Everyone deserves a safe home in which to live, work, care for their families and be able to make plans for their future. Yet, more than seven years after the Grenfell Tower fire, an estimated 600,000 people will go to bed tonight in homes that are still unsafe, and almost 3 million are trapped with unsellable homes, unable to move on with their lives, according to recent analysis by the Sunday Times. More than 15,000 residents have been ordered to leave their unsafe homes since Grenfell, and evacuations are on the rise.
Justice has been a long time coming for the bereaved, residents and survivors of Grenfell. The Grenfell Tower Inquiry will publish its Phase II report on 4th September, which is an important step in holding individuals and organisations to account for the loss of 72 innocent lives, but criminal trials are not expected to begin until at least 2027, ten years after the fire. Shockingly, the pace of removing cladding and other fire safety defects from flats across the country has been even slower – and at the current rate, it could take decades.
The previous Government rarely acknowledged the full scale of buildings affected, but estimates published in July show that 11,000 buildings are expected to require remediation works, including 2,414 managed by social housing providers. Despite this, the latest official statistics report that only 4,630 buildings are being actively monitored or “in programme.” Cladding has been removed from 1,350 buildings: just 12% of the estimated total. The government has committed £9.2bn of funding, but only £2.3bn (25%) has been spent so far.
Being “in negotiations” about remediation or having “plans in place” counts for little when dangerous cladding – or other construction defects that enable fire to spread rapidly – remain on people’s homes. Let’s not forget, these defects are defined as “life-critical.” Recent cladding fires, from Wembley to Valencia, have demonstrated why action remains so urgent.
When Grenfell survivors gave evidence to parliament a year after the fire, they warned MPs that :
“Grenfell 2 is in the post unless you act, and quickly… The Government need to take responsibility… There needs to be a plan, and it needs to be acted on right now.”
In Opposition, Labour agreed. Back in 2021, Sir Keir Starmer shared his plan to end the cladding scandal. He was adamant that Boris Johnson, then Prime Minister, “could end this scandal right now if he wanted to. The Government must end the delay and give innocent homeowners the safety and security that they deserve.” Now, with a new Labour Government in power, there is no time to lose in getting a grip of this crisis.
Since day one, the pledge to build 1.5 million new homes in this Parliament and to “get Britain building again” has been front and centre in Labour’s messaging. However, residents and leaseholders are still waiting anxiously to hear the same kind of commitment and clear deadline for making existing homes safe.
The Minister for Building Safety and Homelessness, Rushanara Ali, has written to property developers about her intention to convene a roundtable, to agree a plan for accelerating remediation. This is welcome, but what is needed is firm action to hold all parties to account, with clear deadlines and real consequences for delays. Otherwise, building profitable new homes will continue to take precedence over making existing homes safe, leaseholders and residents will remain trapped, and the market for flats will remain broken.
Labour must focus not just on the pace but also on the quality of remediation, ensuring that the scope of works is not being minimised by developer-commissioned assessments which leave combustible materials and other defects in place, because this leaves leaseholders and residents with higher risks, higher costs, and potentially unsellable homes forever.
The current developer remediation contract covers only 15% of the 11,000 buildings expected to require remedial work. Therefore, the same urgent focus must be applied to government-led remediation programmes, and a wider pool of developers, contractors and freeholders should be compelled to make all their buildings safe. That does not just mean external cladding; internal building safety defects must also be addressed, because buildings cannot be made half-safe.
The End Our Cladding Scandal campaign has published a manifesto, outlining five key focus areas for the new Government to finally end the crisis:
Establish clear and comprehensive risk assessment standards. Definitive, holistic, and risk-based guidance is essential for buildings of all heights and for both external and internal defects, so that safety assessments and the remediation required will be absolutely clear and consistent.
Make homes safe at the pace residents need and deserve. The pace of work must significantly accelerate from today. The government, construction industry and building owners must all be held to account to ensure a swift solution.
All leaseholders must be fully protected from the cost of remedying safety defects. The building safety crisis is the result of a decades-long collective failure by the construction industry and successive Governments that ignored warnings that the building regime was not fit for purpose. Every leaseholder is blameless and should have equal protection.
Protection from further financial penalties. The government must ensure leaseholders affected by this national scandal are not further penalised by an onerous mortgage lending process and exorbitant building insurance premiums.
Urgent action to give people their lives back – now. Those affected must be able to obtain accurate information about their homes, remediation work must be carried out with respect for residents, and mental health support must be available to those affected.
We cannot wait for Grenfell 2 before we act. The new government has an opportunity to step up and deliver a much fairer and faster end to the building safety crisis – and it is time to grasp the nettle.
This is an excellent and harrowing account of the events of the night of 14 June 2017 and the relevant policy framework by a leading housing journalist. 72 residents lost their lives in the fire that engulfed Grenfell Tower. We know from Part 1 of the now-published Grenfell Tower Inquiry that this tragic event should never have happened. Part 2 of the inquiry is in the process of being written. Once the final report is published, the police will announce what criminal charges if any will be brought.
In successive chapters the author takes the reader through what happened on the night of the fire and the historical reasons for the fire. Below are summarised the key staggering conclusions that the author reaches.
Peter correctly identifies the failure to properly respond to the fire at Lakanal House in South East London with fatal consequences. The inquest exposed major fire safety failures. The coroner wrote to the Government to ask for a review of the official fire safety guidance. She wanted the government to encourage greater use of the fire sprinkler system. The Coalition Government was too concerned with deregulation to take effective action: had they done so this tragedy would not have happened.
The Building Research Establishment were not asked by Government to carry out tests on the paneling at Lakanal House. However, the Metropolitan Police and the Fire Brigade approached the BRE to do so in December 2009. The result of these tests was that the panels used on the walls burnt fiercely and did not meet the relevant safety standard.
Fire Brigade Commanders struggled with managing the fire on 14 June. Communication systems failed which had been at fault in 2009. A paper system was relied upon to communicate between incident commanders and firefighters. The Brigade had no effective plan to deal with a major fire at this 24-storey block.
There was an over-rigid reliance on the “staying put “policy whereby residents were told to remain in their flats until fire fighters could rescue them. The fire and the smoke were too intense and toxic to allow firefighters to get to all floors in this 24-storey tower block. Nor was there an effective Plan B if the staying put policy failed.
Part 1 of the inquiry has recommended the introduction of Personal Emergency Evacuation Plans. 37 of the Tower block residents when the fire broke out were disabled: they could not be evacuated unaided. Fifteen of them died in the fire. Despite Ministers saying that they would implement all Inquiry recommendations, the Government will shortly have to defend its refusal to make such plans mandatory in the High Court.
There were numerous failures by the landlord, Kensington and Chelsea Management Organisation. Warnings from residents were ignored as were various fire safety notices served on the Tenant Management Company by the London Fire Brigade There were major problems with the self-closing mechanisms for the fire safety doors that an independent fire safety consultant failed to spot.
The tower block was fitted with Aluminum Composite Material (ACM) cladding. ACM is effectively two thin sheets of aluminum held together by a plastic core. The plastic bonding the metals together is polyethylene. This is made from petroleum. It is highly flammable. The manufacturers knew from tests carried out in 2004 that this was the case. They concealed these results from their customers and lobbied Government for less regulation.
There was one civil servant, Brian Martin, who was responsible for fire safety policy in residential buildings. He knew all about the dangers of ACM cladding. He had the difficult job of trying to advise Ministers who were committed to deregulation and austerity cuts. Prime Minister David Cameron pledged in a speech in January 2012 to ‘wage war against the excessive health and safety culture that has become an albatross around the neck of British business’.
At the inquiry on 30 March 2022, Brain Martin is quoted as saying there were ‘a number of occasions where I could have potentially prevented this [ the fire] from happening.’ ‘What I will say is that the approach the government-successive governments had to regulation had had an impact on the way we worked, the resources we had available, the mindset that we’d adopted as a team, and myself in particular. I think, as a result of that, I ended up being the single point of failure in the department… For that I’m bitterly sorry.’
But for covid, fire safety would have been the major political issue of the day. The Government has partly improved the fire safety regime via the 2022 Building Safety Act. Remarkably the United Kingdom still appears to be only one of two countries in the world that still allows planning permission to be granted for blocks with only one stairwell.
All Labour activists should read this book. It shows up the failure of Government policy to have effective fire safety policies due to an ideological commitment to deregulation. It will make you angry.
Dermot Mckibbin is a member of the National Leasehold Campaign, a supporter of the Leasehold Knowledge Partnership, and writes a blog on www.getcommonholddone.co.uk. He is also a member of LHG Executive Committee.
ITV’s releases ‘Surviving Squalor: Britain’s Housing Shame’ on Sunday at 10:15pm. Unquestionably highlighting some of the most horrific housing conditions endures by people and families living in social housing in the UK.
Red Brick has long forewarned about the return of squalor. The national scandal that has been the neglect of housing. But as housing associations and local authorities are the only owner operator game in town, is it time for a rethink?
For many, these conditions are everyday norms. The perpetrators are not rogue private landlords, but housing associations and local authorities. And calls for regulatory intervention are falling on deaf ears.
Some of the worst offenders are receiving the most funding
The need for social housing has never been starker. So stark even the Tory Government has made an allocation to fund 30,000 new social homes. Notably following a recent funding announcement under the Affordable Homes Programme. In London, Sadiq Khan has seen £3.46bn distributed. The bulk of the funding is conditional on an emphasis towards social rent.
This funding comes with new conditions attached. These include all new buildings requiring sprinklers and that no combustible materials exist in the facades. Nevertheless, it must be noted that the biggest beneficiary for funding affordable housing in the capital was not a local authority. Instead Europe’s largest housing association, Clarion Housing will receive £240m to deliver 2,000 homes, of which 1,250 are for social rent.
Previous concerns over controversial mega mergers are coming home to roost
Clarion Housing was a merger between Affinity Sutton and Circle Housing Group in 2016. This occurred under the then Minister of State for Housing and Planning Gavin Barwell. Two of the housing associations in the Circle group had chronic problems with its repairs and maintenance services.
Circle had found itself downgraded as a result of ‘serious issues of disrepair’. Nevertheless, the mega merger went ahead. This was despite John Biggs, the Mayor of Tower Hamlets, condemning the lack of local accountability in the transfer to Clarion of Old Ford (Circle). The original stock transfer from the local authority crucially had this as a term in the original transfer agreement, which was completely disregarded.
Highlighting local concerns about the merger, and lack of local accountability, Labour MP for Bethnal Green and Bow, Rushanara Ali questioned the Government. In response, Barwell argued that the housing associations involved believed the merger “will create a more efficient organization”.
Red Brick has long argued for the Mayor to undertake a full audit of board membership of housing associations. While not against those with private sector experience, we need to balance this with expertise in social housing, alongside experiences of tenants and residents.
Clarion Housing continues to dodge regulator judgement despite serious controversies
Clarion Housing have been constantly in the news for all the wrong reasons. Not least down to the tireless campaigning of those affected, particularly across London. ITV Political Correspondent, Daniel Hewitt, has been legendary in his journalism. In particular through coverage of the appalling conditions on a housing estate of 500 homes in South London.
It appears too many residents in 2021 are living in squalor. In this situation finding themselves infested with vermin and plagued with damp issues. The scale of the most recent case prompted consideration whether Clarion Housing breached standards by the Regulator for Social Housing (RSH). The RSH had cleared Clarion just three months prior following an investigation into a major repairs scandal 5 years before. That time concerning buildings in Tower Hamlets.
But that is only the tip of the iceberg, red tape and bureaucracy in the Housing Ombudsman is holding back a tide of cases
Last November, Clarion featured in another investigation, this time by the BBC, investigating how they manage complaints handling and service charges. To date, further action has been actively delayed by the Housing Ombudsman, giving excuses such as not being able to take it on given the different tenures of those effected within a group complaint. The Housing Ombudsman is the ultimate gatekeeper to the RSH.
Still to this date, both shared owners and social tenants continue to pursue their case with the Housing Ombudsman. Almost three years after originally raising concerns with the landlord. Yet these recent regulatory judgements do not fill them with much hope.
But what does this achieve? Cases with the Housing Ombudsman can take up to in excess of a year to process. Even after having to slog through a complaints process that can be manipulated to take over a year in itself. Experiences all too familiar for those whose landlord is Clarion Housing. Along with other dysfunctional housing associations and local authorities.
For those living in the rat infested damp ridden flats that don’t even break social housing regulations, they are left to despair. For those currently living in temporary accommodation, or those who have been made homeless for weeks on end, after repeated leaks and floods of sewage water, lack of action from the Housing Ombudsman or RSH evaporates any sense of hope.
Clarion Housing Resident, Tower Hamlets 2021
Sector needs to do more to prioritise existing housing conditions
But what is the sector doing to tackle the problem of poor housing conditions? The short answer is not enough. Co-Founder of the Social Housing Under Threat campaign (SHOUT), Tom Murtha, aptly pointed out something did not quite sit right as to why housing conditions were not even on the agenda at the Chartered Institute of Housing’s ‘Housing 2021’ annual conference. This was an event that Housing Minister Christopher Pincher could not be bothered to attend in person. Coupled with Daniel Hewitt’s lack of invitation to speak, as pointed out by Tom Murtha below:
Wondering why this is not on the agenda at #housing2021 and why @DanielHewittITV wasn’t invited to speak? Are we not concerned that some tenants are forced to live in unsafe and unfit homes and their voices are ignored? #housing21https://t.co/quahLmdW57
What was on the agenda was housing’s role in health and wellbeing. In addition to this was a panel featuring the RSH’s new Director of Consumer Regulation. Since January 2021 Kate Dodsworth has taken up the mantel. She has also talked about “the road to consumer regulation”, Although called for housing associations to fix their issues now and to “not wait for the regulator to come round in a couple years”.
Perhaps after ITV’s ‘Surviving Squalor’ is released they should come knocking somewhat sooner.
Lacking transparency, Housing Ombudsman statistics are massaged to cover the backs of its largest members
Kate is the former CEO of Gateway Housing, who topped the tables in the Housing Ombudsman own “complaints failures index”. This is despite only having found to be 9 times at fault between 2017/18 and 2019/20. Clarion Housing in comparison were at fault a staggering 129 times.
Determinations by Housing Ombudsman 2017/18 to 2019/20
Oddly, the index weights the number of determinations by how many homes each social landlord manages. In a way, this makes larger landlords appear lower down the rankings, despite having higher total numbers. Larger organisations claim they are more efficient – as aforementioned by Lord Barwell. But if true, bigger organisations should be indexed more heavily based on size. As opposed to the other way round.
In the latest landlord performance data published by the Housing Ombudsman, complaints received on Clarion Housing about complaint handling has seen a 250% increase in 2019/20 compared to 2017/18. Over the past three years Clarion Housing has received 1,899 complaints, of which 42.5% are related to property conditions.
What is not transparent from these figures is the number of tenant’s and leaseholders impacted by the complaints. By way of example, over 500 homes were affected in the ITV investigation, but these are not logged as individual complaints. Nor are they split out by tenure.
Social media is making prevalence of cases harder to ignore
In Channel 4’s ‘Grenfell: The Untold Story’ the poor treatment of residents by both landlord and local politician was all too revealing. It revealed how the then MP Victoria Borwick urged a mother concerned about being without water for days to “take baths with people next door”. This exemplifies the growing sense of the “us and them” society that we know is so deeply corrosive to our cohesion as a nation.
This remarkable footage emerged from a meeting concerning repairs and maintenance. It provides such crucial evidence of the plight put forward by many residents, many of whom are no longer around.
Snippets from this weekend’s ‘Surviving Squalor’ also highlight the ineptitudes of some local authorities too. Chronically ill Mehdi was living with water leaks contaminated with “significant faecal contamination”.
His landlord?
Lewisham Homes – a recent nominee for the Tpas England Awards Shortlist. While TPAS expressed their shame at the conditions some tenants are having to endure, they highlighted that their awards cover a range of categories. Admittedly, not just “managing homes”.
Real capitalism in the interest of humanity can help solve our low-income housing issues
So herein lies Sadiq’s funding conundrum. At present grant can only be provided to local authorities or housing associations. Some of which face reputational damage resulting from serious causes of concern and ESG related controversies.
Under the Labour-led Wheatley Act 1924 we as a country subsidised private builders to create homes for those on low-incomes. If we are to provide grant to the private sector conditional on owner operation at social rent levels, we would enable funding packages to be less reliant on those guilty of such poor management. Instead, we see the lion’s share of London’s funding for example go to a housing association with the most complaint determinations against its name. Clarion Housing.
At present we are dealing with the inability of the country to meet the heavy burdens now placed upon it. Back in 1924 private enterprise had little to no interest investing money in houses for letting purposes. Yet today we see operators indeed willing to invest. Whether this be through the burgeoning Build-to-Rent sector, or the nascent Single Family Rental sector, the local authority and housing association is no longer the only possible investment partner to bear these costs.
At the time, John Wheatley described his socialist housing funding proposals as “real capitalism – an attempt to patch up, in the interests of humanity, a capitalist ordered society”. Yes you read that correctly. The first socialist Labour government knew it had to patch up these interests through what it described “real capitalism”. For this reason, it is not outside Labour principles to fund housing at social rent levels for direct provision by the private sector. Nor has it ever been.
We need to diversify who owns and operates social housing
At present, only Registered Social Landlords can own and operate affordable housing under the eye of the regulator. Often forward funding from housebuilders and developers who do not have a long-term interest in the construction of the property. We have seen Clarion Housing’s own Group Director of Development highlight the “lack of commerciality in the sector”. It comes as no surprise that we see just as many issues with new build social housing, as we do with buildings coming to the end of their life.
In America federal states fund the construction of affordable rental housing for those on low-incomes through conditional tax credits. They provide this to both for-profit and not-for-profit owner operators through its Low-Income Housing Tax Credit (LIHTC) programme. By being sector agnostic both state and federal government drive competition, and thus commerciality, into funding programmes.
We should explore progressive innovative new funding models of low-income rental housing. For those on the left we cannot shun the private sector. We must work progressively with it to provide more options for those in most housing need. This will allow government to be less reliant on some of the worst offenders to deliver housing for those on low-incomes.
The ultimate goal?
To make fewer people have to survive squalor.
Christopher Worrall
Editor of Red Brick.
He sits on the Labour Housing Group Executive Committee, is Chair of Poplar and Limehouse CLP, and co-hosts the Priced Out podcast.
Since 72 people lost their lives in the Grenfell tragedy on 14 June 2017, the cladding and building safety crisis has spiralled. Estimates vary as to how many households are affected. The End Our Cladding Scandal (EOCS) campaign believes that up to 11 million people are now caught up in the scandal. Luxury flats and social housing alike are affected. This article examines the impact of the cladding and building safety crisis on shared owners, and asks whether it lays bare fundamental flaws in the shared ownership model.
June 5th saw a National Day of Developer Protests outside new home sales offices, organised by local campaigners and supported by the national End Our Cladding Scandal (EOCS) campaign. The protests will be followed next month by a Leaseholders Together rally – planned in collaboration with the National Leasehold Campaign (NLC).
How long will it be before the spotlight shifts from developers to housing associations? How long before mass protests are taking place outside housing association offices and first-time buyer events?
What has gone so wrong that shared owners who placed trust in the promise of ‘affordable homes’ now face crippling bills? What are housing associations doing to support shared owners facing life-changing building safety remediation costs? Is it enough? What lessons may be learned, and what more can be done immediately to help shared owners and leaseholders in dire situations?
The Affordable Homes Promise: What’s Gone Wrong?
Schrödinger’s Flat
Shared ownership has been described as ‘Schrödinger’s flat’; it is simultaneously affordable and unaffordable. Housing associations define affordability by way of contrast to short-term costs of buying outright or renting, or accessibility of a mortgage deposit and loan. But these definitions oversimplify and distort understanding by failing to specify timescales of comparison, and by conveniently overlooking financial obligations imposed by leasehold contracts – such as indexed annual rent increases – and costs not referenced in lease terms, including lease extension. A rent that is often set initially as a percentage of the unsold share of the property, typically 3%.
Shared ownership is not ‘ownership’; it is an assured tenancy. And given that shared owners are liable for 100% of all maintenance and repair costs, on top of service and administration charges, and are now expected to pay for building safety remediation works too, it is clearly not ‘shared’ either.
The National Housing Federation chirpy marketing campaigns reassure first-time buyers shared ownership doesn’t mean sharing their home with a stranger but fail to explain clearly the risks arising from 100% liability for all costs. In fact, sponsored content encourages first-time buyers to believe ‘there’s no catch’. Not true! Something that the devastating cladding scandal has brought into stark relief. Problems for shared owners are complex and inter-related, full stop. Building safety issues massively compound inherent flaws and contradictions in the shared ownership model.
Staircasing rates were already dismally low: a mere 2.3% staircased to 100% in 2018-19. (It’s worth noting that this percentage is not analysed between staircasing to 100% to achieve full ‘ownership’, and a simultaneous sale and staircasing transaction undertaken purely in order to sell – a crucial distinction). The building safety crisis means any shared owners who planned to staircase to 100% are now likely to be unable to obtain mortgages to do so.
Shared owners who are unable to staircase to 100% have no statutory rights to lease extension. All things being equal, the cost of lease extension increases year on year. Particularly once the all-important 80-year threshold has been breached. And, in the absence of lease extension, shared owners’ homes will devalue dramatically over time (a separate issue from the nil valuations arising from building safety issues).
A significant number of shared owners will be trapped in negative equity situations as a direct consequence of building safety remediation charges. Those who purchased smaller shares, say 25%, are particularly disadvantaged. The people suffering the most severe financial distress may be those who had least to lose in the first place.
Going back to that £100,000 charge Irwell Valley Homes plan to levy on their shared owners… Although details remain sketchy, the Government has proposed a loan scheme capped at £50 monthly. At £50 per month, £100,000 would take 2,000 months, or 167 years to repay. Such charges are clearly a problem not just for this unfortunate generation of first-time home buyers, but for the next couple of generations too, perpetuating inequalities patently at odds with leveling up agendas.
How are Housing Associations Supporting Shared Owners?
Credit Loans
Some housing associations have obtained authorisation from the Financial Conduct Authority (FCA) to offer interest-free credit to shared owners where recharged building safety remediation costs are unaffordable. Although loans from housing associations have the advantage of being interest-free, unlike bank loans, this option raises a number of troubling questions.
The assured tenancy nature of shared ownership renders shared owners extremely vulnerable to repossession of their home in the event of mortgage or service charge arrears. Given the risks and unavoidable costs the current shared ownership model exposes shared owners to, what confidence can they have that housing associations and lenders have their best interests at heart? Why should they believe housing associations would be flexible as life circumstances change over the potentially life-long timespan of such loans? Additionally, housing associations that have already sold off freeholds may have tied their own hands regarding their ability to assist shared owners facing possession by lenders.
Such concerns are likely to be exacerbated by proposals to sell off shared ownership portfolios to institutional investors, whose primary motivation will be to maximise returns for their own shareholders and clients, not to act in the best interests of shared owners. This not only raises disturbing questions for the future of shared ownership, but also potentially stymies meaningful attempts to fix the broken housing market.
Buyback
Maureen Corcoran – a former board member of one of the largest housing associations in England, a member of the G15, and former Head of Housing in London for the Audit Commission – suggests that: ‘housing associations that sold these properties on a shared ownership basis could buy the shares back from anyone who is struggling and unable to move’. Housing associations counter that they do not have the financial means to do so at scale. Whilst some housing associations express commitment to do so in ‘exceptional circumstances’ it’s not at all clear what would constitute exceptional circumstances.
Where policies subtract the cost of any known or estimated remediation costs from the buyback valuation there may be little benefit of shared owners pursuing buyback as a way out of an impossible situation.
Back to back staircasing (a simultaneous staircasing and sale transaction) is sometimes required due to indexed annual rent increases (RPI plus 0.5%-2%). Where such increases have resulted in rent levels becoming more expensive than local private rents – or even specified rent on local new-build shared ownership properties – the property may become unattractive in the market place. Shared owners may have no other option but to eliminate the specified rent component, regardless of the erosion of any gain by the increased selling costs arising from the staircasing transaction.
Shared owners whose building doesn’t have a satisfactory EWS1 form face additional problems. Potential buyers are not currently able to obtain a mortgage due to nil valuations. To purchase a part share buyers have to meet affordability criteria; something that is highly unlikely to be the case if they are in a position to make a cash offer. Shared owners in this situation may have no alternative to back-to-back staircasing to 100% to facilitate a cash sale on the open market.
Confirmed or potential remediation costs will drastically reduce the purchase price. This is particularly problematic for shared owners whose housing association has a policy requiring shared owners to pay over to them any difference between the valuation and the purchase price.
Subletting
Subletting is generally prohibited on shared ownership properties. This is justified by housing associations on the basis that shared ownership properties are supposed to be the primary residence of the shared owner, and not a source of profit. Such an argument erroneously conflates ‘accidental landlords’ – who may need to relocate temporarily for a variety of reasons – with commercial for-profit operators. The no-gain requirement falls away once (if) a shared owner staircases to 100%, effectively penalising shared owners who can’t afford to staircase. Or, in the case of those whose buildings are found to have safety defects, are unable to staircase due to unavailability of mortgages.
The restriction on making a gain applies only to shared owners themselves and not to housing associations, who benefit from income streams generated from shared ownership homes; nor to institutional investors eyeing up shared ownership portfolios.
When exceptional permission to sublet is given it is on a ‘no gain’ basis; with no acknowledgement of the fact that in real life it is practically impossible for landlords to plan to break-even – not least due to the unpredictable nature of shared ownership service charges (including retrospective annual adjustments). Shared owners seeking to sublet rapidly discover they have taken on all the liabilities of home ownership, with none of the financial benefits and flexibility purchasing a home usually provides.
Are Housing Associations Doing Enough?
There are clear financial challenges for housing associations in addressing the building safety crisis. But growing vocal discontent across social media and elsewhere indicates that shared owners find it hard to accept how little housing associations are doing to support them now they are facing financial ruin. More than a few shared owners now regret the mistake of trusting persuasive marketing rhetoric.
Strong sector leadership is long overdue to protect shared owners from the worst consequences of a shared ownership model that has always exposed them to unlimited risk and costs regardless of affordability claims.
The following is intended to indicate some areas where the current offering could usefully be reviewed, by no means an exhaustive list.
Shared owners report that transparency and communication on building safety and related costs is poor. This is unacceptable and should be corrected as a matter of urgency.
“We know a bill is coming… Just not when, or how much…?”
A sector-wide review of whether current provision of expert financial advice and debt counselling adequately meets identified need.
A sector-wide published commitment to clearly identified policies to support shared owners facing building safety issues, including:
Not to initiate possession proceedings for shared owners in arrears due to building safety remediation charges (including waking watch and increased insurance premiums).
To waive marriage value on lease extensions (something MTVH have already committed to), and to calculate the premium on the percentage share held (where applicable) rather than total value.
Not to charge any difference arising between the valuation and the purchase price.
Work with mortgage lenders on whatever actions are required to facilitate access to consent to let or buy to let agreements.
Work with Government to remove, or apply considerable discretion on application of, restrictive and hard to justify restrictions on subletting, including no gain requirements and time limits.
Withdraw any shared ownership properties with potential building safety issues from the market unless it may be evidenced that there are no remediation cost consequences arising for first-time buyers.
Review marketing terminology to ensure buyers have full knowledge of exposure to long-term risks and costs. This information should include – but not be restricted to – building safety and defects, and associated costs and obligations. These should be simply, transparently and adequately explained to enable informed decision-making (in compliance with Consumer Protection from Unfair Trading Regulations 2008).
Review implications of cross-subsidy model for achievement of policy aims for shared ownership (affordability, fairness and transparency), and in relation to potential conflicts of interest.
What Lessons Can Be Learned?
The building safety crisis has bought into sharp focus a number of troubling aspects of the current shared ownership model:
a vast discrepancy between expectations created by marketing strategies and real-life outcomes;
adverse consequences of a policy and research focus on access to shared ownership rather than on performance of that tenure over the long-term and the success of exit strategies in achieving foot on the housing ladder policy aspirations;
adverse consequences of a policy and research focus on financial risks, costs and benefits arising for housing associations and mortgage lenders rather than those arising for first-time buyers;
lack of ability and will of housing associations to intervene where required arising from the nature of some partnership arrangements;
failure of housing associations to solicit and sincerely take account of the concerns of long-term shared owners and campaigners;
the conflict of interests which inevitably arises from the cross-subsidy model; and
failure to fulfil fiduciary duties.
These matters should surely be of grave concern for housing association Boards of Trustees and likewise for regulators including the Regulator of Social Housing, the Charity Commission, the Advertising Standards Authority, and the Competition and Marketing Authority.
Thanks are due to Dr Audrey Verma (campaigner), Deepa Mistry (shared owner and campaigner), Dr Alison Bancroft (shared owner and campaigner), Ed Spencer (shared owner and co-founder of One Housing Residents Action Group) and Neil Goodrich (housing professional) for support in writing this article. Any errors are, of course, my responsibility and mine alone. I welcome feedback on the content.
Sue Phillips
Sue Phillips is an accountant (ACCA) who spent much of her career working in the not-for-profit sector. She is now semi-retired. She says she never expected to become a housing campaigner!
She purchased her own flat via a shared ownership scheme in 1999, staircased to 100% in 2013, and completed a lease extension in 2020.
Her own experience of shared ownership led her to start campaigning in 2019, with a particular focus on greater transparency on potential long-term costs and risks of shared ownership. She campaigns under the moniker Shared Ownership Resources.
Leading housing associations are losing their integrity as charitable organisations. They continue to trade on a set of myths about the sector that no longer hold true – writes Suz Muna.
Housing Associations Build Social Housing
Associations are increasingly indistinguishable from private developers and landlords, and their activities are increasingly focussed on market-level rents and sales. The result is that the interests of tenants and leaseholders trail in the wake of the board’s need to generate large surpluses and satisfy their lenders.
Associations generate larger profit margins by developing for market sale and rent than from any other activity. Inevitably, the profits are greatest in London where house prices are higher. The boards of Associations increasingly gravitate towards construction, and especially in the South East. They are aided and abetted by government policy, regulatory institutions and finance houses.
Analysis of the sector shows that there has been a considerable shift in its stock profile over the last few years. For example, in 2019 the category of housing with the largest percentage of growth was in market sale (non-social leasehold), jumping almost 16% (8,500 units) on the previous year.
The change in profile over a seven year period spanning 2012 and 2019 illustrates a sharp jump in Low Cost Home Ownership (LCHO) units, and a corresponding decline in supported housing. The ring-fencing of grants under the Supporting People programme ended in 2009.
Stock profile changes include conversions from the more secure types of tenancy with cheaper rents attached such as social rent which is capped at 50% of market rents. Often these are converted to less secure tenancies with higher rents.
Property lawyers Savills captured this trend in May 2019 when they noted that “the amount housing associations generated from new open market home sales increased 16% (£221 million) to £1.61 billion between 2016/17 and 2017/18, with 37,000 homes for sale contractually committed to be built in the 18 months from December 2018”.
Housing Associations Fund Their Activities from Rents
This is a myth that should be busted, not least because it implies a stability that is absent. In fact, house building in particular is funded through debt leveraged on existing homes. The Regulator for Social Housing anticipates that debt of £42 billion will be added to the sector’s debts over the next five years. And ratings agency Standard & Poor predicted that the need for housing associations to rely on debt to fund their activities will increase not decline in the future.
Housing Associations are Governed by People with a Commitment to Social Housing
One trend drives another. The focus on development means that associations deliberately attract board members with backgrounds in equity and finance, squeezing out those with any genuine commitment to, or experience of, social housing. The exceptions are occasional hand-picked and often financially reimbursed ‘tenant board members’ with no democratic mandate.
Many housing associations publish brief biographies for their board members. What these show is just how widespread board-level involvement has become by people whose careers span financial services, planning, development, property markets, private finance initiatives, and insurance industries.
There also exists a golden circle whereby the housing association and housing sector institutions populate each others’ boards. One Housing Group, St Mungos, Clarion, Paradigm, and Onward Housing for example, are all led by ex-employees of the Regulator of Social Housing. The Chair of Peabody’s board, Lord Kerslake, previously headed the Homes and Communities Agency.
The corporate plans developed by associations inevitably reflect the highly commercial interests of its board members, and the vicious circle is complete.
Associations Have Inclusive Cultures
An inclusive culture would in fact be a terrible hindrance to an ambitious housing association, and frowned upon by its institutional backers. To help ensure that associations are unchecked in their commercial direction of travel, they are moving away from democratic influence by tenants and residents, preferring methods of engagement over which the landlord has almost exclusive control.
Tenant and Resident Associations (TRAs), the most democratic of engagement models, are being replaced by Tenant Scrutiny Panels whose members are appointed by the landlord. This is akin to the derecognition of a trade union in favour of an employer appointed staff council – something that many associations also seek to do.
The Greater London Assembly noted in 2018 that the Grenfell Tower fire had “brought into sharp focus the lack of effective mechanisms for social housing residents to have their concerns addressed and to hold their landlords accountable for property standards and management.” The Assembly also noted that TRAs were being actively undermined by having recognition by the landlord made contingent on adoption of the association’s model constitution.
What these trends produce for tenants is inadequate repairs and maintenance services, high rents and service charges, anti-social behaviour problems, discrimination against those with disabilities, unsafe homes, and the cladding scandal. Despite huge leaps forward in communication technology, alerting the landlord to a problem is becoming increasingly difficult, and attempts to find a resolution too often feel like a war of attrition.
It Doesn’t Have to be Like This
It is all too clear to the tenants, residents and staff of housing associations that this sector has undergone a fundamental transformation, but that public perception has yet to catch up. It is wealthy, powerful and almost wholly unaccountable. Remedy is needed in the shape of much firmer, independent scrutiny and regulation, rent controls, and a supply of genuinely affordable housing through local authorities.
The Social Housing Action Campaign (SHAC) is a democratic, voluntary network of tenants, residents, and workers in housing associations and cooperatives. It campaigns to improve the lives of those who live in HA accommodation and reduce the commercialisation of the sector. SHAC is keen to build links with Labour councillors and MPs with an interest in housing. It is developing a political representatives network and would welcome contact via [email protected].
Suzanne Muna
Suzanne Muna has worked in housing for the last 20 years, serving continuously as a trade union representative alongside her paid work. She is secretary of the Social Housing Action Campaign, a trustee of the Public Interest Law Centre, and a member of the Unite Housing Workers branch committee
As Shadow Secretary of State for Housing, I am extremely concerned about the remediation of unsafe cladding on residential blocks and the impact this is having on leaseholders.
I have been contacted by pregnant women trapped in dangerous flats, elderly people unable to move into retirement accommodation and families on the brink of bankruptcy after receiving five-figure bills for a problem they did not cause. These are just a few of the heart-breaking stories now common across the country.
Because the government response has been so painfully slow, hundreds of thousands of leaseholders across the country remain trapped in unsafe blocks during a third lockdown, facing increasing interim costs. When you look at the knock-on effects, including those unable to sell or re-mortgage their property, the number of people affected is much higher.
Broken Tory promises
This week, the government announced another package of measures to try to fix the cladding scandal. While headline-grabbing figure of £3.5 billion is a huge victory for Labour and the campaigners across the country who have worked tirelessly on this, it will not protect many leaseholders from mounting debt.
For many of the people affected by this crisis, this latest announcement will feel like a betrayal. On at least 17 occasions, government ministers promised that leaseholders will not be left with the bill.
Sadly, these promises have been broken by this week’s announcement, which includes the detail that funds to fix buildings will only be given to those over 18 metres tall – and the residents of lower buildings will be forced to take out loans to pay to fix fire safety problems. You can watch my speech here.
This is not the first time that leaseholders have been let down in this this crisis. A year ago, the Chancellor said, “all unsafe combustible cladding will be removed from every private and social residential building above 18 metres high.” This has not happened. Buildings haven’t been able to access the fund. Nine of every ten pounds has not been paid out.
Many of these problems stem from a refusal to properly evaluate the risks. Three and a half years on from the Grenfell Tower disaster, the government still has not done a proper investigation of the number of buildings involved, the risks or the cost of reducing that risk. Until we know the scale and nature of the problem, any response will be ineffectual.
Labour’s plan
I am leading Labour’s response to this problem and am working with campaigners and specialists from across this country – and in other countries too – to get justice for those affected.
I believe the UK Government must establish a National Cladding Taskforce to address unsafe cladding and protect leaseholders from the costs of remediation. The Taskforce should be underpinned with strong powers to establish the full extent of dangerous materials on buildings, prioritise them according to risk and ensure there is enforcement against those who refuse to undertake works. It must be backed with up-front funding and include a legally enforceable deadline of 2022 to make all homes safe. There is more on Labour’s plan here.
What’s next?
I spoke about the problems faced by leaseholders on Question Time last week, when a member of the audience spoke about how she is trapped in an unsafe flat, with no end in sight. I will be doing all I can to keep the pressure up and spur the government into action.
The next opportunity to force further changes out of the government will come on 24 February, when the Fire Safety Bill comes back to the Commons.
This date will be a chance for the Government to reflect on the failing of their latest announcement and bring forward a set of legally binding commitments to deliver on the promises they made to leaseholders.
Last week, Keir Starmer challenged Boris Johnson on this during Prime Minister’s Questions. Justice for all those affected will continue to be one of my top priorities over the coming weeks and months.
Thangam Debbonaire
Thangam Debbonaire is the Labour Member of Parliament for Bristol West and Shadow Secretary of State for Housing.
The Fire Safety Bill has passed its second reading in Parliament but not without bringing the fears of multi-occupancy residents back to the centre of the housing safety conversation.
The bill seeks to amend the Regulatory Reform (Fire Safety) Order 2005, to clarify which parts of buildings are covered by requirements to manage and reduce the risk of fire by responsible owners. Whilst the bill makes necessary changes to fire safety law, it does not go far enough to meet the Government’s pledge to prevent another Grenfell Tower tragedy.
The Housing, Communities and Local Government Committee has published the findings of a survey into the progress of remediation work to improve fire safety in residential buildings.
The survey found residents continue to face bills of thousands of pounds for remedial or safety measures for a range of issues including combustible cladding, inadequate fire breaks and timber balconies or walkways. It also found that out of 1,352 respondents, 70% said they still had combustible cladding on their building.
Residents of multi-occupancy households have called on the Government to go further in its efforts to improve fire safety. Further to the £1 billion Building Safety Fund announced in the 2020 Spring Budget, residents have called for a pledge to ensure that all forms of dangerous cladding be removed and other safety defects dealt with.
During the 2nd reading of the Fire Safety Bill, I raised concerns of a constituent who had expressed fears to me regarding a tower block in a neighbouring constituency that was covered in combustible cladding which the landlord was refusing to remove.
The survey conducted by the HCLG committee has given us an insight into the reality of the fear thousands of people face across the country following the Grenfell Tragedy. As we have seen in the previous three years, where a loophole exists some will exploit it, despite the risk posed to residents.
One respondent to the survey said:
“I have highly flammable insulation, missing fire breaks, missing compartmentation, poorly fitted fire protection to the structural steel and poorly fitted fire doors. I fear for my life on a daily basis.”
As many raised during the Fire Safety Bill debate, the Government needs to do much more to ensure the safety of residents in multi-occupancy residences. Like many colleagues pointed out in the debate, the Grenfell Tower tragedy was one that should have been avoided.
As part of my role on the HCLG I will be continuing to hold the Government and industry to account over its failings to support residents in feeling safe in their own homes, so that we never have to experience such a devastating and preventable loss of life again.
Abena Oppong-Asare
Abena Oppong-Asare is the Member of Parliament for Erith and Thamesmead. She was elected as MP in December 2019 and has since been appointed to the Shadow Treasury Team as PPS to Anneliese Dodds.
Abena also sits on the Housing, Communities and Local Government Committee with specific interests in affordable housing and local government funding.
