By Lucy Brown-Cortes
LKP has released a draft version of an ongoing report into the economic impact of the fire safety crisis.
The report looks at negative equity and measures the potential financial burden on leaseholders.
The Essential Information Group provided LKP with auction details for a random sample of 110 impacted buildings in Birmingham, Sheffield, Manchester and Liverpool.
Data from December 2019 was provided, yet 47% of the flats were found to have been listed for auction in the last four months. At total of 93.7% were sold for less than their purchase price, including flats purchased in the early 2000s.
Financial modelling suggests that fire safety defect costs and interim fire safety costs will reduce the average value of flats by 17% in London to 63% in the North East. It is clear that there is a stark difference between the impact on those living in London and those in the rest of the country, particularly the North.
As a percentage of household income, remediation costs are expected to account for approximately three times annual household disposable income in Sheffield, Liverpool and Manchester.
LKP will continue monitoring this data with the help of the Essential Information Group, and will provide regular updates to readers and MPs.
Average per flat fire safety defect remediation bill (incl non cladding): £47,500 – £51,000 per flat (ARMA and one of the largest Housing Associations).
• Average monthly waking watch cost per flat: £499 (London); £179 (England excl London). (MHCLG)
• Average insurance rise: 400%. £1,087 average increase per flat. (ARMA)
• Average alarm cost installation: £100,000 per block (ARMA)
• Study commissioned by The Telegraph found 870,000 cladding-hit properties are in buildings above 18m (eligible for funding for cladding remediation only) and 3.7 million problem homes are in blocks between 11m and 18m (eligible for low interest loans for cladding remediation only). It is unknown how many flats are in buildings below 11m (ineligible for loans and/or funding for any remediation).
• Estimated length of time to remediate buildings based on current labour supply and availability of materials. 5-10 years (IRPM).
• LKP random sample of 110 buildings with known fire safety defects found that at least 57% of buildings had flats registered for auction auction post December 2019.
• Significant discrepancy between industry figures and MHCLG assumptions.
• Average remediation costs account for approximately 300% of total average household disposable income in cities analysed by LKP (Sheffield, Manchester, Liverpool and Birmingham).
The LKP report, co-ordinated by Lucy Brown-Cortes :