England’s cladding leaseholders could end up with equity stripped out of their homes, warns Welsh minister

By Harry Scoffin

The UK government is to force England’s cladding leaseholders into deals with unfavourable terms as part of a long-term funding solution to the post-Grenfell fire safety crisis, according to the Welsh housing minister.

Julie James, Labour, said on Wednesday that while the Welsh executive had been monitoring the rollout of the £1bn Building Safety Fund in England, she wanted Wales to chart a different course and provide “a decent way forward” in supporting affected leaseholders.

Ms James told the Welsh parliament of her “fear” that ministers and officials in Whitehall were “going to take the equity away from the leaseholders [in England], that’s the truth”.

She appeared to be hinting that leaseholders will be left to pay large sums for cladding removal and other safety-critical works, possibly in the form of state-backed loans that would be cleared from the proceeds of flat sales, potentially wiping out their capital investment.

Noting a modest amount has so far been dispensed – and with the cladding grants anticipated to cover only a third of total remediation costs according to the UK parliament’s Communities Select Committee – Ms James suggested the policy in England on making dangerous private sector flats safe had yet to be settled. “It’ll be interesting to see what happens,” she said.

“But I have a lot of sympathy for the people.”

The Welsh minister’s intervention comes as the Sunday Times revealed 2,957 apartment buildings in England, home to an estimated 186,000 flats, have overwhelmed the scheme with applications to the Building Safety Fund, which had been announced by Rishi Sunak in his first Budget as chancellor of the exchequer in March.

The report said that the total number of unsafe residential blocks in England is understood to be 75% higher than original ministry of housing estimates, which portends major policy change.

Thousands of families trapped as ‘unsafe’ flats paralyse property market

The Grenfell fire is casting a pall over the whole property market. First the fallout hit 30,000 flats with the type of cladding that fuelled the inferno. Now it has exposed 186,000 private high-rise flats wrapped in other flammable materials.

In another ominous development for England’s cladding leaseholders, a Freedom of Information request by Inside Housing magazine asking for the official number of Building Safety Fund applications was refused by MHCLG last week. It was claimed that disclosure would endanger “the private thinking space” of officials and the decision-making process of ministers in Whitehall.

Government refuses to release data on cladding fund to protect its ‘private thinking space’

Inside Housing, news, analysis, and comment about the social housing sector in the UK.

In the Senedd on Wednesday, the long-serving Welsh Conservative politician David Melding, who steps down in May after representing South Wales Central since the start of devolution in 1999, led the debate on the need for a fire safety fund in Wales.

He queried the Labour-dominated administration’s decision to spend all £58 million of its cladding fund money from the UK government on coronavirus when leaseholders were “facing imminent enforcement orders and estimated costs that run from £10,000 to £40,000 in our own neighbourhood here in the Senedd”.

He brought the parliament to silence reading out the words of constituents trapped in the Celestia and Victoria Wharf developments which can be seen from its windows in Cardiff Bay.

Flats fire safety funding offer ‘insulting’

People living in high-rise flats that failed fire safety tests say an offer from the developer to loan funds for improvements “adds insult to injury”. Tests at the Celestia complex in Cardiff Bay, developed by Redrow, found faults including “very poor or non-existent” fire barriers between flats.

“The problem is still massive and unresolved, and you’ve not made any attempts so far to emulate the system in England. Instead, leaseholders must make do with the minister’s sympathy,” he said.

Surveyors find flammable cladding was used on Cardiff Bay flats

Surveyors have found several fire safety risks at an apartment complex in Cardiff Bay, with flammable polystyrene in the walls and a lack of adequate fire barriers. Residents living at Victoria Wharf are facing bills of thousands of pounds to pay for increased insurance premiums and works to make their homes safe from the risk of fire.

Mr Melding was joined by Labour politicians Mike Hedges, who proposed that the government in Cardiff deploys Financial Transactions Capital (FTC) to issue loans to cladding sites, and Jenny Rathbone, who urged Welsh ministers to pay first and settle later with the “errant builders and errant regulators” to spare innocent leaseholders.

Mr Hedges said that a new settlement for funding remedial works would be essential, but must be combined with a transition away from the “feudal system” of leasehold.

He noted “co-operative ownership and co-operative payments”, a legal scheme analogous to commonhold, has been successful in owning interdependent property in New York, Vancouver and Scandinavia, places that cannot be described as “socialist, left-wing parts of the world”.

Ms James said the Welsh executive were “right in the middle” of stepping up its efforts in the fight against coronavirus, with the £58bn part of all the new consequential funding from London that was being funnelled towards the health emergency.

In any case, she intimated that ministers were not in a position to unveil a fire safety fund for Wales which “means that the leaseholder ends up with something at the end of it”.

“We haven’t stepped over it yet because I haven’t got a solution that I personally think does the thing that people want.

“At this point, I’d just like to offer the thing I always say: I don’t have all the ideas here. I’m very happy to work in conjunction with any other member in the chamber who’s got any idea at all of what we could do.”

The minister explained that although mobilising councils to take over dangerous properties and remediate them would address the immediate safety concerns, recouping the costs by way of a land charge on the blocks – or through Mr Hedges’ FTC mechanism – will wipe out the equity of the leaseholders.

 “… it doesn’t solve the problem that they’ve often invested all of their savings and some substantial effort and they end up with nothing.”

In contrast to the approach that she anticipates will eventually be taken in England, Ms James said the devolved administration in Wales is “trying to preserve some equity for the people who are in this situation through no fault of their own”.

“So, there are other issues at play here that are really complex. And your heart goes out to the leaseholders trying to navigate their way through who exactly it is that they’re trying to sue, who exactly it is that holds the responsibility.

“In addition, many of those companies have either gone out of business, or they’ve gone bankrupt, or they’ve gone into administration, and there’s a chain of passing on of the responsibility. It’s one of the most complex things I’ve seen in quite a long legal career … we do need to navigate our way through quite complex straits in trying to sort out what happens.”

The debate can be read in full here:

Plenary 16/09/2020 – Welsh Parliament

The National Assembly for Wales is the democratically elected body that represents the interests of Wales and its people, makes laws for Wales, agrees Welsh taxes and holds the Welsh Government to account.