structural and fire safety in higher-risk buildings when they are occupied. 

3. As these regulations will result in a description of building becoming a higher-risk building, the Secretary of State is required by sections 120F of the Building Act 1984 (inserted by section 31 of the Act) and section 67 of the Act to carry out and publish a cost benefit analysis. The Act sets out that if, in the opinion of the Secretary of State, the costs or benefits cannot reasonably be estimated, or it is not reasonably practicable to produce an estimate, then the cost benefit analysis need not estimate the costs and benefits but instead must include a statement of the Secretary of State’s opinion and an explanation for it.

4. It is the Secretary of State’s opinion that it is not reasonably practicable to produce estimates of the costs and benefits that will arise if the regulations are made. We judge that there will be costs related to including buildings defined as higher-risk buildings in the new regime. These costs are not created directly by the regulations but will be generated by future requirements related to the design and construction phase and in-occupation phase of the new regime. Some of these requirements have been established by the Act and will come into force in due course. Others will be established in secondary legislation.

5. Those costs and benefits cannot, therefore, be reasonably be estimated at this time, as the new regime has not been fully established in law. Until the policies and regulations that implement the new regime are finalised, an estimate of the costs and benefits of including the buildings defined in these regulations in the new regime cannot be accurately produced.

6. For these reasons this cost benefit analysis sets out an analysis of where the costs and benefits of the new regime will fall but does not provide estimates of these costs and benefits.

Costs and benefits of including buildings defined as higher-risk buildings in the new regime

7. Higher-risk buildings will need to meet the requirements of the new, more stringent regime. For buildings included in the design and construction part of the new regime this will mean: having named dutyholders; a new building control application process; managing, maintaining and handing over a digital golden thread of information; and, the creation of a mandatory occurrence reporting framework. For buildings subject to the in-occupation requirements this will mean: meeting the requirement to register the building prior to occupation; having named Accountable Persons (including a Principle Accountable Person); the creation of a safety case and safety case report; duties concerning residents; the ongoing management of a digital golden thread of information; and, the creation of a mandatory occurrence reporting framework.

8. As of April 2020, there were an estimated 12,500 existing buildings which will be subject to the requirements of the new regime as they are at least 18 metres in height, or have at least 7 storeys, and have at least two residential units.

9. We estimate that on average 490^{[footnote 1]} new buildings which are at least 18 metres in height, or have at least 7 storeys, and have at least two residential units will be built per year. These buildings will be subject to the design and construction requirements while being built and will be regulated under the in-occupation requirements once complete. We expect the number of care homes and hospitals impacted by these regulations to be low.  

Costs of including buildings defined as higher-risk buildings in the new regime

10. There will be a cost to complying with the requirements of the new regime for developers, designers, contractors and others involved in the commissioning, design and construction of higher-risk buildings. Dutyholders involved in designing and constructing new higher-risk buildings will have specific duties and all new higher-risk buildings will need to meet the requirements of the new building control process being set by the Act and subsequent regulations. There may be costs for dutyholders in ensuring that they have the right competence and training to meet the specific duties being placed on them by the new regime. There will also likely be costs to those developing buildings as they will need to ensure that their building is built in line with the full requirements of the regime. The new regime places more stringent requirements on those developing higher-risk buildings, and building to this standard and demonstrating this to the Building Safety Regulator is likely to incur costs. These costs will also apply to those participating in building work in existing buildings as the new regime also places more stringent requirements on those involved in building work in existing higher-risk buildings.

11. As the design and construction requirements of the regime apply to hospitals, the National Health Service may also incur the costs of meeting the new regime.

12. There will also be costs for building owners, management companies and individuals involved in the management of higher-risk buildings in occupation. Accountable persons will be required to meet specific duties including developing and managing a safety case and safety case report, managing the golden thread of information and engaging with residents. Meeting these duties, and others to ensure their buildings are managed in line with the safety case system is likely to incur costs.

13. Once commenced, the Act makes sure that ongoing costs can be charged back to leaseholders as part of the ongoing cost of living in a safe building. Leaseholders with leases of 7 years or more in a high-rise multi-occupied building covered by the Act will be liable to pay these costs through the service charge. The list of the building-safety costs that can automatically be passed through the service charge is narrowly defined in the Act as ‘building safety measures’. This does not include remediation costs, which are subject to different requirements (for example, the leaseholder protections).

14. There will also be costs to government for the setting up and ongoing role of the Building Safety Regulator who will oversee the new regime in design and construction and occupation. Local regulators will be required to provide assistance to the application and enforcement of the new higher-risk buildings regime by the Building Safety Regulator. Local Regulators, including building control teams in Local Authorities and Fire and Rescue Authorities, will facilitate and assist the Building Safety Regulator through a multi-disciplinary team approach and will be able to cost-recover for their functions, once the Building Safety Regulator charging regime comes into effect.

Benefits of including buildings defined as higher-risk buildings in the new regime

15. We estimate that there will be benefits of including buildings defined as higher-risk buildings in the new regime.

16. The new regime will reduce the risk of fires spreading across or within buildings and reduce the risk of structural failure. This will reduce risks to life and health (including mental health) and avoid losses of property and other costs related to such incidents. These changes should reassure residents, mitigating negative mental health impacts arising from fears around safety or financial insecurities. The changes should also provide confidence to the insurance and mortgage markets.

17. The likelihood of risks arising and requiring expenditure to mitigate, and remedy them will also be reduced. This includes the need to repair, replace or remediate damage cause by defective or otherwise unsafe construction products. There will also be other cost savings, in part due to the avoidance of defects arising in the construction process, as well as potential benefits related to innovation and trade.

1. This is an average over the 15-year appraisal period. ↩