Queen’s Speech

Earl of Lytton Excerpts

Thursday 9th January 2020 Lords Chamber

[The Earl of Lytton (CB)]

My Lords, in her very expansive opening remarks the Minister referred to the Government’s agenda including such issues as housing demand, tenancy reform and the Hackitt report. I wish to address the residential development and construction issues that lie behind housing supply, matters affecting conduct and standards in property and construction normally to be expected in a mature democratic society and with which I am professionally involved.

There are some excellent developers, but debate after report after Parliamentary Question have highlighted aspects of housing delivery where monopolistic and bad practices have eroded trust and good governance and are failing basic standards of delivery to society. Long highlighted have been the poor standard of some modern housing construction and dysfunctional and fragmented construction practices. While the tragedy of Grenfell Tower highlighted retrofits and ACM cladding systems, there have been other construction failures. As with ACM systems, while the freeholders, who may themselves be blameless, ponder how they came to be holding such a toxic parcel when the music finally stopped, the occupiers of these same buildings are locked into their leasehold purchases by the uncertainty of indirect liabilities through service charges. The previous Government are to be commended on their creation of a fund to address this, but the problem at the sharp end, in this and analogous situations, has not yet gone away.

Last September, a modern four-storey block of flats in south London burnt down. It should not have done, but modern homes are still being built with such poor workmanship that their overall performance is little better than that of decades earlier. I have visited new housing where the insulation simply got forgotten, where the details of as-built construction were not recorded or where so many changes of management had taken place during construction that there was no continuity of supervision and definitely no one taking responsibility.

Help to Buy has hugely bolstered the profits of many housebuilders, with one reputedly making over £70,000 gross profit on every home it builds. Part of my work is to act for owners of potential housing land. I have several instances of corrupt and sometimes illegal activities aimed at concocting price reductions. Doubtless, the same approach is used against local authorities. Some immensely powerful organisations run rings around strapped planning departments on viability tests, and on site allocations they can secure improbably large developments in remote locations with no natural advantages or synergy with any existing settlement. As a councillor of my acquaintance might have put it, they are committing the new residents to burning massive amounts of fossil fuels just to get to a place of employment. At the same time, they crowd out SME constructors, which cannot compete with the demands of complex planning and infrastructure.

There are some real scams going on. There are escalator ground rents, where year-on-year ground rent increases are an investor’s dream but a homeowner’s nightmare when it comes to selling and no mortgage lender will touch it. I am glad that the Government are acting on this, but what about rent charges? Here, freehold purchasers find themselves committed to funding a management company that has been crafted to take on all sorts of common or uncommon liabilities which the housebuilder could not be bothered to sort out or the local authority would not risk adopting. The implications hide in obscure legal drafting masked by “free” conveyancing and early years funding, but ultimately are hobbled by long-term contracts with management companies interested only in maximum profit. Parallel developer support to local charities and community projects do not cancel out these evils.

Housebuilding is not the only sector at fault. Some seem to think that the rule of law does not apply to them, or that regulatory standards are optional. They believe that legal agreements do not matter, or that compromising on design or performance in use is victimless. Such failings ultimately cheat the community and purchasers for whom a house is their largest ever commitment. They hide behind special purpose vehicles, disinformation, the principle of caveat emptor, obscure process and so-called construction warranties, when in every other walk of life there are end-to-end product and service delivery liabilities. Moreover, the risk of challenge or enforcement is extremely low.

This looks like sharp practice, and it is time the Government went much further in addressing it. Strict product liability across the board with an enforceable code of ethical conduct and insistence on high standards of design, construction and performance are a minimum. This must lead to better corporate social responsibility and result in—one would hope—transactional confidence, transparency and trust, which is the lifeblood of commerce. Government support to the sector is huge, so they can demand better and they need to organise a spring clean.