Skip to main content

Leaseholders: Costs

Volume 816: debated on Thursday 18 November 2021


Tabled by

To ask Her Majesty’s Government what steps they are taking to ensure that leaseholders and others do not bear the costs of repairing building safety defects for which they are not responsible.

My Lords, on behalf of my noble friend Lord Kennedy of Southwark and with his permission, I beg leave to ask the Question standing in his name on the Order Paper.

The Government are investing £5.1 billion to remediate unsafe cladding and residential buildings over 18 metres. The Building Safety Bill will require building owners to consider other cost recovery routes for remediation before passing them on to leaseholders. A new developer tax and levy will ensure that industry contributes towards making buildings safer. For the small number of 11 to 18-metre buildings with remediation costs for unsafe cladding, we are exploring all options to make sure that leaseholders are protected.

My Lords, does the noble Lord agree with his Secretary of State, the right honourable Michael Gove MP, when he expresses concern at leaseholders having to pay for all the faults and mistakes of others? If he shares that concern, surely the right thing, after all this time, is to make those responsible for this scandal—this crisis—pay up, not the innocent victims.

My Lords, unsurprisingly, I completely agree with the Secretary of State on those principles, and I add a third: first, we need to protect leaseholders as far as we can; secondly, we must ensure that the polluter pays, and that goes beyond the developers to every single person who has contributed to this crisis; and thirdly, we need a degree of proportionality, so we do not create an industry that profiteers off the back of the poor leaseholders affected.

My Lords, I am grateful to my noble friend for what I know he was doing behind the scenes to sort this. Can he confirm that when his Secretary of State was given his new job, he was instructed by the Prime Minister to resolve the cladding crisis? This clearly involves measures beyond those that my noble friend has already referred to. If innocent leaseholders are to avoid financial distress, bankruptcy and eviction, either the Treasury or those responsible for building these defective flats will have to dig deeper into their pockets. Does he agree?

My noble friend makes it easy for me: yes, I agree. Implicit in the fact that the Treasury would have supported a subsidised financing scheme is that we need more taxpayer subsidy, but it cannot be the only answer. We need to make sure the polluter pays, and the Secretary of State is looking at every avenue to do that.

My Lords, I remind the House of my relevant interests as in the register. If the Government are to avoid a torrent of bankruptcies by April next year, as has been predicted by Inside Housing, action must be swift. In particular, I ask the Minister about shared ownership. Somebody with shared equity of 25% is being asked to pay 100% of the remediation costs. That might be right in law, but it cannot be right in fact. What on earth are the Government going to do to safeguard shared owners?

My Lords, I feel the burden, particularly on shared owners, who have a fraction of the equity in their home but face intolerable bills. I am surprised when I hear that social landlords, who should be caring for the people who live in those homes—the nurses and other people who support our NHS—are considering massive remediation schemes, very often for buildings that really require only mitigation at far lower cost instead. An MP raised a case with me yesterday of a nine-metre building where shared owners are facing bills of £20,000. That is because there is no sense of proportion. Let us get a sense of proportion, protect leaseholders and shared owners, and make sure that the polluter pays.

My apologies to Members. My list was the list for the fourth Question, not the third Question. I think we are on the right track again if I call the noble Baroness, Lady Chakrabarti.

My Lords, faced with repeated variations on this question from my tenacious noble friend Lord Kennedy of Southwark, I have heard the always affable Minister talk about this injustice in terms of complexity, sometimes referring leaseholders to their contracts. I am delighted that the new Secretary of State takes a more bullish approach, suggesting that leaseholders should pay nothing and acknowledging that we collectively—the department, some in local government and others in the private sector—failed people at Grenfell. That is a wonderful acknowledgement of principle. Why did it take four and a half years, and when will we move from principle to practice?

We will move from principle into practice in a matter of months, but this problem has occurred over decades. Sadly, every decade, there has been a significant fire in a high-rise where there was a loss of life: Garnock Court in 1999, Lakanal House in Southwark in 2009 and the tragedy of Grenfell in 2017. Governments knew that cladding was often the cause, as it was in Garnock Court, and the regulations were actually dampened down under a previous Labour Government, who inserted the word “adequately”. It is a mess that took decades; give us months to sort it out.

Notwithstanding the Minister’s earlier comments, housing associations and councils too face a challenging situation. Both the LGA and the National Housing Federation have evidenced the double whammy of the financial burden to remedy the fire safety issues for the tenants and, consequently, less money to invest in their existing stock—in particular, to build new social and affordable homes. In the recent rethinking, please will the Minister agree to look specifically at the situation faced by housing associations and councils and consider widening the criteria for support for any money that is available? This is their tenants’ rent money, after all, and they too should not have to pay for 20 years of industry failure.

Of course we want to protect leaseholders and ensure that social landlords can build new homes of high quality but, far too often, they as developers were in charge of building homes of poor quality, and they need to fix those homes. The figures are that, as of 31 October, £97.3 million has been approved from the building safety fund, and there is the £200 million to remove cladding of aluminium composite material. We are doing what we can to protect leaseholders, but we recognise the challenges faced by registered providers.

My Lords, further to that very point, the Secretary of State, in front of the HCLG Committee, acknowledged the unfair and undue burden on both leaseholders and social housing tenants to shoulder the remediation costs. How do the Government plan to alleviate what the Secretary of State referred to as the Sophie’s choice of the housing associations between safety and investing in stock and quality?

All major landlords, including social landlords, will have to do that as a matter of course. We are providing funds that will protect leaseholders where the balance sheet does not enable them to do so, and I have given those figures already. However, we ask for a sense of proportion from registered providers—I have reached out to the noble Baroness’s chief executive—not to inflate the bill just because the taxpayer sums are there, but to keep costs down. We need to ensure that together we remediate, mitigate where that is preferable to remediation, keep tenants safe and use the affordable homes programme to build more homes.

It is not just the remedial work, it is also the fact that insurance premiums have gone up, leaseholders cannot sell their property and they sometimes have to have a waking watch, which is a 24/7 dedicated project to protect from future fires. The Minister said that the polluter pays, but that is not how I see it. The Government are using taxpayer money to finance this. Why are the Government not insisting that builders pay? Is it more corruption: these builders and developers are government friends, so they should not have to pay?

I think that is an unfortunate line. Developers have caused this, and there are the insulation manufacturers and product manufacturers in the frame—for instance, for fire doors that do not act as fire doors. We have announced both a tax and a levy, and the new Secretary of State has further plans to ensure that the polluter will pay.

My Lords, for the avoidance of doubt, what assessment has been made that the building safety levy will provide the most balanced approach for funding historical remediation of building safety defects? Have the Government carried out an impact assessment?

The building safety levy is one in a suite of measures. The Gateway 2 levy which the noble Baroness refers to runs alongside the residential property developer tax. There is a levy and a tax. That will make a contribution but, by and large, we are seeking to fund the running cost of a high-risk regime, so her question is not actually hitting the mark.