Opinion

Chris Blythe: Housing needs a shift in the balance of power

1 July 2017 | By Chris Blythe

If the prime minister really wants to put fairness at the heart of government, she should start by reforming the way we sell homes.

Chris Blythe

Dear housing minister, congratulations on having won one of the most difficult jobs in government. The politics of housing is usually about the number of houses need to meet the housing demand. What is also crucial is the build quality of the houses being built. 

You may be aware of the survey by the House Builders Federation showing another year-on-year fall in customer satisfaction; perhaps what it does not fully show are the number of faults new homebuyers have to deal with.  

It seems extraordinary that there are fewer statutory consumer protections for buyers of new houses than buyers of the £30 kettle used to make the first cup of tea. How can it be that with the average price of a new home in the region of £270,000 the buyer is at the mercy of the goodwill of the builder or its insurers? Any reasonable person must think this is absurd.

The often dismal quality is down to poor workmanship. A site manager said to me one day when I had quality issues: “The trouble is you cannot get good tradesmen these days.” Twenty-five years later nothing seems to have changed. This lack of investment in skills is troubling. Housebuilders are reporting record profits and one is paying dividends equivalent to 10% of its average selling price.

This suggests that the hard-earned deposits paid for such homes go straight to shareholders. With the Help to Buy initiative, it seems to me that this is a subsidy for the builders, not prospective homebuyers.

“Leasehold is unique to the UK and it is time that leaseholds were abolished. It should not take long to come up with an alternative which is fair.”

The surge in the development of modular housing should bring the quality and consistency associated with manufacturing in controlled environments along with the volume. The benefits of offsite will be wasted if the onsite activity in erecting and finishing the homes is as poor as at present. It would be the equivalent of building an airliner in a field.

The last thing we need is to build in future defects though poor site practice due to meeting a political target; we will only have one opportunity to get this right.

High profits and poor quality suggest that the market is not operating in the best interests of consumers. The prime minister said in her post-election statement: “The government I lead will put fairness and opportunity at the heart of everything we do… and over the next five years build a country in which no one and no community is left behind.”

Fairness could start with building quality homes whatever the price. Fairness could also be through imposing regulations requiring housebuilders to take back defective properties with market price compensation so the housebuyer is not disadvantaged.

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Fairness could also be in the way houses are “sold”. Of course, buyers of leasehold homes are not buying bricks and mortar, they are only buying a right to occupy until such time as they can no longer afford the ground rent or sell their “rights”.

Recent trends in the growth of leasehold sales and the lamentable terms of some of the leasehold agreements with ground rents doubling every 10 years are a scandal. Taylor Wimpey has made a £130m provision to try and undo something even they say is wrong.

What makes the scandal worse is the lack of transparency involved in trading freeholds to third-party companies where the beneficial owners are shrouded in secrecy, usually with nominee shareholders. Leaseholders have little idea who owns their freehold, and who knows the provenance of the funds used to buy them? 

Being asked to pay a non-refundable reservation fee just to have sight of the leaseholder agreement is another example of sharp practice. The way the leasehold system is manipulated seems designed to ensure that leaseholders have to bear considerable cost and difficulty in securing information in respect of their freehold. 

Leasehold is unique to the UK and it is time that leaseholds were abolished. It should not take long to come up with an alternative which is fair; the world is full of better schemes.

In summary, good quality costs but, poor quality costs more – not just financially but in lives. Increased consumer protection, putting the homebuyer first, would be a start to a “getting it right first time” culture. Shifting the balance of power from the developers (the powerful), to the homebuyers (the powerless) is essential for a properly functioning market.

The ending of leasehold would mean that when you buy a property you own it, not some shadowy investor. It will need resilience to push through these measures against influential vested interests, but that is what “putting fairness at the heart of everything you do” means.

Comments

The first time buyer cannot secure a loan with a mortgage company if the lease on the property is less than 70 years. It is a shame that there are over millions of flats and other residential accommodation which has been locked in this unreasonable circumstance. The investors who are controlling the market with the finance back up of their surveyors and solicitors have gridlocked the market and imprisoned thousands of properties to be released for the benefit and affordability of first time buyer.

Abolishing the leasehold on residential property would only benefit our young generation to be in the next millennium.

Alister Kalhor, 10 July 2017

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