As the UK government prepares to pass its Fire Safety Act, concerns are growing that it could leave even more apartment owners in limbo.
One of the most brutal aspects of the Grenfell fire disaster is the sheer number of victims it has left in its wake, who now count in their millions. First and foremost, of course, are the 72 residents who perished in the blaze on June 14, 2017, and the loved ones they left behind. Then there are the hundreds of residents who managed to survive the inferno but lost their homes. Many had to wait years for rehousing. Then came the legions of indirect casualties: the millions of leaseholders* who discovered after the disaster that the buildings in which they own their flats may have also been rigged with flammable cladding and insulation materials.
Through no fault of their own, they have found themselves trapped in apartments they cannot sell. In buildings that could be highly inflammable. Since the introduction of the External Wall Fire Review form, or EWS1, in December 2019, banks have refused to offer mortgages for the purchase of any properties in high-rise apartment buildings (above 18 metres) that do not have one of the forms. Then, in January 2021, the government issued a poorly conceived “advice note” that extended the crisis to 1.3 million flats in 88,000 blocks taller than 11 metres high.
Making Matters Worse
Ostensibly intended as a means of recording what assessment has been carried out for the external wall construction of residential apartment buildings, the ESW1’s most notable impact has been to trap millions of leaseholders — including many first time buyers — in financial hell.
In a recent survey conducted by BBC Newsnight, 16% of respondents said they have either been directly affected by the crisis or know someone who has. Many have had to pay hundreds of pounds a month to cover the costs of round-the-clock fire-patrols. Home insurance costs have exploded. Many have also paid for a safety inspection, so that their building can finally qualify for an EWS1. But if their building didn’t make the grade, they have had to pay tens of thousands more to have the flammable insulation and cladding materials replaced and other fire risks remediated.
One first-time buyer was recently landed with a bill of more than £200,000 to rectify fire safety defects — almost as much as the price she paid for her flat. According to a recent article in The Times (behind paywall), around 3 million people are currently stuck in limbo as a result of the crisis. That number could be set to grow even larger, if the UK government’s Fire Safety Act (FSA) passes in its current form, warns independent cladding expert Jonathan Evans, who blew the whistle on the cladding crisis just after the Grenfell fire.
A former technical committee chairman of the Metal Cladding and Roofing Manufacturers Association and CEO of the cladding company Ash & Lacy, Evans is scheduled to address MPs and peers at an all-party parliamentary group on Thursday, where he will warn them that “this document must not come into effect”. Rather than streamlining processes, the new bill could end up making the crisis even worse, as a new code of practice for checking walls for fire risks — the so-called PAS9980 — risks lumbering even more people with homes they cannot sell and bills they cannot pay, Evans told The Times.
In the next few months the Fire Safety Act will make it a legal requirement to check the external walls of all blocks with two or more flats — even sub-divided period homes. The PAS 9980 is due to replace the government advice that triggered the mortgage crisis later this year. If most assessors choose to use the new PAS, or “publicly available specification”, which the government commissioned from the British Standards Institute (BSI), it could affect almost 12 million people in all 4.9 million flats in England, of which two thirds are private leasehold.
“There will be a huge queue. There will be people who can’t afford the assessments. There will be people who are stuck in limbo. It will jeopardise property sales,” Evans says. He adds that PAS 9980 is “terrible news” for people in smaller blocks, who pinned their hopes on the July announcement by Robert Jenrick, the housing secretary, that buildings under 18m would no longer need an EWS1 form…
Evans believes this code, which is voluntary, will be “a catastrophe for residents and property owners that could lock up the market for flats for years”. On Thursday he will warn MPs and peers in a speech at an all-party parliamentary group that “this document must not come into effect”.
The cladding crisis has already triggered a collapse in sales of a significant slice of the UK housing stock. If sold for cash, affected properties — and there are up to 1.3 million of these flats — sell for as little as one third of what the owner had paid. As flats are often the first step on the UK housing ladder, this has set off ripple effects across the whole housing market. For instance, most first-time buyers who had purchased property using the UK government’s help to buy scheme are now unable to sell their properties. If their parents served as guarantors on the mortgage, they too are now in trouble.
The Bank of England has already voiced concerns about the banks sitting on loans backed by those properties. Behind the scenes private banks are saying that it’s in no one’s interest to seize up the housing market. They are also pressuring the government to withdraw its controversial advice note, and exempt smaller blocks from fire safety checks.
Another major flaw with the new 183-page document (PAS 9980) is its lack of clarity. Despite laying out in exhaustive detail what could be wrong with walls, it does not say say what is acceptable, says Evans. Instead, it should focus on what is most important: identifying the buildings with external walls that could be prone to “rapid and disproportionate fire spread“. After all, this is what made the Grenfell fire so deadly and destructive:
Another big problem is that there simply aren’t enough qualified personnel to conduct the extensive fire safety surveys on the scale that will soon be needed. The UK has faced a dire shortage of fire safety assessors ever since Grenfell and there’s little sign of that shortage being plugged any time soon. Last year, just 291 engineers were qualified to carry out such checks. A government-funded scheme to train up an additional 2,000 has apparently failed to fill all the slots. Doing the checks “could take years”, Evans says. And that means even more uncertainty in store, potentially for more people.
Current State of Play
The UK’s cladding crisis, now in its fifth year, has already uncovered a litany of fire safety problems afflicting high-rise and medium-rise buildings. And it’s the apartments’ leaseholders — who hold zero responsibility for the problems — who are having to foot the lion’s share of the bill to rectify them. The estimated cost of remediation per property is between £40,000 and £50,000 but it can rise a lot higher than that.
Ministers have offered just over £5 billion in funding to fix inflammable cladding on high rises in England (but not Scotland or Wales). Much more is needed. The assistance does not cover all of the costs for those in high-rise buildings (over 18 metres high), nor has any money been made available to leaseholders in blocks of flats less than 18 metres high, many of whom will have to take out tens of thousands of pounds in loans to cover the costs. As the UK Law Society recently warned, the UK government’s Fire Safety Bill will do little to change that, and could even make matters worse:
“The bill lacks measures to protect such leaseholders against increases in insurance premiums or to cover the costs of safety precautions, such as waking watches.
“Where the bill does require developers to cover the costs of cladding removal, it does not go far enough.
“It introduces a targeted levy on developers seeking permission to build certain high-rise buildings, which it is hoped will generate £2bn over 10 years to fund the removal and replacement of combustible cladding. However, the full cost is estimated at as much as £15bn.
“UK government should provide additional financial support to leaseholders to help cover the costs associated with managing and rectifying the dangerous cladding on their homes.”
The Law Society is also concerned that rather than directly requiring developers to rectify dangerous cladding, the bill instead opts to grant leaseholders with new rights to bring their own litigation against developers.
“A major drawback of this approach is that it only gives leaseholders the right to take action via potentially costly and time-consuming legal proceedings, rather than offering them direct support,” added I. Stephanie Boyce.
“While the liability cut-off date for developers would be extended from six to 15 years, many developers responsible for developing buildings with unsafe cladding have already gone out of business, making any new legal rights worthless.
“In addition, UK government has previously stated that issues relating to unsafe cladding began around 20 years ago, which makes the 15-year cut off insufficient.
As more and more leaseholders — many of them first-time buyers — slide into bankruptcy, succumb to mental health issues and face the prospect of being fleeced by profiteering landlords, the government continues to resist calls to provide more assistance. At the same time, it shields developers, investors and freeholders, including (as Harry Shearer pointed out in a recent post) London’s top landowners, such as the Queen, the Duke of Westminster and the Earl of Cadogan, from the economic fallout of the cladding crisis. These, ultimately, are the government’s prime constituency, having provided a large chunk of the Conservative Party’s funding, and they have a big voice.
The leaseholders do not wield that sort of influence. But they do have a certain strength in numbers. And they hope to leverage that strength on Thursday, as thousands of cladding victims converge on London to vent their anger and frustration at a government that has hung them out to dry. They also appear to have plenty of public support. Just 1% of the people polled by Newsnight said they believe leaseholders should shoulder the costs of the cladding crisis.
In the meantime, the residential fire safety industry remains “in disarray with widespread confusion relating to regulatory compliance, safety, insurance and mortgages,” says Evans. “Decades of corporate influence, weak legislation, inadequate fire test and classification standards overarched by a regulatory determination to ensure that buildings can be delivered as profitably as possible, has manifested itself in a mess that may take many years and an uncharacteristic display of leadership to resolve.”
* Leasehold” arrangements are still commonplace in England, particularly when it comes to apartment buildings with some common land and building use. When an apartment is bought as a leasehold, the buyer is essentially no more than a tenant, albeit one with a tenancy agreement that often lasts for up to a century. The “freehold” — the building and the land — belongs to someone else who is able to extract annual rent on those assets. The freeholder can be the developer, an entity that the developer sold it, a well-heeled private landlord or an institutional landlord such as the insurance behemoth Aviva, which manages pension funds that own dozens of buildings caught up in the cladding crisis and which recently warned the government against taking any action that would “make it unviable for institutional investors to remain in the private property market”. The terms of the leases have become increasingly onerous as global investors have bought up the “freeholds.”