Housing (Poplar and Limehouse)

Jim Fitzpatrick Excerpts

Wednesday 31st October 2012 Westminster Hall

[Jim Fitzpatrick (Poplar and Limehouse) (Lab)]

It is a pleasure to see you presiding in the Chair this morning, Mr Crausby, especially as you are wearing the beloved claret and blue. I hope that we will see Bolton back in the premiership soon, because then you can come back to Upton Park and see some decent football. It is also a pleasure to see the right hon. Member for Bath (Mr Foster) in his place as the Minister. He played a prominent role in the arrangements for the 2012 Olympics over many years and is very highly regarded. Although this matter is not exactly in his brief, it is a pleasure to see him and I know that he will take my request back to his colleague, the Minister for Housing.

After making a few brief comments about housing in general in Poplar and Limehouse and Tower Hamlets, I want to raise two issues: the governance of One Housing Group estates on the Isle of Dogs; and the question of leaseholder reform and the operation of housing management companies.

In Tower Hamlets, more than 20,000 families are on the waiting list. Thirty years ago, 95% of our housing stock was council owned, and that figure is now nearer 60%. Two specific matters impact directly on the communities that I represent. First, the 80% market rent is, I understand, an attempt to fulfil an ambition to make tenants pay a fairer amount for their property, but as property prices in London are much higher than elsewhere, there is a degree of distortion. Property rents around Canary Wharf, in the heart of my constituency, are even higher, which means that there is a disproportionate impact on affordability levels. Of course, the reduction in housing benefit will have a further impact.

Secondly, there is the problem of density. Tower Hamlets already has one of the densest population levels in the country. When I was elected in 1997, there were 11,000 voters on the Isle of Dogs, and in 2010, when I was re-elected, there were 23,000 voters. The figure has doubled in less than a generation, and massive developments are still planned for the Isle of Dogs, upon which Canary Wharf sits. There is a lot of local concern about the pressure on infrastructure, transport, health services, schools and so on. I hope that the Government are keeping an eye on that, even though it is the council’s job to approve, with the Mayor of London, the planning applications and the overall strategy.

One issue on which I want to focus is the governance of One Housing Group, the history of which relates to the stock transfer of council estates to registered social landlords. In my constituency, there were, I think, 17 successful stock transfers—out of 23 ballots—in 10 years. There was a massive shift in ownership from council to housing associations. One successful bid was for the four council estates on the Isle of Dogs. Residents voted by transfer to join Toynbee Housing, which failed miserably and was basically disestablished and subsumed into Community Housing, which became One Housing Group.

Some of the people who were on the original board were alleged to have broken rules and breached financial regulations. Tower Hamlets council did not monitor the situation as effectively as it should have done. The matter was pursued by two colleagues from Tower Hamlets council, Councillors Marc Francis and David Edgar. Promises were made in the offer document to tenants that had explicitly said that Island Homes would have a resident majority on the board of 15 members and that the four estates that had transferred were to determine the methods by which each of their two representatives would be chosen. Frustratingly, Tower Hamlets council lawyers failed to include that promise in the governing arrangements and the legal agreement. As a result, the whole thing went pear shaped. It was only after Tower Hamlets voiced its concern that One Housing Group agreed to restore the resident majority on the board of Island Homes, but it continued to refuse to allow tenants and leaseholders to determine that representation.

Earlier this year, One Housing Group notified me and the local authority that it intended to wind up Island Homes and replace it with area resident boards, which will have no decision-making powers. Disappointingly, the executive mayor of Tower Hamlets, Councillor Rahman, decided against challenging the legal basis for that decision. Questions have been asked about the votes that determined the course of events, with One Housing Group quoting numbers to validate its action. There have also been questions about the honesty of the ballot. In a report sent to Tower Hamlets council, 796 residents are said to have voted on the proposal, with 640 in favour and 132 against. On closer inspection, however, 255 of those voting are residents not of Island Homes, but of other One Housing properties on the Isle of Dogs.

Former council tenants on the four estates have found their homes being owned by a very different landlord from the one whom they had been promised in the transfer ballot some years ago, and they still feel quite aggrieved. The matter has not been helped by the fact that One Housing did not initially perform well in terms of repairs, refurbishments and improvements. That performance has improved, but still a bad taste has been left.

In a response from the previous Housing Minister, I was told that from April 2013, local councillors will have a formal role in the resolution of social housing complaints at a local level. That provides some reassurance, but it will not happen until 2013. At the moment the complaints that residents have made to the Homes and Communities Agency and now to the Financial Services Authority are basically in a cul-de-sac and do not appear to be going anywhere. I do not think there is anything that the Minister can helpfully add to resolve that matter. I am flagging up the anomalies in the procedure and the system and, despite the promises made, a lack of protection for residents. I will obviously be looking closely at the 2013 regulations, as will my councillor colleagues.

Leaseholding is a growing home ownership style in Poplar and Limehouse, which is coupled with the introduction of estate management companies. I am talking about not just right-to-buy properties, where tenants exercise the right to buy their previous council property, but new, fashionable blocks around the Canary Wharf estate, which have freeholders offering leasehold contracts of between 99 and 999 years. That creates a whole new cadre of house owner in the country.

Yesterday, the hon. Member for Worthing West (Sir Peter Bottomley) convened a meeting at which the agenda title was, “Leasehold exploitation.” I recommend that the Minister read, “A new lease of life”, which is compiled by CentreForum, with which he will be familiar because it is, I believe, a Liberal Democrat think-tank. That should not detract from the fact that it is a good and useful piece of research. It clearly lays out the nature of some of the problems.

Those at the meeting included a former Tory Cabinet Member, former Ministers and MPs from all parts of the House as well as their staff. The speakers represented the sector, different parts of the industry and people who have been through the land valuation tribunal procedure. There was also a representative from the Greater London Authority, a Conservative member from Sutton in south-west London.

The GLA Planning and Housing Committee has just produced a report that estimates that there are some 500,000 leaseholders in the Greater London area alone paying service charges worth some £5 billion. The report, which has unanimous support from the four political groups on the GLA, basically says that the regulation is not fit for purpose. It also says that there is massive opportunity for bad practice in the sector, which must be addressed. Which? magazine has calculated that leaseholders were overcharged to the tune of £700 million in a recent year, which is a very significant amount of money. Also, a management agent was recently sent to prison for 30 months for the theft of £122,000 of leaseholders’ money. Apparently, the Prime Minister himself has been involved in trying to disentangle a leasehold and freehold dispute in his constituency at a residential retirement home. Many people think this issue is just about elderly people and pensioners, but it actually covers people of all ages and backgrounds.

The House of Lords has already had debates on the issue, raised by Baroness Gardner of Parkes. The hon. Member for Worthing West has raised the issue in a debate in the House of Commons. In addition, there have been two Channel 4 “Dispatches” programmes on the subject. All of that indicates that this is an issue of some importance, about which, I respectfully suggest, the Government are in denial.

The previous Labour Government introduced some leasehold reforms in 2002, but they are patently inadequate for the growing sector that exists 10 years later. The issue affects hundreds of thousands of home owners across the country, including thousands in my constituency of Poplar and Limehouse.

Several recommendations were suggested at yesterday’s meeting. I will quickly run through four of them, before I finish. The first is

“For the Government to enable sections 152 and 156 of the Commonhold and Leasehold Reform Act 2002.”

Those sections have not been enacted adequately, which is an issue that we want to see addressed.

The second recommendation is:

“To address the unfairness in Leasehold Valuation Tribunals where leaseholders legal fees are capped at £500, whereas those of the freeholder are unlimited (and can be reclaimed in the residents’ service charges after a win).”

At yesterday’s meeting, a case was referred to in which a resident won a victory at the leasehold valuation tribunal and had the £31,000 that was being sought by the freeholder struck off, only to find that that £31,000 reappeared as an administration charge on his service bill for the following year. Clearly, in some instances freeholders are flouting the regulations.

The third recommendation is:

“Parliament intend for ‘right to manage’ to be a right: unless there is a compelling reason to oppose it, leaseholders should be granted RTM. But Leasehold Valuation Tribunals are often being used to thwart RTM on trifling grounds. The Government is urged to review and remove the anomalies in the RTM legislation.”

Service charge payers ought to have the ability to sack a poor performer by a majority vote that is patently demonstrated, but that ability is being frustrated time and again.

The fourth recommendation is:

“Leasehold managing agents need statutory licensing and regulation. This regulation needs to be entirely separate from the existing compromised trade bodies.”

Estate management companies perform very important work, arbitrating between freeholders and leaseholders, and one would think that such work required legal expertise or some kind of legal qualification. However, there is no requirement for members of estate management companies to demonstrate such expertise or such qualifications to anybody’s satisfaction. Members of estate management companies manage hundreds of millions of pounds of other people’s money, but once again there is no requirement for them to have legal or statutory qualifications in accountancy, and—as I understand it—they are not regulated by the FSA. Such estate management companies can just set up and be there.

Estate management companies can also appoint contractors and award business, and their responsibility is to maintain the fabric of our communities. I live on an estate managed by Consort, which used to be Peverel OM; Peverel OM used to be Peverel. The company gets a bit of a reputation and, to avoid its image being tarnished, it keeps changing its name. It is the biggest estate management company in the country, handling hundreds of millions of pounds. I am a freeholder on my estate, but there are also hundreds of leaseholders on the estate. The company’s team on my estate is managed by Mr Stefano Leonardi and it is very good, but we are not talking about day-to-day management. Instead, we are talking about the national structure, the regulation and the transparency of this sector, which vary at best and are lacking at worst.

A great flowchart was produced at yesterday’s meeting, demonstrating that a developer’s parent company can build an estate. The developer then has the ability to sell the properties to the landlord, as freeholder; it appoints the managing agent; it appoints the insurance provider; it appoints the other service providers; and the leaseholders are at the bottom of the pile. Clearly, that is not a healthy situation in any way, shape or form.

To conclude, I am grateful to the Minister for being here today and for listening. I will make a request of him, which comes from the meeting yesterday; I hope that he will take it back to his colleague, the Minister for Housing. The meeting resolved yesterday to ask the Minister for Housing and his counterpart at the Ministry of Justice—the Minister for Policing and Criminal Justice—to meet with interested colleagues and experts on this subject to examine how to improve the arrangements that exist, to strengthen protections for leaseholders and to raise the standards in what is a very important sector. This is not a “quick fix” situation; these are very complex issues. Everyone knows how completely opposed the Government are to any new regulation, but this is a growing sector that is much more significant than it ever has been. Clearly, there are loopholes that allow for exploitation and there are horror stories in pretty much every constituency in the country.

At some point, the Government have to grasp the nettle, sit down with people and see how we move the issue forward. As I have outlined, there are some very simple recommendations for improvement and there are some very good estate management companies in this sector that want to see regulation and licensing being introduced, for their professional reputation as well as to protect the people from whom they are taking money.

As I have said, I am grateful to the Minister for listening. The One Housing Group issue is not going away. I have written to the HCA and the FSA; councillors in my area will continue to press on this issue; and local residents will continue to be frustrated and will express concern. However, that is all happening in a different arena from this one. This issue is very much in the Government’s hands and I would be very grateful if the Minister could take the message that I have given him today back to his colleagues at the DCLG.