Is the government’s Building Safety Regulator shake-up enough to fix the delays?

UKREiiF this year was busier than ever. More than 16,000 professionals from across the construction sector filled a small section of Leeds over three sunny days in May to network, booze and discuss the latest goings-on in construction.

Most of the many dozens of events held during the conference were predictably policy-focused and well-behaved. But there was one particular panel discussion which stood out.

It was obvious, just walking up to the Places for Life tent on the Wednesday morning, that something significant was happening. A crowd of attendees stood outside, craning their necks to get a view of the stage.

Inside, it was at full capacity. The event, sponsored by regional contractor Caddick and sister firm, build-to-rent developer Moda, was a discussion on the ongoing delays to high-rise residential schemes which have been caused by the new building safety regime.

The industry should hold its head in shame with regard to what happened at Grenfell. But, post that, it has just been complete disarray

Delegate at UKREiiF

Maybe it was the hangovers speaking but there was a palpable sense of anger in the room. When it came to audience questions, the usual reticence was replaced with a forest of hands going up as people shared their experiences of dealing with the Building Safety Regulator (BSR).

“The industry should hold its head in shame with regard to what happened at Grenfell. But, post that, it has just been complete disarray,” one audience member said.

One of the speakers on the panel was Pareto Projects director Kuli Bajwa, who says her firm, a Birmingham-based project manager and employer’s agent, has been “in the thick of” the delays impacting schemes across the UK. “I knew that it would be highly emotional in the room but I wanted that because it’s really important that we don’t just glaze over these issues,” she told Building last week. “I just felt like I needed to be honest about what is happening.”

The issues focus on approvals from the BSR needed to progress past three “gateways” on construction schemes for higher-risk buildings (HRBs), defined as those over 18m in height and containing at least two dwellings. So far, the most severe delays have been encountered at gateway 2, which is neeeded before construction can start.

Before it came into force in October 2023, the regulator committed to returning gateway 2 applications within eight weeks. In reality, it is taking up to three or four times that long for applications to be decided, with some projects waiting for more than a year. 

Adding to the pressure this puts on projects is a notorious lack of communication from the regulator during the approvals process, described by multiple people to whom Building has spoken as “radio silence”. Meanwhile, a lack of clarity over what the applications are meant to contain to ensure compliance and an inconsistency in responses from the BSR’s multidisciplinary teams (MDTs) has led to a growing sense of exasperation.

Data published by the Cast Consultancy at the end of June found that barely 10% of new-build schemes submitted to the BSR for gateway 2 approval, needed before construction can begin, had been signed off. The status of some 80% of applications was still unknown, according to the freedom of information request, which covered the entire period of the new building safety regime from its roll-out in October 2023 until the end of May.

It is important to note the drumbeat of setbacks which the housing sector has faced over recent years, from material price inflation to high interest rates and new building safety requirements such as second staircases in HRB schemes. But, by all accounts, these have paled in significance when compared to the impact of gateway 2 delays over the past year and a half.

Cast is currently working on around 20 HRB projects for a variety of clients. “There are lots of other things going on that are contributing to it being a difficult environment for developers,” says the firm’s owner and chief operations officer Lilly Gallafent. “But I would say this is probably the thing that is most at the forefront of every developer’s mind, ahead of everything else at the moment.”

So, you would think that recent signs of movement at the regulator might have got some hopes up. Last month, Philip White, its director of building safety, announced he would “partially retire”, stepping back after 18 months at the helm of the body but remain as the chief inspector of buildings, the Health and Safety Executive (HSE) said.

Then, last week, the government announced it was shaking up the BSR with a set of new measures aimed at reducing the delays. The regulator will be taken out from under the wing of the HSE, where it has been since it was established, and moved into the Ministry of Housing, Communities and Local Government (MHCLG).

These changes will also see the introduction of a fast-track service for some applications and bring around 100 building inspectors and engineers in-house in efforts to speed up approvals. Meanwhile, two fire brigade chiefs will be put in charge, with Andy Roe, former commissioner of the London Fire Brigade (LFB), set to chair the board and LFB deputy commissioner Charlie Pugsley to become chief executive.

Window dressing?

There was some limited praise for the move last week, with the British Property Federation’s chief executive Melanie Leech describing it as a “significant package of measures”. Behind the scenes, however, industry professionals are far from convinced that what has been proposed is enough to address the huge backlog of delays that has accumulated.

Questions also remain over whether the influx of 100 technical staff, aiming to reverse the hold-ups caused by the BSR’s outsourcing model for assembling MDTs, will be sufficient to have a meaningful impact.

“It’s a bit of window dressing,” says Paul Dodsworth, construction group managing director at Caddick. “Until we see the substance that sits behind it, in terms of level of resource, and we see timescales actually being delivered on, then the jury is out, I’m afraid.”

One developer dismisses the reforms as “too little too late”.

Fire safety is obviously fundamental, absolutely, but you need someone that has the construction technology, procurement, design understanding of how design works

Kuli Bajwa, Pareto Projects director

PRP partner Andrew Mellor welcomes the addition of in-house teams, but worries about the disruption which might be caused by hauling the regulator from the HSE to MHCLG. “I think government are taking this seriously but it’s just the time period that’s available to address these issues now, and what is the transition? So, if you’ve got an application submitted with the BSR, how is that going to transition across out of the HSE?”

Others have voiced concern about the choice of the LFB as the regulator’s new leadership and what this means in terms of direction of travel. “Do they understand design? Do they understand procurement? Do they understand how a project is constructed?” Bajwa asks. 

“I appreciate that they understand fire safety. But, when you look at a building, it’s everything else that is included in a building. Fire safety is obviously fundamental, absolutely, but you need someone that has the construction technology, procurement, design understanding of how design works.”

One senior leader at an HRB developer, speaking off the record, says the signals sent by the appointment of the LFB have set nerves jangling within the high-rise residential sector. “There’s some scepticism and a bit of fear, frankly, as to what it means for us all,” they say. 

“There is a feeling that the industry is perhaps overly tarred in a negative way. People assume that, somehow, developers are trying to do the dirty on everybody. And, actually, the reality is that for most of us who’ve been around for an awfully long time, we know what we’re doing.

“We need to get on with it. You need to be able to explain what you’re doing to people. These are big, complex buildings. It’s not just as simple as ‘computer says no’. And there has to be a bit of give and take about who the experts really are in the room.”

The amount of money that is being lost in terms of potential revenue, potential spend, jobs that are being lost as a result of this is just incredible

Anonymous developer

HRB developers have been reluctant to talk about issues at the BSR, even off the record. “We’re loathe to be seen to be anything other than a helpful friend [to the BSR],” the developer says. “And part of the challenge is that everyone’s a little bit scared of saying anything.”

But it is clear that patience has long run out in the development sector. Rivals which had previously guarded their expertise over how to deal with the BSR are now actively sharing information, having found themselves in the same boat. The anonymous developer describes the government’s promises to speed up approvals as “brave words” which will be difficult to deliver in practice.

“It feels at the moment like we are so far down this hole that it’s quite difficult to see how it will turn about. And, at the same time, we speak with our funders in the funding market all the time. The amount of money that is being lost in terms of potential revenue, potential spend, jobs that are being lost as a result of this is just incredible.”

The next hurdle

While much of the focus so far has been on gateway 2, many in the sector are now turning towards gateway 3. BSR approval at this stage is needed before the occupation of the building and comes at the point of maximum risk for a development team, after funding has been spent on completing a building but before revenue has been generated. 

Gallafent says the risk to developers and investors at gateway 3 is “as much, and arguably more” than at gateway 2, because it involves a completed asset which “is ready for someone to occupy, and you can’t occupy it”.

Much of the risk is a result of the difficulties in financial modelling on schemes created by the uncertainty of both the time it will take for the application to be returned and whether it will be approved or rejected. Although few schemes have got to gateway 3 stage, Gallafent says, if the delays of up to a year seen at gateway 2 are replicated at gateway 3, “it will be an absolute crisis”. 

“It’s the uncertainty that’s killing everything,” she says. “If we have the same degree of uncertainty around gateway 3 that we’ve got with gateway 2, then we are going to have a huge problem. So the thinking caps need to be on now about how we learn the lessons from gateway 2 to gateway 3.”

>> See also: Building safety sign-off problems spooking investors, Quintain boss tells Lords

>> Are the gateway 2 delays a gateway to disputes?

Gallafent believes that there needs to be a “cultural shift” around approaching gateway 3 applications, and Cast is currently advising clients to start thinking about their gateway 3 applications immediately after receiving their gateway 2 approval. “I think the biggest risk here is that people are not prepared for gateway 3, because they leave it too late.”

A lengthy delay at gateway 3 potentially means mounting operational costs to maintain the building, ongoing contractor costs, interest on loans which cannot be repaid before building occupation, and possibly having to retest building services after gateway 3 approval.

“This could have a massive effect on the developer,” says Bajwa. “Especially if they’ve got six or seven schemes, and it’s not moving. That puts them at financial risk. Where’s that money coming from that they have to pay back?”

Purpose-built student accommodation schemes, one of the most successful residential sub-sectors in recent years, are particularly exposed to delays at both gateways 2 and 3 because of the need to match programmes with the start of university terms. Caddick is working on a 400-bed student accommodation scheme in the North-east which is currently on its 26th week of waiting for its gateway 2 approval. The longer the wait, the more likely it is that the client will decide to delay the scheme by a full calendar year to ensure it lines up with students arriving in September. 

“That’s not great for us. It’s certainly not great for our customer,” says Dodsworth. “It certainly puts pressure on viability in a challenging market where you’re struggling to get funding and then the periods are just elongated, and that creates pressure on both ends for them as our customers and us as contractors trying to plan our way forward.”

Delays like this are “uninsurable”, Dodsworth says. “We’ve spent our allocated cost. We’ve got a team of people waiting, planned for 12 weeks. It just leaves a black hole in our ability to deploy our labour and for us to be maximising our workforce.”

We’re all trying really hard not to be like regulator bashers… but it is extremely clear from the data that the implementation has not worked and needs sorting out

Lilly Gallafent, owner and chief operations officer, Cast consultancy 

There is no doubt that there is widespread support in the industry for the principles of the Building Safety Act. Everyone to whom Building spoke praised the increased rigour of the new regime and the drive for greater building safety. But it is now clear, 20 months after the BSR came into force, that the issues which the industry is seeing can no longer be passed off as teething problems.

“We’re all trying really hard not to be like regulator bashers,” says Gallafent. “Because these are people, competent people, trying their best to do the right thing and to do their jobs. But it is extremely clear from the data that the implementation has not worked and needs sorting out.”

Some, but by no means all, have reported a change in attitude from the BSR over the past month or two, with MDTs becoming more responsive to applicant teams and more helpful with what is needed to ensure compliance. The government’s shake-up of the body is a further sign that the concerns of applicants, at least to some extent, are being listened to. But will it be enough? 

The answer may depend on how much pressure the industry is willing to put on a regulator which has the power to make or break projects. For Bajwa, part of the problem is the reluctance of developers to speak out.

“This is why it’s taken us this long to get to this point. I think a lot of people are scared to appeal or to be the first developer to actually say, ‘no, I don’t accept this. This is wrong.’ ”