Category: leaseholds

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The Cladding Scandal – a generation trapped?

On YouTube as I speak.

Why you should watch: There may be as many as 11 million people trapped in apartments that are unmortgageable (and hence unsaleable) as a result of building deficiencies revealed after the Grenfell disaster. Remediating those deficiencies could cost well over £10 billion – vastly more than the £1.6 billion that the government has budgeted for.

Who pays?

Legally, at present, it’s the leaseholders – who can face bills up to £100,000, on top of insurance premiums that shot up five-fold. ‘Morally’, it might be the developers – if you can find them. It doesn’t seem to be the freeholders. This is a major issue – economically, financially, socially, and politically. At present, there is point-scoring in Westminster, with Labour demanding that leaseholders shouldn’t pay anything, and Government ministers backtracking a bit from a firm pledge to a softer promise that leaseholders shouldn’t be faced with ‘unaffordable’ bills.

Maybe this is an area where a bit of financial innovation wouldn’t come amiss…

Moderator: Andrew Hilton (Director, CSFI) Panellists: Sir Bob Neill is the Conservative MP for Bromley and Chislehurst. A barrister, educated at LSE, he was formerly a member of the London Assembly and Shadow Local Government Minister. He is chair of the Justice Select Committee, and has recently become chair of an APPG on the cladding issue. Martina Lees is a senior property writer at The Times and the Sunday Times, where she previously spent ten years as a digital section editor. She began her journalistic career as a crime reporter in Johannesburg. Dean Buckner is policy director at the UK Shareholders’ Association, and a trustee of the Leasehold Knowledge Partnership. He is a former insurance data specialist at the PRA and BofE, and, before that, spent a number of years in the City.

 

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Il ritorno d’Ulisse in patria

Question from Lord German in the Lords yesterday.

My Lords, I rent a flat in a block of unsafe flats in London, and I am surrounded by leaseholders who suffer greatly as a result of the turmoil and fear of the consequences. Does the Minister agree that it is now time for a comprehensive financial solution to these matters, not one that tinkers around the edges? Will he tell the House what consideration he has given to the proposal he received last week from lawyers and financial advisers on behalf of leaseholders for a special purpose vehicle that would provide the £12 billion shortfall that the Government say they are unable to meet from public funds?

Reply from Lord Greenhalgh:

My Lords, I am happy to report that I spent a considerable amount of time being briefed by Dean Buckner, who is at the heart of those proposals, the Leasehold Knowledge Partnership, and the APPG on Leasehold and Commonhold Reform. I can also say that Michael Wade has been asked by my right honourable friend to look into this matter. There was a huge amount of similarity in thinking on how to move forward. In fact, we learned a lot from the discussions. At the moment, I cannot say exactly what will be put forward. That matter is obviously above my pay grade, but we are getting there.

Blimey.

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Can’t pay and shouldn’t pay

A great article in the Telegraph today about a proposed solution to the cladding crisis that has blighted the lives of millions of homeowners.

In a report which will be released later today, experts will call for the Government to establish a “special purpose vehicle” that would raise funds on the bond market. This cash would be used to pay for cladding repairs and the bond would be repaid over time via a levy on the industry.

This would require a new tax on property sales and a levy on the freeholders which own many cladding-hit blocks. It also proposes additional taxes on non-dom and foreign buyers. From April, overseas buyers will pay a 2 percentage point stamp duty surcharge and the report said this should be increased further.

I (DB) am extensively quoted in support of the proposal.

Dean Buckner, a former Bank of England economist who helped design the proposal, said it would help leaseholders avoid ruinous charges but also ensure it was not funded by the public purse. It would also avoid a one-off “windfall tax” on house builders, which may be viewed as unpalatable by the industry.

“Asking leaseholders to pay is like asking the victims of a plane crash to pay for repairs to the aeroplane,” he added.

I am presenting the proposal to the All Party Parliamentary Group on Leasehold Reform later today, and the full report should be available soon.

[EDIT] Presentation went VERY well, which you can view here.   Passcode U$p0+snF

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Louie Burns

I was very sad to learn of the death of my Leasehold Knowledge colleague Louie Burns this weekend.

Louie was one of the country’s leading campaigners against the injustices of the leasehold system.  He was, as they say, a larger than life character, and could light up any group that he joined.

I worked with him on the setting of the deferment rate, a subject on which he campaigned tirelessly. The world of leasehold will be a darker place without him, but the campaign will go on.

RIP Louie.

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Persimmon appoint Bank of England Chief Operating Officer to their board

Persimmon confirmed that Joanna Place (Chief Operating Officer at the Bank of England for three years) will be taking a place on the Persimmon board as an independent non executive director (link).

There is some interesting stuff about Persimmon on Leaseholder Knowledge here.

Help To Buy cheat Persimmon racks up £1bn profits – and spread the plague of leasehold houses around the country

Persimmon is to make a £1 billion profit thanks to taxpayers pouring in money through Help To Buy to get young first-timers onto the property ladder. And in return, what? The company has been the main offender in spreading leasehold houses around the country, creating homes which include an investment asset for someone else. So, taxpayers have been subsidising the investments of private equity speculators in residential freeholds, who hide their beneficial ownership behind nominee directors and are often based offshore.

That was this time last year. I’m sure everything has been sorted out now.

Earlier this week David Blanchflower, a former member of the Bank’s influential monetary policy committee, called for Place to resign after a security breach that gave some speculators early access to an audio feed of market-sensitive press conferences.

It looks like the buck doesn’t stop at the top,” he said. “This needs to be fully investigated by the Treasury select committee.

All in good time.

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The value of merged interests

The BBC leasehold programme will be broadcast on Moneybox today at 12:04.  The accompanying article is already available here, and has already attracted the ire of ‘property guru’ Richard Lovell on Twitter.

The ignorance of a BoE regulator is frightening … The principle of merged interests being worth more than the sum of the individual parts is well known in finance and commerce. It’s the justification for M&A! What quality regulation?

Continue reading “The value of merged interests”

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Bits and pieces

A fair bit going on in Eumaeus world right now. More later. For the moment:

  • The Radio 4 Moneybox programme at 12:00 tomorrow will have an item on the Law Commission report on leasehold enfranchisement published on Thursday. I (DB) am featured trying to explain the no-arbitrage principle without using any technical term such as time value, discount rate etc.
  • Ian Mulheirn has a great piece out here on a recent Bank working paper by Victoria Monro and David Miles, the main conclusion of which is that, relative to incomes, the rise in house prices between 1985 and 2018 “can be more than accounted for by the decline in the real risk-free interest rate observed over the period”. Ian comments “Stop me if you’ve heard that before”. Indeed, and see our post from September 2018 on the same subject.