Phil Whitehouse, managing director, MCI Mortgage Club
At the time of writing this column we are just one week away from the snap General Election that Theresa May called just after the Easter break.
Political parties have been busy unveiling their manifestos and housing, quite rightly, has come up a number of times.
Indeed, for some time now the big issue hitting the headlines was a lack of supply, particularly of affordable homes, and the solution being touted about was to incentivise developers to build more new build homes.
It’s certainly the case that successive governments have failed to meet housebuilding targets and, if they had managed to hit them, we wouldn’t be in as much of a mess as we are today. But let’s not fall into the trap of thinking new builds – at least, those that are being built and sold at the moment – are the solutions to all of the market’s problems. Indeed, I think much more attention needs to be given to the problems that can and often do occur as a result of such properties.
In recent months we’ve seen numerous news stories in the press relating to poor quality new build homes while a study by Shelter found more than half of new build homes had major faults.
Meanwhile of course developer Bovis announced earlier this year it would be setting aside £7m for redress for customers as a result of “poorly built houses”.
Is it really a sensible approach to the housing crisis to essentially throw up homes quickly, even if it means these properties are not suitable to live in? Of course it’s not. By rushing to build houses and not prioritising quality we are leaving ourselves in danger of making things worse, if not now then certainly in the not too distant future.
We also need to take a close look at how these houses are being sold. A large number of new build houses are being sold as leasehold homes rather than freehold. I fail to see any justification for this – except to line the pocket of the freeholder – and as news reports are showing, this can turn into a nightmare for homeowners.
Some developers are selling the freeholds of these properties on to investment firms who are then demanding huge sums of money from ‘homeowners’ wanting to buy them.
Some homeowners are finding themselves effectively trapped, with freeholders often including sneaky clauses in the contracts which dictate that ground rents will double every 10 years or so – effectively rendering the properties unsellable.
According to a recent report by the campaign group the Homeowners’ Alliance 1.577 million owner-occupied properties across Britain are not owned by their leaseholder in the eyes of the law. Worryingly 58% of owner-occupied leaseholders do not know the length of time remaining on their lease and of those that do, almost a quarter (around 370,000 owner-occupied homes) are under 80 years. The cost of extending these is likely to total over £4bn.
The survey also revealed almost half (49%, or 771,000) of all owner-occupied leaseholders have had at least one negative experience of their freeholder or managing agent, ranging from high maintenance or repair costs (24%) to lease disputes that had negatively impacted the value of their property (2%). The Homeowners Alliance says there is set to be a dramatic increase over the coming years as the scale of the ground rent and leasehold house scandal begins to unfold.
Clearly something must be done. We cannot think shoddily built new build houses with unfair and immoral tenures are a good idea. Developers should be incentivised to build quality homes with an emphasis on affordability and value for the buyer. But building new homes should not be our only course of action.
According to a shocking report in The Guardian during 2016 there were more than 200,000 homes with a total value of £43bn that were empty for at least six months. The figures quoted in the article revealed Birmingham was the worst affected city outside London with 4,397 empty homes worth an estimated £956m, followed by Bradford and Liverpool.
How is this now being addressed? We have a severe shortage of home to buy and rent and yet hundreds of thousands of properties are sitting empty across the country.
Why is the government so intent on pushing private developers to build instead of making use of the properties already available? It wouldn’t have anything to do with money would it? Surely not.
Housing must remain a key focus for politicians. It is not right that homeowners, desperate to get on the housing ladder are losing out just because an open and frank discussion on what really needs to be done has yet to be had. Let’s hope whoever is now in Number 10 knows this.