EOCS gives evidence to HCLG Committee on cladding loans and non-cladding costs

The Government recently announced a further £3.5bn of funding for cladding removal on high-rise buildings, new long-term cladding loans for leaseholders in mid-rise buildings, and nothing more than ‘caveat emptor’ for the remediation of other serious safety defects and interim safety measures.

The cross-party Housing, Communities and Local Government Committee scrutinises the work of MHCLG; Lord Greenhalgh appeared before the Committee on 8th March and we will report on that shortly, but first the Committee invited witnesses, including EOCS campaigner Will Martin, to share evidence:

• Dr Will Martin, affected leaseholder and co-founder of the UK Cladding Action Group
• Dr Dean Buckner, Trustee, Leasehold Knowledge Partnership
• Dr Nigel Glen, CEO, Association of Residential Managing Agents, which manages around 1.5m leaseholds
• The Lord Porter of Spalding CBE, Fire and Building Safety spokesman, Local Government Association
• Kate Henderson, Chief Executive, National Housing Federation

Here are the key messages that the witnesses shared with the Committee on 1st March:

Remediation could take a decade – so where is the Government’s sophisticated risk matrix?

All witnesses agreed that remediation is far too slow, despite the highly misleading statistics that ministers love to quote, which narrowly focus only on high-rises with ACM – while ignoring the far bigger picture of unsafe buildings of all heights, with all types of defect.

In the absence of any upfront Government funding for other serious safety defects, leaseholders in buildings of all heights are being left to pay huge bills for non-cladding remediation. But you can’t make a building half-safe – and works won’t start if all funds aren’t in place. Leaseholders simply can’t afford to pay, so they will remain stuck in unsafe and unsellable homes.

ARMA members are seeing average cladding remediation costs of £22.5k per flat, but non-cladding costs are even higher, at £25.5k per flat. Nigel Glen therefore raised concerns that the scale of the non-cladding crisis will surpass cladding. These defects won’t go away just because the Government is not reporting the

Witnesses pointed out that even if a block successfully qualifies for the Building Safety Fund, the pace of work and capacity in the industry means some buildings could be waiting for up to a decade until they are made safe.

The Committee needs to ask the Government if they understand the total scale and timeframe of all this work. Are the safety risks genuinely so high on all these buildings that it justifies a decade of work at such a huge cost? If ‘yes’ – then why aren’t all possible resources being diverted to make these buildings safe
more urgently?

Or perhaps the answer is ‘no’. In Nigel’s words, “Where do we stop? We need to have a grown-up discussion” about how to prioritise work based on the level of risk in each building.

Remember when Robert Jenrick promised a “sophisticated matrix of risk prioritisation,” more than a year ago? The Committee needs to ask where it is.

Interim costs will bankrupt leaseholders

ARMA members are paying an average of £213k per block per year for “a leech that’s been sucking the blood out of leaseholders for a long time” – yes, that’s waking watch.

However, Will Martin highlighted that the £30m Waking Watch Relief Fund will only cover a small fraction of the buildings that need it and is unfairly restricted to a few locations; it hasn’t even launched in London yet.

There should have been a sense of urgency to provide this funding, with a quick and straightforward process; but instead, the benefit has already been lost. In the time that has already elapsed since the fund was announced, Will said, leaseholders have collectively paid out more than £30m – and, in many cases,
have paid out as much as an alarm would have cost for their building.

The Government either doesn’t know or doesn’t care that every day that passes adds to the risk of bankruptcy for leaseholders. Which is it?

The Committee also needs to ask Lord Greenhalgh why this funding can only be used for alarms. Why can’t it be used to fund sprinklers, or remediation work that would have a permanent benefit in making the building safe?

Additionally, ARMA noted an average increase of +400% for building insurance premiums, but 1 in 10 cases had seen an increase of more than +1000%. These increases are not the sign of a healthy market; the Committee must ask the Government how they plan to step in.

Cladding loans could lead to widespread mortgage defaults

The Government thinks their proposal of cladding loans for mid-rise blocks is ‘generous’, but the witnesses were emphatic that when a leaseholder tries to sell their property, the outstanding loan value will simply be knocked off the offer price.

A maximum loan charge of £50 per month will not be ‘affordable’ for many leaseholders, either – not forgetting that this will be in addition to non-cladding costs, waking watch and soaring insurance premiums, on top of the usual mortgage, service charge and ground rent.

The Committee should ask the Government what modelling has been done around the proposed loans, because there is real concern about leaseholders being pushed into negative equity, and 1 in 6 leaseholders are already exploring bankruptcy options.

Dean Buckner– a former Bank of England economist – told the Committee that forcing leaseholders to pay for loans they can’t afford could cause widespread mortgage defaults and lead to the next banking crisis.

Has the Government asked the banks whether they have stress tested the impact of cladding loans and other safety costs on homeowners?

The polluter hasn’t paid

Every witness was unequivocal that the principle of fairness had been abandoned. In Lord Porter’s words, loans [for mid-rise buildings] “still leave leaseholders paying and we’re adamant that they shouldn’t be picking up the bill for this”.

Kate Henderson said the NHF “fundamentally do not believe leaseholders should have to pay for the failures of developers, product manufacturers and regulators”.

While Nigel Glen said placing any costs on leaseholders is tantamount to “crossing a moral Rubicon”.

The Committee estimates the full cost of remediation will be at least £15bn, so the proposal for developers to pay a levy of £200m a year for ten years would result in their paying just 13% of the total bill, while leaseholders pay over 50%. How can the Government justify this as being ‘fair’ or ‘proportionate’?

Since the Grenfell tragedy, the five biggest developers have made £10bn in profits and awarded £4.5bn of dividends to their shareholders, all while the Government has handed £13bn to developers via the Help to Buy scheme.

Housing associations are already diverting funds from social housing because the Government hasn’t offered any funding to support the remediation of tenanted properties. Witnesses expressed concerns that developers will also try to claw back any money that they pay in a levy, by reducing the number of affordable homes on new sites. The Government must be stronger at making sure the polluter pays.

Where is the incentive for developers to clean up their act? And why is the Government not ensuring that other parties who profited from unsafe homes, including product manufacturers, are made to pay?

The building safety crisis is a public health crisis

We hear every day about the crushing sense of powerlessness and anxiety being felt by thousands of people caught up in this crisis, and Will very clearly expressed the huge impact on mental health.

Nearly a quarter of leaseholders told UKCAG they have felt suicidal or are thinking about self-harm; 9 out of 10 say their mental health has deteriorated; 7 out of 10 say they can’t sleep at night. People are living in fear and in a complete sense of limbo; it’s hard to see a future because all they can see is unpayable bills.

Read UKCAG’s mental health survey in full.

Get support for mental health.

Watch on Parliament TV:

HCLG Select Committee Oral Evidence Session on 1st March

HCLG Select Committee Cladding Remediation Follow up with Lord Greenhalgh on 8th March

Westminster Hall Debate on Interim Fire Safety Costs with Florence Eshalomi MP on 10th March

End Our Cladding Scandal

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