Unsafe Cladding: Protecting Tenants and Leaseholders — House of Commons, 2021-02-01
Topic: Housing
Matthew Thomas Pennycook (Labour, Centre-left): Strip away all the technical complexity, and the cladding crisis has always been about two fundamental issues: how can we identify and quickly make safe dangerous buildings; and who is going to pay for them? Both issues haunt those affected by this crisis, but in the long term it is the issue of liability that is in many ways the more terrifying, because leaseholders fear that it is they who will ultimately be forced by the Government to pay the lion’s share of a bill that is projected to rise to over £16 billion. They have good reason to be alarmed, because although we may not know the detail, the broad contours of the proposals developed by Michael Wade that Ministers are considering ahead of the Budget are an open secret—minus an unknown, but almost certainly tokenistic, annual contribution from developers. He recommends that remediation is funded up front by long-term loans attached to individual sites, with the building owner or responsible person then recouping that loan from its leaseholders over a period of decades. In the brief time that I have, I want to draw the attention of the House to what that would mean in practice. First, unless leaseholders were deliberately to be protected from any form of repayment until the point of sale, they would be hit by significant service charge increases Even assuming an interest-only repayment model with modest interest rates—say 1% or 1.5%—on remedial works bills at the lower end of the scale, say £30,000, leaseholders would still be looking at an extra £60 to £100, or perhaps more, on their monthly bills, depending on the length of the loan period. What on earth makes Ministers think that leaseholders can manage such costs, and what do they think those additional charges will do to mortgage affordability calculations Secondly, the attachment of a loan to a site will immediately devalue the properties within it, instantly creating a two-tier property system and placing a significant proportion of affected leaseholders, particularly in areas of lower property values, at risk of negative equity and bankruptcy. Who is ever going to purchase—willingly—a flat with one of those loans attached, at least unless the leaseholder discounts their total liability from the asking price, with all the consequences that that implies for the housing market and mortgage lenders? The fact that Ministers are even contemplating a proposal of that kind is utterly reprehensible, given the commitments made by many Secretaries of State and Ministers of State at the Dispatch Box that blameless leaseholders in privately owned blocks would be fully protected from cladding costs in all circumstances. If the Government plough ahead with Mr Wade’s recommendation or any variant that punishes leaseholders they will make a colossal mistake There are other solutions that can provide up-front funding to accelerate the pace of remediation and that would protect the general taxpayer as well as leaseholders. All that is required is that Ministers give them serious consideration and, more importantly, that they steel themselves finally to confront the vested interests that created this problem in the first place.