Double blow for cladding victims
Loans to fix dangerous panels can wipe 30% off home value
PROPERTY values could be slashed by 30 per cent under plans to make leaseholders pay for the building safety scandal through long-term loans.
Hundreds of thousands of leaseholders face bills of around £40,000 each to replace dangerous cladding similar to that on Grenfell Tower.
Ministers have set aside £1.6billion to fund repairs, but MPs estimate they could cost £15billion. The work cannot begin properly until funding is released.
The Daily Mail is campaigning for all buildings to be fixed within 18 months and for leaseholders to be spared the bill.
But proposals by a Government adviser could force freeholders to cover the costs through a 30-year loan. They would then charge leaseholders higher service fees
‘Devastate the market for flats’
to pay for it. But critics warn any outstanding debt would be cut from the value of homes when leaseholders sell.
Unless the Government subsidises the scheme or developers are forced to contribute, the typical nationwide value of a flat would be cut by around 20 per cent, from £209,330 to £169,330. In the North East, where property values are lower, it would slash 30 per cent off the average £136,261 flat.
But some leaseholders have already been sent bills of £115,000, meaning the value of their homes could be wiped almost entirely.
In July, ministers appointed insurance executive Michael Wade to advise on how to protect leaseholders from unaffordable costs without further burdening the taxpayer. He has told the All-Party Parliamentary Group on Leasehold Reform he was examining the idea of long-term loans. He said it was for politicians to decide who pays for the loans, but added: ‘The leaseholder has to pay, that is the law. You then have to focus on how that is paid and how is that burden paid for, who pays for it and what’s the share.’
Campaigners say the Government and developers must share the burden. The Leasehold Knowledge Partnership charity (LKP) said Mr Wade’s interpretation was ‘ fundamentally unfair’, giving leaseholders unlimited liability. It warned that the idea would ‘devastate values of less expensive properties’ and ‘the market for flats for the foreseeable future’.
Property expert Henry Pryor said it was like buying a home ‘with ball and chain attached’, adding: ‘They need a bigger solution than putting a large annual cost on the property. It doesn’t work.’
James Chisnall, of City Finance Brokers, said it could lead to a ‘double whammy’ if it is taken into account in mortgage assessments. He said if a loan was paid with increased service charges, lenders may subtract that from a borrower’s income, thereby reducing the size of the loan they can afford.
The LKP wants the Government to impose a levy on developers that would provide a repair fund. Its adviser, former Bank of England economist Dean Buckner, said the taxpayer would match developer contributions. Backing the Mail’s campaign, Clive Betts, chairman of the Commons housing select committee, said: ‘Hundreds of thousands of people are trapped in potentially unsafe homes. They are looking for a champion. I have every expectation the Mail will provide that.’
A Government spokesman said: ‘Building safety is the responsibility of building owners. They should seek the costs of remediation work from developers... without passing them on to leaseholders.’