Leaseholders and Cladding: Greenwich and Woolwich

Matthew Pennycook Excerpts

Monday 16th November 2020 Commons Chamber

[Matthew Pennycook (Greenwich and Woolwich) (Lab)]

May I begin by thanking you, Mr Deputy Speaker, for granting the debate, and the Minister for taking time from his schedule to respond?

The debate concerns a subject of the utmost important to thousands, if not tens of thousands, of leaseholders in my south-east London constituency, and to hundreds of thousands more people across the country. For those who have not followed the twists and turns of this scandal since 2017, it is easy to forget just how staggering the scale of the cladding and mortgage crisis truly is. Its impact on an urban constituency of the kind that I represent has been, and continues to be, enormous. Within Greenwich and Woolwich, the external wall systems of more than 20 privately owned buildings across seven developments have been found to have aluminium composite material cladding of the type found on Grenfell Tower. The external wall systems of a further 59 buildings have been found to contain some other kind of combustible material, and many of those also have significant building safety defects, ranging from non-existent fire stopping to defective compartmentalisation. Thousands of leaseholders in countless other buildings locally—many with no defects whatever—remain mortgage prisoners or have had to absorb the significant costs of intrusive inspections to gain an EWS1 form.

I would be the first to concede that there are no simple or straightforward answers to this crisis, but based on my involvement in scores of cases over recent years, of which there are far too many to cover individually, there are some obvious things that the Government can and should do immediately to better support leaseholders, as well as a pressing need to provide greater clarity on the fundamental issue of leaseholder liability. In my remarks, I intend to touch on three specific areas where I believe decisive Government action is required—namely, public funding, buildings insurance and mortgages—before addressing that more fundamental issue of leaseholder liability.

Turning first to Government funding, while leaseholders will not easily forget the fact that previous Ministers had to be cajoled over several years into making various funding commitments, the public funding that the Government have made available for both ACM and non-ACM remediation is welcome, but further changes will need to be made, and I will speak briefly to three.

It is obvious that the deadlines involved in the building safety fund will have to be revised. The latest statistics released by the Department make clear that only 139 applications have been processed since 31 July—an average of just 17 a week. Even if the process accelerates markedly in the weeks ahead, there is no chance that more than a tiny proportion of eligible projects will have contracts in place by the 31 December deadline, given that the average time taken from the release of funds to having one in place is between 25 and 30 weeks. In responding, can the Minister confirm that he accepts that all the deadlines in the fund will have to be pushed back, including the 31 December deadline and the March deadline for people being on the ground and in place? When can this House expect an update to that effect?

The size of the building safety fund will clearly have to increase. It is well known that the Government’s own estimate is that the total cost of remediating non-ACM buildings will be in the order of £3 billion to £3.5 billion. The current size of the fund is only large enough to cover around 600 buildings, so even if a significant proportion of the 2,784 applications made to date are deemed ineligible or are rejected, it is patently obvious that the £1 billion of funding that has been allocated will still not be enough.

I appreciate that there are good reasons for the Government not to rush to announce additional funding, and I also trust that the Department is trying to make the funds that do exist go further by doing everything possible to convince developers to contribute to remedial costs in ways that do not prejudice applications to it, but it surely cannot be the case, as it is at present, that some affected leaseholders in non-ACM buildings over 18 metres will receive support from the taxpayer while others will not. Again, I would be grateful if the Minister could assure me—I phrase this carefully in order that he might—that the Government have not ruled out additional public support for non-ACM remediation beyond the moneys already committed.

[Florence Eshalomi (Vauxhall) (Lab/Co-op)]

I thank my hon. Friend for securing this important debate on a big issue for my constituents in Vauxhall. On the funds that the Government have made available, does my hon. Friend think the Government should make provide funding for waking watch, for which, in some cases, constituents are being asked to pay in excess of £30,000 a month just to stay in their buildings? Without that, they would have to evacuate the building.

[Matthew Pennycook]

I thank my hon. Friend for that intervention. I agree that the costs of waking watch are absolutely staggering. Leaseholders are already paying those costs, as she makes clear, in a way that is financially unsustainable for many of them. I will pick up on that point later, not only in what I will say on the fund, but in talking about leaseholder liability and whether leaseholders are being protected in the way that has been suggested.

Finally, the scope of public funding more generally must also be revisited. It is Government guidance that is ultimately driving the need for remediation and it is simply not equitable that leaseholders in buildings over 18 metres in height, whether those buildings are covered in ACM or non-ACM cladding, are assisted by the state while those in buildings below that threshold are left to fend for themselves. The Minister must surely recognise that the Government cannot argue that height should not be the sole, or even the—

--- Later in debate ---

[Matthew Pennycook]

As I was saying, the Minister must surely recognise that the Government cannot argue that height should not be the sole, or even the main, determinant of investigations but then make height the main criterion for access to public funding. Nor is it equitable, as my hon. Friend the Member for Vauxhall (Florence Eshalomi) touched on, that leaseholders continue to bear the exorbitant costs, the median of which in London stands at £256 a month per household, of interim fire safety measures either through service charge increases or the draining of sinking funds.

[Elliot Colburn (Carshalton and Wallington) (Con)]

I congratulate the hon. Member on securing this important Adjournment debate. I have a building under 18 metres in Carshalton and Wallington that is similarly affected. Does he agree that it is not the leaseholder’s fault that they are living in a building that has this cladding on it, and therefore any remediation that we offer has to accept that, and we need to support them through the process?

[Matthew Pennycook]

The hon. Member makes an excellent point, which I will pick up on towards the end of my remarks. To my mind, either the Government are responsible, in terms of defective regulation over many years, or builders are responsible, in terms of defective buildings. I cannot accept that the leaseholder, who of all the parties involved bears the least responsibility, is potentially being landed with the costs. The leaseholders I represent cannot understand how that potential still hangs over their heads.

I believe that eligibility for the building safety fund should be overhauled to cover buildings between 11 and 18 metres in height. The Government should re-open the private sector remediation fund for ACM-clad buildings in the same height category, and secondary costs as they relate to any affected building should be covered. I would be grateful if the Minister could indicate whether the Government are at least willing to consider those changes.

Buildings insurance is a growing problem, and the Government must step in to help to find a solution. With the insurance industry moving to limit its exposure on buildings covered in combustible materials of any kind, leaseholders in my constituency are finding it increasingly difficult to keep their buildings insured or, if they are able to do so, they are having to absorb soaring premium costs.

The case of Blenheim Court, a 24-unit development in east Greenwich, is worth citing as it is a good example of what is happening on the ground. Having secured several extensions to its policy as the right to manage sought to progress plans for remedial works, the insurer in question made it clear that the risk involved no longer fell within its underwriting appetite and the leaseholders faced the prospect of seeing their building uninsured, with the heightened risk of repossession that that entailed. Thankfully, at the eleventh hour they secured a policy with a consortium, but at an eye-watering cost of £163,000 for just 12 months’ cover. With the cost of renewals on affected buildings increasing across the board, does the Minister accept that to protect leaseholders adequately the Government will ultimately have to support the insurance industry, in all likelihood by acting as an insurer of last resort, in bringing forward a temporary solution?

I could have had a whole Adjournment debate on the mortgage crisis alone, such is the scale of the problem it is causing across the country and for the housing market. For all the hopes originally invested in it—and let us be clear it was an initiative that the Government were involved in developing even if they decided to distance themselves prior to its announcement—it has been clear for some time that the external wall fire review process has not resolved the difficulties caused within the mortgage lending market through changes in Government building safety guidance.

The guidance is not sufficiently clear. Too many buildings have been brought within the scope of the process. The issues around professional indemnity insurance are too thorny to resolve, and the scale of the remediation challenge is far bigger than originally assumed. The problem cannot be resolved by industry alone—something that I hope the Government have also now accepted. I do not pretend to have the answer, but I would be grateful if the Minister could at least provide leaseholders with some reassurance that his Department is trying to devise a system that facilitates the valuation and sale of properties that have some fire risk or an unconfirmed external wall façade, and to ensure that all buildings can be surveyed within a reasonable timeframe.

There are many other issues I could cover—not least what more can be done to speed up the pace of remediation more generally—but decisive Government action in the three areas I have covered would go a long way to improving the situation for affected leaseholders in my constituency and around the country. However, even if each were to be resolved in short order, that would not entirely alleviate the concerns, because there remains an ambiguity on the fundamental issue of leaseholder liability.

Strip away all the complexity in this crisis and the fundamental questions have always been: how can we make buildings safe more quickly, and who is going to pay to clean up this mess? It has always been my firm view that it would be indefensible—I turn to the point made by the hon. Member for Carshalton and Wallington (Elliot Colburn)—to pass on to leaseholders even a fraction of the £15 billion that the Select Committee on Housing, Communities and Local Government estimates will be required to fully remediate all buildings over 18 metres and the unknown costs of remediating buildings between 11 and 18 metres. As I said earlier, of all the parties caught up in this scandal, leaseholders bear no responsibility whatsoever for it.

Leaving aside the fact that over the past three years countless leaseholders across the country have been hit with huge bills for interim fire safety costs and remediation, and that the Government have entirely failed to protect them, until a few months ago the Government’s stated position, repeated by successive Secretaries and Ministers of State from the Dispatch Box, had always been that leaseholders should be fully protected. The then Housing Minister, the hon. Member for North West Hampshire (Kit Malthouse), set out the position succinctly on 22 January last year, when he made it clear that the Government would

“ensure that leaseholders do not bear the cost of this situation in any circumstance.”—[Official Report, 22 January 2019; Vol. 653, c. 135.]

Fast-forward to 16 October this year, and, in response to a written question, the current Housing Minister stated only that the Government were looking to protect leaseholders from “unaffordable costs”, subsequently defined by one of his colleagues as anything short of bankruptcy. Likewise, in evidence to the Select Committee on 19 October, the Minister for Building Safety and Communities stated plainly that

“some costs would fall on leaseholders—they would not be protected from all costs”.

Hon. and right hon. Members, as well as leaseholders across the country, concluded that the Government’s position had changed, and they worried accordingly.

Today at departmental questions, in a response to a question from the Chair of the Select Committee, my hon. Friend the Member for Sheffield South East (Mr Betts), the Housing Minister argued that there had been no change of position and that the Government are “quite clear” that they “do not expect” and “do not want” leaseholders to bear the cost of remediation. If that is the case, why has Michael Wade been charged with

“rapidly identifying financing solutions that protect leaseholders”

not from costs entirely but from “unaffordable costs”, and why does the draft Building Safety Bill, a legislative vehicle that should have been used to properly protect leaseholders in the way Ministers promised repeatedly from the Dispatch Box, seek instead to render leaseholders liable for defects, irrespective of the terms of their individual leases?

As I stand here this evening, not only are leaseholders more confused than ever about the Government’s position on their liability, but even if it remains the case that—again, I quote the Minister’s words earlier—the Government “do not expect” and “do not want” leaseholders to bear the cost of remediation, the Government actually have to take steps to ensure that that is the case.

Perhaps I am being unduly cynical, but I and leaseholders in my constituency fear that, confronted with a situation where, in all likelihood, more than half the country’s stock of buildings over 18 metres have had or still have some kind of building safety defect that requires fixing, and unprepared on the one hand to openly admit that this crisis is the result of profound regulatory failure under successive Governments but on the other hand not willing to go after developers more assertively on the grounds of mass non-compliance with the regulations in place over many years, the Government have decided that the only way through this morass is for them to cover a small proportion of the costs, to encourage but not compel developers and building owners to bear some of the costs, and to allow the latter to pass on the remaining costs to leaseholders using the mechanisms that the Government will have afforded them to do so.

I truly hope that I am wrong, and if that is the case the Minister has a perfect opportunity this evening to make clear precisely why, but if leaseholders did ultimately end up picking up the lion’s share of the bill, not only would it be an outrage but it would force untold numbers of leaseholders—even if the blow was limited by some form of cap or a long-term payment system—into financial hardship and, in many cases, ruin. For many leaseholders, all but the most superficial costs are likely to be unaffordable.

I will finish by saying this: any Member who has spent any time listening to the testimonies of leaseholders affected by this scandal will know that it is hard to overstate the abject misery it has caused. There is, of course, plenty of anger, but the overriding feeling on the part of leaseholders I have spoken to over the years is one of utter desperation—a feeling driven by the belief not only that they are trapped in their homes physically, mentally and financially, but that they have been all but abandoned by their Government. I hope that in his response the Minister disproves that belief and makes it clear that the people at the centre of this crisis can expect not just comforting words in this Chamber, but action to remediate their buildings, and action that will afford them more protection financially than they look likely to receive at present.

[The Minister for Housing (Christopher Pincher)]

I congratulate the hon. Member for Greenwich and Woolwich (Matthew Pennycook) on securing this important debate on a matter of significant importance not only to him and his constituency but, as we have heard, to the hon. Member for Vauxhall (Florence Eshalomi) and my hon. Friend the Member for Carshalton and Wallington (Elliot Colburn), and to my hon. Friend the Member for Bromley and Chislehurst (Sir Robert Neill) and many other Members across the House. It is a national concern, and I pay tribute to the hon. Member for Greenwich and Woolwich for his remarks and his doughty campaign on behalf of his constituents, and I will try to address the points he raised during the course of my remarks.

First, however, I will provide some context. We established the building safety programme within days of the Grenfell Tower fire, and its aim has always been to ensure that residents of high-rise blocks are safe now and in the future. Our intention has been clear from the outset: that unsafe aluminium composite material of the type found on Grenfell Tower and other dangerous cladding must be removed from high-rise residential buildings. It is therefore our priority to ensure unsafe ACM cladding is removed and replaced swiftly, protecting leaseholders from unaffordable costs.

We want to see the completion of remedial works by the end of 2021, as the Select Committee report recommends. While many responsible building owners and developers—including Pemberstone, Barratt Developments, Legal & General, Mace, Peabody and Aberdeen Standard Investments—have taken action to remediate and fund the remediation of their buildings, some have not. Too many building owners and managing agents in the private sector have been too slow in getting remediation work started, and that is why the Government have intervened with the funding and the specialist support that we have provided. We will not tolerate any further delays. Where building owners are failing to make acceptable progress, those responsible should expect local authorities and fire and rescue services to take tougher enforcement action.

At the end of October, of the 460 identified high-rise buildings with ACM cladding, 363 buildings—that is 79% —have either completed remediation or had their ACM cladding systems removed. If we include the social housing sector, that figure rises to 97%.

We recognise that in London there is a disproportionate number of unsafe cladded high-rise buildings, so we have convened two London summits since September, bringing together the Mayor, key local authorities—including Greenwich—and the London Fire Brigade, to agree an action plan for accelerating the remediation of buildings, and my right hon. Friend the Secretary of State and my noble friend Lord Greenhalgh have been instrumental in that process.

Overall, the Government have set aside, as the House will know, £1.6 billion in funding. That covers the remediation not only of ACM cladding but of other types of unsafe cladding from high-rise residential buildings in the private and social housing sectors, and we have been guided in our approach by the recommendations of the Hackitt report. We made this money available to support the remediation of unsafe cladding, and a large proportion of that support will protect leaseholders from those costs.

We recognise that wider remediation costs will need to be met to ensure the safety of existing blocks of flats. However, as I am sure the House will accept, public funding does not absolve the industry from taking responsibility for any failures that led to unsafe cladding materials being put on these buildings in the first place. That is why we expect developers, investors and building owners who have the means to pay to take responsibility and cover the costs of remediation themselves, without passing on costs to leaseholders. We have heard that some are doing that, and they are to be commended, and others must follow their lead. That is the case for more than 50% of privately owned high-rise residential buildings with unsafe ACM cladding, and we expect developers and owners to step up in similar ways for other kinds of unsafe cladding.

We have always acknowledged that materials other than ACM are of concern, and we have been providing advice on their removal to building owners since 2017. The highest priority has, as we have heard, been the removal of the type of ACM cladding used on Grenfell Tower, because it poses the most severe safety risk, but other unsafe cladding materials must also be removed. As such, and for those cases where costs present a financial barrier to the pace of remediation, we have taken action. In March, we announced that additional £1 billion of funding, through the building safety fund, for the remediation of unsafe non-ACM cladding in the social and private residential sectors. The building safety fund is available for high-rise buildings with unsafe non-ACM cladding, such as those types of high-pressure laminate. We are already working to advance eligible applications to the fund to the next stage so that we can begin the remediation process as quickly as possible. The hon. Member for Greenwich and Woolwich suggested that there were very few processed applications, but I can assure him that there are many more than just a few. I look forward to presenting a fuller report, so that by the end of March 2021 we will see that that funding has been allocated in full, as we promised.

Although this funding is a much-needed step to make homes safer, we still expect a significant proportion of the remediation of unsafe non-ACM cladding to be provided by those responsible for the original work.

[Matthew Pennycook]

I thank the Minister for the detail he has provided in his response. I should make it clear that the statistics are his Department’s own published statistics, so if he has different figures, I urge him to bring those forward in the monthly publication so that we can see them. I am putting figures to him that his own Department has published. On developer liability, the Minister has again said “we expect”. I have sat in this Chamber and heard successive Ministers say that they “expect” developers and building owners to come forward, that it is morally right that they do so and that nothing is being taken off the table, but here we are in the same position many months if not years later. What are the Government actually going to do to compel developers and building owners to contribute more?

[Christopher Pincher]

I assure the hon. Gentleman that we have made significant progress with the processing of the applications. I look forward in due course—I hope it will be soon—to giving him better news than he supposes may be out there.

We have been clear that it is unacceptable for leaseholders to have to worry about cladding remediation costs to fix safety defects in their buildings that they did not cause. That is why—I say it again—where developers or building owners have been unable or unwilling to pay we have introduced funding schemes, providing that £1.6 billion of remediation to accelerate the pace of work and meet the costs of remediating the highest-risk and most expensive defects. We recognise that there will be wider works. We are accelerating work with leaseholders and the financial sector on solutions to deal with those wider works, and we believe that there will be a combination of options to deliver a solution—there will not be a quick fix, as the hon. Gentleman put it. I want to update the House and leaseholders on that set of options as soon as I can.

The hon. Gentleman also mentioned waking watch, as did the hon. Member for Vauxhall. I know that leaseholders have very significant concerns about the costs of interim measures, which have been heightened due to the covid-19 emergency. Waking watch is a short-term tool; it is no substitute for remediation. It is by targeting remediation funding where it is needed most—by removing and replacing dangerous cladding—that we can help make those homes safer more quickly and dispense with waking watches.

However, I recognise residents’ concerns about the costs of waking watch measures and the lack of transparency about those costs. That is why we have collected and published information on waking watches. The data will enable those who have commissioned waking watches to make comparisons and challenge providers about unreasonable costs. We have also identified, as a result of that work, that it can be cheaper to install alarm mechanisms rather than use waking watches. We will, of course, keep the situation under review.