(Bloomberg) --

The U.K. government confirmed it will tax the country’s largest property firms to help replace unsafe cladding in apartments that’s left thousands of people in potentially dangerous homes.

Chancellor of the exchequer Rishi Sunak said the government will levy a 4% tax on developers’ profits that exceed 25 million pounds ($34 million), in his budget speech on Wednesday. The money raised will help fund 5 billion pounds of investment toward repairs that some of the country’s largest housebuilders have also pledged millions of pounds toward.

The safety of U.K. apartment blocks came into question in the aftermath of the Grenfell Tower tragedy in 2017, where a high rise block of flats with flammable cladding caught fire and 72 people died. With estimated national repair costs rising to billions of pounds, the dilemma of how to pay for the crisis without potentially bankrupting residents has been a thorny issue for Prime Minister Boris Johnson’s government. 

Former housing secretary Robert Jenrick said in February that a new tax on developers from 2022 would raise at least 2 billion pounds over the next decade. The full repair bill could come to 15 billion pounds, according to a figure from a Parliamentary report last year, though the lack of data on buildings affected and the extent of work needed makes the number difficult to quantify.

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