Will developers reach a satisfactory cladding deal with Michael Gove?

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UK developers and the housing secretary Michael Gove are nearing a deal that could resolve a large part of the building safety crisis highlighted by the 2017 fire at London’s Grenfell Tower – a horrendous fire that killed 72 people – reports the Financial Times (FT).

Mr Gove has been pressing the sector to release more funds for fire remediation work on mid-rise blocks between 11 and 18m tall. The housebuilders and the UK government have been locked in talks since the start of 2022 and there are now signs that progress is being made.

The cost estimates

It has been estimated by Mr Gove’s department – The Department for Levelling Up, Housing & Communities – that the cost of addressing safety issues on blocks in this height range at £4 billion. His idea is to have the developers pay by imposing an annual levy on the sector that will be used to repair the affected buildings.

One developer, UK housebuilder Crest Nicholson, has announced that it is planning a big increase in the amount it is setting aside to fix flats with fire safety problems – a sign that Mr Gove’s tough stance is having some success, says FT.

The FTSE 250 company has said it is willing to set aside between £80 million and £120 million for alterations to any of its mid-rise buildings that require fire safety work. This amount of spending would be substantially above the £47.8 million it has already paid out to deal with the safety issues.

Crest Nicholson is the first builder to make an announcement that it had signed up to the pledge and to put a figure on the forecast cost of remedial work. The pledge has since been followed by three other major UK house builders: Taylor Wimpey, Persimmon and the Berkeley Group.

Taylor Wimpey is making provision for an additional £80mn on top of around £165mn it has already provided for fire safety work, while Persimmon has promised to remediate every mid-rise block with fire safety issues that it has built in the past 30 years, without increasing its already announced provision of £75mn. Berkeley, it seems, has not disclosed its estimate of the cost of providing its own remedial fire safety work, but crucially it has made the commitment.

More house builders are now expected to follow these leaders after Mr Gove gave the sector until the end of March to come up with a fully costed plan to remediate mid-rise buildings they are responsible for.

Another developer, Bellway, has indicated that its remediation costs could be almost treble the £187mn it had already set aside, but it has not come up with the exact figure.

No further Government work

Developers have been told that if they do not sign up to the pledge they will be locked out of government housing funds and the planning process in the future, a measure that would severely limiting their ability to operate successfully.

Since he took over from Robert Jenrick as housing secretary in September 2021, Mr Gove has ramped-up the pressure on housebuilders to resolve the cladding fire safety crisis that has left tens of thousands of homeowners and some landlords facing potentially life changing costs. They are stuck in properties (mainly high rise flats) with fire safety problems that are making them effectively unsaleable.

Some issues still unresolved

Progress in the talks has been welcomed by Government and leaseholders alike, but there still remain some difficult unresolved issues, such as who pays for fixing those blocks needing remediation where the builder went bust or cannot be located?

Clyde Lewis, an analyst at Peel Hunt, told the FT that Crest Nicolson’s announcement was a sign that the sector was coming closer to accounting for the crisis, but that costs would vary considerably between builders.

“It all depends on what they have built historically: it will come down to who has built lots of mid-rise blocks and who has not. Redrow and Persimmon have built very few; Barratt, Berkeley and Bellway have built a lot.”

A spokesperson for Mr Gove’s housing department has said: “We welcome the developers who have signed pledges so far and we have the powers to impose a solution in law if those in scope do not do the same.”

Government sets out new plan to protect leaseholders and make industry pay for the cladding crisis

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House price growth records unlikely to last

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The latest Halifax House Price index reports March recorded the biggest monthly increase since September last year with house price growth of 1.4%. The average property price has now reached £282,753, meaning two years on from the first lockdown, house prices have risen by £43,577.

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Paul Shamplina seeks big hitter landlords who could pack a punch for charity

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Landlords who fancy being big hitters are being invited by evictions expert Paul Shamplina to join him in the boxing ring.

The Landlord Action founder has for the past six years run an annual charity boxing event to raise funds for various local and national charities, raising in total some £115,000.

Each year Shamplina seeks out and then offers rigorous ringside training to a clutch of recruits ahead of the gala evening event which this year is on 22^nd September at the Holiday Inn hotel at 58 Regents Park Road, N3.

Those watching during the Rumble with the Agents event get a three-course meal, unlimited drinks and the opportunity to watch both the novice and more advanced boxers do six minutes in the ring, all for £160 a ticket.

For those who would like to be one of the boxers, Shamplina says it’s an ideal opportunity to ‘get fit for summer, be a hero for six minutes, learn to box and raise money for charity’.

‘One more’

Shamplina says this may be the last time he boxes in public. Last year he had to withdraw at the last moment after contracting Covid, and says he’s got ‘one more year’ left in him.

“Last year we raised some £12,000 for Cherry Orchard Cancer Care and I was gutted not to be there,” he says.

“We will be confirming our chosen charity for this year’s even in the next couple of weeks.

“Last year’s event was extremely well attended by landlords, agents, property professionals and suppliers, and we’re hoping to make this year even bigger.”

To contact Paul either email him or call him on 07956 414 254.

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Does our tenant have to pay CGT after 10 years?

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A few months ago an email was sent to our PDPLA (Portsmouth and District Private Landlord Association) mentioning that tenants must start paying CGT (Capital Gains Tax) after 10 years in the same home!

It vaguely rang a bell

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CLADDING: Why are landlords being singled out? 

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The cladding crisis has had a devastating impact on leaseholders across the country, with property values plummeting and bills for waking watches and other safety measures rocketing.  

When, after years of debate, the Government announced leaseholders would not have to pay for remediation work on properties between 11m-18m high there was a collective sigh of relief. 

This relief, however, was short-lived as the Government announced developers would be responsible for funding works for owner-occupiers only, with leaseholder landlords left out in the cold. 

Following extensive lobbying by the NRLA, including meetings with ministers at the very highest level, these rules were changed, with landlords owning up to two rentals in addition to their own home now proposed to benefit from the funding. 

But while the change is welcome it still leaves many landlords high and dry, facing bills of tens of thousands of pounds for remediation works through no fault of their own.  

These landlords have purchased properties in the same way as those owning and living in their flats, with no more involvement in development decisions. Yet for some arbitrary reason they are being denied the help and support they need and deserve. 

Fallacy 

Housing Secretary Michael Gove said he had excluded landlords from the plans as he did not want to support those who already had “significant means” to pay for remedial action themselves.  

However, this idea that landlords are somehow ‘fat cats’ by the very nature of them owning rental properties is a fallacy.  

We know the vast majority of landlords are individuals and not property tycoons with vast portfolios and disposable income – with 70% basic rate taxpayers. 

 Indeed, the Government’s own figures show:  

• 94% of private landlords rent property out as an individual 
• 45% of private landlords rent out just one property 
• 44% of private landlords became one to contribute to a pension 

Worthy or unworthy of help?  

The idea the Government seems to be encouraging, that there are ‘worthy’ and ‘unworthy’ leaseholders is dangerous and it is unfair.

Buy-to-let landlords are no more to blame than other leaseholders for historic building safety defects and landing them with potentially unaffordable bills will only slow down or prevent works to make buildings safe. 

The existing policy is unfair, and while we are glad to see the Government has made some changes in response to our campaigning, we continue to call for all landlords to be included.

The exclusion of some leaseholders causes unnecessary complications, to the detriment of all property owners. 

I have raised questions about cladding and the decision to exclude landlords with the Levelling Up, Housing and Communities Select Committee and in private meetings with housing minister Eddie Hughes, shadow housing minister Matthew Pennycook and Lord Greenhalgh, minister of state for building safety and fire in the hope we can bring about further change. 

The Government announcement that developers would foot the bill for remedial works was a huge step forward after years of debate, however what we need now are assurances that this will be a step forward for all.  

Ben Beadle is Chief Exective of the NRLA.

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HMO capital values outstrip rest of housing market by 32%, research reveals

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The average HMO is now worth £364,508, 32% more than the typical house, according to new research which finds that trickier financing and licensing schemes have not deterred landlords from investing in the sector.

On the contrary demand for HMOs among landlords, and the restrictions imposed by additional licensing and planning restrictions in many cities, mean demand is outstripping supply.

Octane Capital reveals that in the North East, HMO market values are as much as 109% more than other properties, with London (72%), the West Midlands (55%), and Scotland (41%) also seeing some of the largest HMO price premiums.

Even in the East Midlands where this premium is at its lowest, HMOs still come in 2% above the value of the wider market. 

Investing in an HMO can be tricky, as they are often harder to finance and subject to extra planning rules, while ongoing costs and management requirements can be higher, according to CEO of Octane Capital, Jonathan Samuels (pictured).

However, he says it seems that professional buy-to-let investors are still hungry for HMOs, infused by the benefits of greater rental incomes and capital growth.

Complicated

“There’s no doubt that HMOs are a more complicated buy-to-let option but this doesn’t mean that they should be avoided as an avenue of investment,” says Samuels. 

“In addition to greater rental incomes and capital growth, you are far less susceptible to rental arrears and the impact they can have on cash flow, while void periods are also generally shorter, especially in areas such as major cities where demand from single tenants is consistently high.”

Read more: What about insurance for HMOs?

He adds that despite the initial higher cost of investment and new licensing laws presenting an additional hurdle, rental values and yields are also generally higher with HMOs.

“While they may take a little more time and effort to get up and running, you tend to reap the rewards once this hard work has been done.”

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