CN understands that Dŵr Cymru Welsh Water is set to increase construction bond rates for developers from 10 per cent to around 33 per cent, as new legislation is enacted by the Welsh Assembly.
House Builders Association strategic policy adviser Roger Humber told CN increasing the rates would lead to “an absolutely horrendous situation”, while the National Federation of Builders said the move could lead to a “dead stop” in Welsh housebuilding that would “scupper Cameron’s housebuilding plans”.
The bonds are provided by developers in case of defects in the construction of sewerage and drainage systems, and are paid back after the sewers are transferred to the water company.
Welsh Water supplies drinking water and wastewater services to most of Wales and some parts of England.
Under new legislation coming in on 1 October, water companies must take ownership of new sewers and lateral drains, and will be responsible for maintaining the network.
These requirements may lead to new costs and inspections for water firms.
Section 42 of the Flood and Water Management Act (2010) will be activated in Wales on 1 October, and the HBA says the changes mean housebuilders will be unable to start building on a site – even where they have planning permission – unless they agree to the demands of the water supplier.
There are also fears that the move could affect housebuilders across the border, as the Welsh company operates in parts of western England.
DEFRA may implement the same rules in England, subject to the outcome of a consultation that is due to report in 2013.
Mr Humber told CN that “in the current market, you are just not going to be able to get these bonding facilities”, and that the utility provider had “suddenly become incredibly unreasonable”.
The government had “washed their hands” of involvement in the negotiations, he said.
Welsh Water told CN: “We have been working with developers to inform them of the new standards and to ensure that the new requirements are met.
“The bond provided by developers will be released after the new sewerage system has been installed correctly – in line with current arrangements.
“We will continue to discuss these changes with developers and others affected by the change.”
The Welsh Government told CN the changes would ensure suitable standards and that a proper impact assessment had been carried out.
But the HBA said they had yet to see any evidence that the rate change was necessary, or that water companies would face any new costs resulting from the change in regulations.
The failure rate under the current 10 per cent bond requirement was “tiny”, said Mr Humber.
The new Welsh legislation represented confusion in government policy, he added: “You cant have this contradictory position where we’re all gung-ho about housebuilding while letting this situation fester on.”
NFB chief executive Julia Evans has called on new housing minister Mark Prisk to intervene, amid concern that the move could affect housebuilding in parts of Cheshire, Shropshire and Hereford.
The Welsh Government said the increase in bond rates “will ensure that the second stage of the transfer of private sewers happens successfully, and that customers are protected from the potentially costly burden of the maintenance and repairs of private sewers and lateral drains”.
They said they had worked with builder representatives and “consulted extensively on the implementation”, with the views of industry incorporated into the policy.
The devolved body had initially planned to implement the law change on 1 Apri, but delayed it until October, saying the earlier target date “would not give sufficient time to fully consider consultation responses and make any necessary changes”.