A spate of wipe-out major works demands from local authorities have come to prominence recently, with The Guardian reporting a £97,860 bill from Lambeth, leaseholders facing £100,000 demands at the Silchester estate from the Royal Borough of Kensington and Chelsea and The Sunday Times reporting a more modest £36,000 demand from Bromley council the week before.
Leaseholders are being hit with huge unexpected bills for repairs to their housing blocks as critics warn that the whole system is broken and needs radical re
Is there any sort of pattern here, beyond councils continuing to be absolutely deaf to the consequences of these sorts of demands, especially during a cost of living crisis?
Or maybe property maintenance companies, who have their claws deep into council housing stock, are feeling the pinch from the two-year Covid hiatus and are starting to make work for themselves?
There is nothing new, of course, in local authorities blithely issuing major works demands that are very high, with private leaseholders on the hook to pay their share.
Local authority blocks do not have reserve funds, so the bills are often large – leaving aside the delicate issue of councils being up to the task of competent cost control.
Of the three cases, that highlighted by The Guardian’s consumer champion Anna Tims was the most egregious.
Lambeth wants to splurge £1 million on a Victorian conversion of ten flats, which means a bill of around £100,000 each for the two private leaseholders.
This is an astonishing sum for a small building, which is not to be evacuated or completely rebuilt. It is difficult to understand how such a figure is justified.
The quote comes from the Mears Group, which Lambeth has removed as the long-term contractor after accusations of poor workmanship and a backlog of unfinished jobs, reported here:
Mears left backlog of unfinished repairs, housing chief admits – as they appoint change management consultant – at contractor’s expense
Mears left a backlog of unfinished repairs when their contract with Lambeth council ended, Lambeth’s cabinet member for housing has admitted. Cllr Maria Kay says problems were also exacerbated because 50 per cent of the staff expected to transfer across from Mears to new contractors didn’t.
LKP was invited to comment and we tried to explain the issues of council leasehold as best we could.
The line usually goes: councils’ primary responsibility is to house the unhoused; it is right that leaseholders pay their share; but there are no reserve funds; the upside of council leasehold is that it is cheaper than wholly private, but the downside is that councils spend money – in this case, yours – like water.
Here is the archive with many cases reported:
The Sunday Times case concerns a young professional couple – one who worked for News UK which owns the newspaper, as it happens – who bought a London council flat in Bromley for £350,000 in 2018.
Many others have done the same thing, ex-council flats being seen as an affordable property in ludicrously over-priced London. LKP is contacted 2-3 times a week by leaseholders facing extraordinarily large major works bills.
The third case involved an investor who owned a flat at Kensington and Chelsea’s Silchester estate and was now facing a £100,000 bill.
The leaseholder attended the meeting of the December 12 All-Party Parliamentary Group on leasehold and commonhold reform, and raised this point in front of assorted MPs.
Afterwards I established that she was in fact an investor with only one flat and that it was her pension.
I am afraid hearts will harden at this news.
Councils are deluged with limitless demand for social housing and the Conservative policy of selling off council homes at a generous discount is absolutely loathed by most of them.
It is estimated – perhaps conservatively – that around 40% of ex-council property in London bought under the Right To Buy scheme over the past 40 years now belongs to assorted investors.
So, Right To Buy has not been altogether successful in increasing home ownership.
The public may be alarmed at this, as well as at reports of sleazy property investors stuffing leaflets through the doors of elderly council tenants offering the funding to exercise right to buy, with a condition to buy the property when it comes to resale.
Tom Copley, the Labour deputy mayor of London, has carried out two studies, in 2014 and 2019, on the effects of Right To Buy. He calls on the government to give the London mayor the right to abolish the policy.
This has already happened in Scotland in 2017, and in Wales in 2019.
Mr Copley argues: “The Right To Buy acts as a disincentive [to build more social rent homes] as councils fear their investment will be wasted as they may be compelled to sell homes at a discount only a few years after they were built, and further money would need to be spent on housing families in need of social rent homes.”
After Mrs Thatcher introduced the policy in the Housing Act 1980, 2.2 million council homes were sold.
Initially, tenants got a 50% discount if they had lived in the home for 20 years, but this became a 70% discount after 15 years. The discounts were capped at £50,000.
New Labour in 1997 reduced the discount to £22,000 outside London and £38,000 in the capital. In 2003 it was reduced further to £16,000 in London.
It estimated that Right To Buy had cost £400 million by 1997.
By 2012 only 2,600 Right To Buy sales took place, compared with a high of 69,500 in 2003-4.
The Coalition government increased the discount cap to £75,000 in April 2012, but this was extended to £100,000 in 2013 as high property prices deterred take-up, and from the next year the discount rose with inflation.
Mr Copley concludes: “Nearly 40 years on, the long-term consequences of the Right to Buy have not built a property owning utopia, but have instead concentrated a significant portion of state funded assets into the ownership of private landlords. Steps must be taken to prevent this from continuing.”
The Conservative government has been well aware of the danger of councils’ expensive major works schemes to its ambitions to expand home ownership.
In 2014 Communities Secretary Eric Pickles introduced Florrie’s Law, named after Florence Bourne, 93, who died anxious at owing £50,000 to Newham council for a badly estimated major works bill.
Council leaseholders were to see major works bills capped at £15,000 in London and £10,000 outside the capital. But the catch was that the works had to involve the use of direct central government funding. These grants have almost completely dried up and LKP is unaware that Florrie’s Law has actually been deployed anywhere since it was placed on the statute book.
It would of course involve yet further subsidy by taxpayers of a minority of people’s dreams of home ownership – as well as a sizeable number of investors.
As Right To Buy’s purpose is to increase home ownership, there is no reason at all why the properties should not be covenanted to owner-occupation only with very restricted opportunity to rent the place out as an investment.
After all, we have seen something similar with the Building Safety Fund: if you own five properties anywhere, then you are on your own when it comes to paying for the building’s remediation.