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Housing association loans £28m to PFI for cladding work
A housing association has agreed to loan £28m to pay for cladding removal work on nine council-owned blocks in Salford that are plagued by funding issues.
Together Housing will lend the money to its subsidiary Pendleton Together Operating Limited (PTOL), a private finance initiative (PFI) that manages homes on behalf of Salford City Council.
The funding agreement involved amending the original PFI contract, requiring government approval that has now been received, according to the council.
Dangerous aluminium composite material (ACM) cladding was discovered on the nine tower blocks owned by Salford City Council in the aftermath of the Grenfell Tower fire three years ago.
But removal work has been severely delayed by funding issues, with the blocks barred from both the government’s £400m ACM remediation fund for social sector blocks and the subsequent £200m fund for private buildings because of PTOL’s status as a PFI.
The council was also forbidden from borrowing £25m to lend to PTOL to fund the work and was told by the Ministry of Housing, Communities and Local Government that the council was responsible for fixing the cladding and so could not give another company money to do so.
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PTOL reported a £22m loss in 2018/19 as result of the fire safety funding hole.
Only the first three storeys of the nine blocks have had their cladding removed, while fire marshals patrol the buildings 24/7.
The £28m loan from Together Housing, which owns more than 35,000 homes, is equal to the group’s entire operating surplus for 2018/19.
John Merry, deputy city mayor of Salford, welcomed the conclusion of negotiations over the funding.
“My gratitude also goes to our Salford tenants who have been incredibly patient during the last three years as we worked with PTOL as they developed a financial model to pay for the works and to secure funding to make homes safer,” he said.
Full removal and replacement of the cladding is expected to take more than two years to complete – five years on from the Grenfell Tower tragedy.
The council has also handed PTOL £4m to install sprinklers in all its blocks.
Tom Miskell, chair of PTOL, said: “We’re delighted that our plans have now been approved and work has already started on works to remove the cladding.
“Contractors have continued to work safely during the recent restrictions and they are on schedule to have all the cladding removed before the end of the year.
“We’re aware that this has been a troubling time for residents and we’re pleased that the important work can progress.”
Salford City Council entered the PFI contract with PTOL in September 2013.
Cladding was initially installed on the blocks as part of refurbishment works completed just months before the Grenfell Tower fire in June 2017.
