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Is the government about to bankrupt thousands of homeowners?

The new scandal about to hit the government

29 August 2020

9:00 AM

29 August 2020

9:00 AM

Within the next year or two, I could go bankrupt. My mistake: to join a government-backed affordable housing scheme and purchase a one-bedroom flat in east London. For the past four years, it has been my pride and joy — not to mention my savings, my pension and my financial future. I was grateful for the government’s help in getting a foothold in the city. But now another government policy is hurtling towards me, against which I have no defence. Nor do potentially tens of thousands of first-time buyers and the owners of affordable housing in my position. It might be the next big scandal to hit the government.

It’s about cladding. Three years ago, the tragedy at Grenfell showed what can happen when you get this wrong: insulation added for environmental reasons turned out to be highly flammable. The residents were living in a death trap, and when a fridge caught fire, the tower block became an inferno. This, of course, raised the immediate question: how many others are living like this? The answer, it turns out, is all too many — 600,000. Including me.

Or so we’re now told by my housing association. We’ve been warned that the cladding covering our block of flats, along with 11,300 other buildings across the UK, is potentially combustible and has to be tested. Should it fail those tests, the cladding will have to be replaced — and that huge financial cost will most likely fall on leaseholders. You might think this is unfortunate, but is it really a disaster? Unexpected expenses are, after all, one of the normal pitfalls of home ownership; in the great Monopoly game of life, you pick up a Chance card that has you buying a new boiler, fixing your roof or treating subsidence. Is cladding so different?

The answer is yes. First, a good survey can protect you against repair bills. There was nothing to protect me against what turned out to be inept government regulations, which allowed flammable cladding to be fitted. Next is the scale of the cost. The new draft building safety bill — due to be examined by a parliamentary committee — makes clear that leaseholders will be liable for sums of up to £78,000, payable within 28 days. Other home repairs are affordable; this would be crushing.


And all the more so because I’m a shared ownership tenant. I own a 40 per cent stake in my flat (my housing association owns the rest, which I pay rent on) but I’m liable for the whole repair bill. To put it mildly, I don’t have £78,000, or anything approaching this sum. We’re not talking about being sent back to the beginning of my financial life — I’d be sent way backwards. It would take me years of work and savings to pay off the debt.

The government has offered some help, but it’s going to fall woefully short. In his March Budget, Rishi Sunak announced a £1 billion first-come, first-served fund on top of £600 million already promised for those affected. However, government officials have admitted the cost will be nearer to £3.5 billion — meaning two-thirds of homeowners will miss out on assistance.

At the same time many housing associations, including Moat, One Housing Group and Optivo, have started writing to leaseholders, warning them that, because of charity laws, flat owners will be liable for remediation work if funding applications fail. As Peter Apps, deputy editor of Inside Housing, starkly puts it: ‘We could face the very ugly scenario in coming months of people who purchased government-backed affordable housing products being bankrupted to cover the costs of removing dangerous cladding.’

It’s not only the threat of a devastating cladding bill that keeps me awake at night. If a building is deemed too unsafe a ‘waking watch’ can be ordered — whereby between two and five people walk around the property, day and night, ready to sound the alarm if they see a fire. Although these were only ever meant to be an interim measure, many waking watches are still in place after more than a year, and costs are spiralling. At Paddington Walk, a development six miles away from me, leaseholders have been charged an astonishing £21,000 per week for a waking watch over a ten-month period.

This has all been exacerbated by the External Wall Fire Review (EWS1) fiasco currently paralysing parts of the housing market — again due to cladding. The EWS1 form was introduced at the end of last year to give mortgage lenders confidence that high-rises over 18 metres were safe; however, in January the government suddenly changed its fire safety guidance to include buildings of any height, even some that don’t have cladding. Without an EWS1 form, owners of these homes can’t sell or remortgage. The result: meltdown. There are only 300 inspectors able to complete the form, leading, it has been warned, to waiting lists of up to ten years. It’s estimated that three million people in private flats are effectively trapped.

Since I can’t sell my home or remortgage because I don’t yet have the form, my property is technically worthless. And there are millions like me wondering what, if anything, we can do. Will we end up like the students in the exams marking fiasco: told that we’re the victims of a Kafkaesque bureaucratic cock-up for whom nothing could be done? I’ve been told that all this could take years to finalise; meanwhile, life is on hold. A generation are being trapped in their homes. None of us has the kind of money to fix things.

It’s hard to overstate the misery this is causing — of the human, not just financial, kind. The stories are starting to be told: a couple who can’t get divorced because valuers can’t begin to estimate the cost of fixing their home; a new mum who can’t get out of her shared ownership house because no one will buy while this mess is unresolved. And those are just the examples people talk openly about. When they do, what strikes you isn’t the anger in their voices, it’s the despair. Suffice to say I’m not surprised by research by the UK Cladding Action Group which found that 14 per cent of affected leaseholders have had suicidal thoughts, and 8 per cent have felt compelled to self-harm.

Affordable housing schemes were seen as a great Conservative idea — to promote a property-owning democracy. I was sold a dream: to work hard, get on the property ladder, get ahead. I took them at their word and now face being ruined as a result. It’s not something that any of us whose lives have been plunged into this nightmare will forget in a hurry.

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