The costs fall on leaseholders, who are least able to pay and not remotely to blame for the crisis while the government protects builders, developers and cladding manufacturers.
On Monday evening, the House of Commons had a golden opportunity to make the lives of millions of lower income people materially better. All they had to do was pass a proposed amendment to the Fire Safety Bill that sought to ban leaseholders* from bearing the costs of cladding remediation. Those costs could rise as high as £15-20 billion in the coming years. The government’s bill placed the responsibility for removing cladding on leaseholders, but peers in the House of Lords proposed a plan that would force the government to pay the initial costs before recouping them from developers, construction firms and cladding manufacturers.
In all likelihood, it’s the second part of the plan — in which builders and manufacturers shoulder the burden — the government objected to. Despite a rebellion by 29 Tories, the House of Commons rejected the amendment by a margin of 322 votes to 253.
A Fitting Legacy
As a result of the vote, the brunt of the remediation costs will now fall on those who are least able to pay and who hold zero responsibility for the problem in the first place. They are the victims, not the offenders, of the UK’s cladding crisis. This is the sad, twisted but predictable legacy of the Grenfell Tower fire, which claimed the lives of 72 people on June 14, 2017. Their lives never meant much to the government. Nor, it seems, does the welfare of the millions of people who live in similarly fire-prone buildings.
If the bill passes the House of Lords, leaseholders in blocks of flats less than 18 meters high will have little choice but to take out tens of thousands of pounds in loans. The estimated cost of remediation per property is between £40,000 and £50,000. The value of the apartments is sinking as insurance premiums and service charges soar. Lenders are refusing to write mortgages on affected properties, which further limits their options. To avoid bankruptcy, some are selling at a big discount to cash buyers.
“Interim costs at the moment are bankrupting leaseholders up and down the country,” said Conservative MP Stephen McPartland ahead of the vote. “Leaseholders are screaming for help, they are screaming in pain and what are we doing? Today we are saying to them ‘Thanks for paying the interim costs, once you’ve finished that we’re now going to load you up with remediation costs on top’ – tens of thousands of pounds that people just don’t have the funds for.”
In the wake of Grenfell, it became quickly apparent that thousands of tower blocks across UK towns and cities had, like Grenfell, been rigged with highly flammable insulation and cladding and were essentially multi-storey death traps. Those living inside these buildings, as well as smaller structures with similar problems, have had their lives upended. Most of the buildings have yet to be inspected, leaving their occupants trapped in financial limbo, in buildings that may also be a firetrap. A survey by the UK Cladding Action Group found that nine out of ten cladding victims say their mental health has suffered.
Many are on the brink of financial ruin. According to a survey by Inside Housing, one in six are exploring bankruptcy options and 62.5% face repair costs of more than £30,000. As if that were not enough, many are also having to shell out hundreds of pounds a month — in addition to the mortgage payments and other costs — to cover the costs of round-the-clock fire-patrols (“waking watches” as they’ve come to be known) to make sure the building they occupy doesn’t suddenly go up in flames.
Zero Responsibility for the Real Offenders
Naked Capitalism has been following developments closely ever since the Greenfell Tower fire (most recently here, here and here). In the previous article Lambert laid out some of the most disturbing revelations of the ongoing Grenfell Inquiry, including the behavior, actions and motivations of the multiple actors that ultimately paved the way for the fire:
- Cost cutting by Grenfell’s Building Control Board, the Kensington and Chelsea Tenant Management Organisation (KCTMO). Determined to cut costs and corners in its refurbishment of Grenfill Tower, the property’s landlord, KCTMO, swapped more expensive zinc cladding panels for aluminium alternatives. Aluminium composite cladding usually comprises a layer of highly flammable plastic sandwiched between two aluminium sheets. This became the main cause of the spread of the fire that claimed 72 lives.
- Manipulated safety tests and fraudulent product claims by the three cladding and insulation manufacturers, Celotex (from France), Kingspan (from Ireland) and Arconic (from the US). The inquiry revealed that all three firms manipulated the fire safety tests in order to get their highly inflammable products certified for use in high-rise buildings. Internal emails have shown that employees at all three firms knew about the huge safety risks posed by their products but sold them anyway.
- Widespread incompetence and conflicts of interest at government and standards bodies, including the British Research Establishment, the British Standards Institute (BSI) and British Board of Agrément (BBA), all of which were privatized in the years preceding the fire. The Fire Brigades Union has published a damning indictment of the revolving door between construction firms and regulators. The Labour government also played a part in paving the way to the Grenfell fire by lifting a ban on combustible insulation for high rises in 2006.
For the moment, none of the organizations, companies or individuals that bear responsibility for Grenfell have paid a price. In fact, The Guardian revealed last week that a UK subsidiary of Arconic, three of whose employees refused to give evidence to the inquiry, tapped UK taxpayers for £500,000 under the furlough scheme.
As for the government, it has thrown leaseholders a few crumbs of comfort in recent months. After all, it doesn’t want to come across as completely insensitive to their plight.
In February, ministers announced an extra £3.5 billion in funding to fix inflammable cladding on high rises in England (but not Scotland or Wales) — on top of the £1.6 billion already earmarked last year. But it’s still a fraction of what is needed. As The Guardian reports, the funding does not cover cladding removal work on low-rise buildings (of six stories or less). The government instead unveiled a scheme to offer loans to fix cladding issues in these buildings. Also not covered are fire safety assessments (though the Scottish government has agreed to stump up the cash for Scottish leaseholders); other fire safety problems that are emerging as blocks undergo inspections; problems with balconies; the cost of “waking watches”; and increased insurance premiums.
In the meantime, the financial limbo affecting millions of homeowners is setting off ripple effects across the UK’s housing market. Lenders have refused to offer loans for any properties in high-rise buildings that have been flagged as firetraps or have yet to be inspected but could prove to be firetraps. As a result, the vast majority of the UK’s high-rise apartments, which sit at the bottom of the property ladder, are for the present moment impossible to sell or buy, apart from to cash buyers at much lower prices.
* When an apartment is purchased as a leasehold, the buyer is little more than a tenant, albeit one with a tenancy agreement that typically lasts for up to a century. The “freehold” — the building and the land — usually belongs to the developer or another entity that the developer sold it to. They are able to extract annual rent on those assets. The terms of the leases have become increasingly onerous as global investors have bought up the “freeholds.” The government has finally been shamed into at least pledging to change this archaic system.