After Grenfell, Many Londoners Are Stuck With Unsellable Homes
(Bloomberg Opinion) -- There are many problems that we hear little about because the pandemic dwarfs everything. One of them is a British housing scandal that Kafka couldn’t have imagined. It goes back to the Grenfell Tower tragedy, which resulted in the loss of 72 lives in June 2017.
A four-hour parliamentary debate this week put a spotlight on whether Britain can indeed “build back better” when tragedy — this one man-made — strikes. At a time when the U.K. is revisiting its regulatory structure to take advantage of Brexit and planning to “streamline” rules to make things easier for business, it also reminds us of the terrible consequences that this can bring about.
It didn’t take long after the blaze took down Grenfell Tower for investigators to identify the main culprit: Cladding made from a highly combustible aluminum composite material formed an infernal ring around the building. Similar stuff covered apartment buildings all over London, Manchester and other cities.
Cladding wasn’t the only problem. Safety inspections revealed that other violations — from dangerous insulation to cavity walls without firebreaks — also contributed to the Grenfell disaster and could lead to others if not remedied.
There is no way to calculate yet the number impacted but Inside Housing, which has done some of the best reporting on this, reckons it’s more than 600,000 people in tall buildings and “millions more” in medium rise towers. Social tenants (who are government subsidized) are stuck in dangerous properties, while private owners have also discovered that their homes are currently unbankable. People cannot sell them or borrow off them without fire-safe certifications and many now face increased insurance bills and charges for a “waking watch” 24-hour fire patrol.
Many describe themselves as prisoners in their homes. “I go to bed not knowing if my child is safe, whether she’ll be forced to grow up in a tiny flat without any of the little luxuries we’ve worked so hard to give her — or whether we will be wiped out by a cladding bill over which we would have no control,” wrote a new mother in a letter to The Spectator magazine.
The discovery that tens of thousands of other buildings may, like Grenfell, be vulnerable to fires is also affecting an already undersupplied housing market, and threatens to put a hole in the government’s balance sheet that could run higher than the 15 billion-pound ($20.5 billion) estimate for repairs. There’s no doubt extensive replacements are needed. The big question is who pays for it and how to liberate owners and tenants in the meantime.
The government pledged 1.6 billion pounds to fund repairs, but only for buildings over 18 meters high. The real costs are estimated to run at many times that — not least when you include building heights down to 11 meters — and the hazards could take a decade to fix. Removal and remediation work on buildings with faulty cladding has been completed on 58% of public housing and only 30% of private sector buildings.
The issue for private apartment owners is complicated by Britain’s byzantine “leasehold” system, where the building owners (the “freeholders”) are often overseas-registered companies who can drag their heels if they’re handed additional costs.
Michael Wade, an insurance specialist brought in by the government, wants long-term, state-backed loans to be given to freeholders to conduct the repair work with the cost passed on to leaseholders (the flat owners) in the form of service charges. This has been decried as a “cladding tax” by furious apartment owners.
A House of Commons Committee report heavily criticized the government’s draft bill on new building regulations, which included leaseholders footing some of the bill for building repairs. Tory members of Parliament have also criticized their government’s inept handling of the cladding crisis. The government is now promising to protect leaseholders and put forward a new proposal.
Any solution needs to free those who want to sell their homes and move. Perhaps a fund of institutional investors could purchase apartments, make the needed repairs and sell them on at a later date, once the cladding problem has been fixed. Given the housing shortage and the long-term attractiveness of these assets, the government should help the market create a natural bridge that gets hapless owners off the hook.
It’s bad enough that the victims of Grenfell Tower and their families have seen little justice or compensation, and it’s still unclear whether those responsible for making the cladding will have to pay up. The inquiry into the Grenfell tragedy — now looking at secondary causes — has heard lots of evidence of how the multinational companies that produced the cladding and insulation were aware their products were unsafe and didn’t reveal the risks to regulators. How much responsibility they bear will be for the courts to determine, though better regulation will help prevent future Grenfells.
The French arm of Arconic, a U.S. industrial company that produced the Grenfell cladding, knew the panels had achieved a Class E (with F being the lowest) rating on French fire tests, but continued to market them as a higher Class B. Celotex, a British subsidiary of France’s Saint-Gobain, sold the insulation in Grenfell after manipulating safety tests. “I went along with a lot of actions at Celotex that, looking back on reflection, were completely unethical,” Jonathan Roper, a former assistant product manager at Celotex, told the inquiry.
Anyone who’s purchased a home knows that it carries risks, including unexpected costs. But the cladding problem is different. Any solution that forces today’s innocent property owners to foot the bill is unfair and politically unwise from a Conservative Party that has long championed home ownership. There has to be a better way.
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
Therese Raphael is a columnist for Bloomberg Opinion. She was editorial page editor of the Wall Street Journal Europe.
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