AGENDA
Meeting Housing Committee Date Wednesday 5 August 2020 Time 11.00 am Place Virtual Meeting Copies of the reports and any attachments may be found at www.london.gov.uk/mayor-assembly/london-assembly/housing
Most meetings of the London Assembly and its Committees are webcast live at www.london.gov.uk/mayor-assembly/london-assembly/webcasts where you can also view past meetings.
Members of the Committee Murad Qureshi AM (Chair) Tony Devenish AM Andrew Boff AM (Deputy Chair) Nicky Gavron AM Siân Berry AM David Kurten AM Léonie Cooper AM
A meeting of the Committee has been called by the Chair of the Committee to deal with the business listed below. Ed Williams, Executive Director of Secretariat Tuesday 28 July 2020
[Note: This meeting has been called in accordance with the Local Authorities and Police and Crime Panels (Coronavirus) (Flexibility of Local Authority and Police and Crime Panel Meetings) (England and Wales) Regulations 2020. These regulations permit formal London Assembly meetings to be held on a virtual basis, with Assembly Members participating remotely, subject to certain conditions. The regulations apply notwithstanding any other legislation, current or pre-existing Standing Orders or any other rules of the Authority governing Assembly meetings, and remain valid until 7 May 2021. The meeting will be broadcast live via the web-link set out above. The regulations may be viewed here.]
Further Information If you have questions, would like further information about the meeting or require special facilities please contact: Diane Richards, Committee Officer; email: [email protected]; 020 7084 2956.
For media enquiries please contact Lisa Lam, External Communications Officer; Telephone: 020 7084 2825; Email [email protected].
If you have any questions about individual items please contact the author whose details are at the end of the report.
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If you, or someone you know, needs a copy of the agenda, minutes or reports in large print or Braille, audio, or in another language, then please call us on 020 7983 4100 or email [email protected].
Certificate Number: FS 80233
Agenda Housing Committee Wednesday 5 August 2020
1 Apologies for Absence and Chair's Announcements
To receive any apologies for absence and any announcements from the Chair.
2 Declarations of Interests (Pages 1 - 4)
Report of the Executive Director of Secretariat Contact: Diane Richards, [email protected]; 020 7084 2956
The Committee is recommended to:
(a) Note the list of offices held by Assembly Members, as set out in the table at Agenda Item 2, as disclosable pecuniary interests;
(b) Note the declaration by any Member(s) of any disclosable pecuniary interests in specific items listed on the agenda and the necessary action taken by the Member(s) regarding withdrawal following such declaration(s); and
(c) Note the declaration by any Member(s) of any other interests deemed to be relevant (including any interests arising from gifts and hospitality received which are not at the time of the meeting reflected on the Authority’s register of gifts and hospitality, and noting also the advice from the GLA’s Monitoring Officer set out at Agenda Item 2) and to note any necessary action taken by the Member(s) following such declaration(s).
3 Membership of the Committee
The Committee is recommended to note the membership and chairing arrangements for the Committee, which were agreed by the London Assembly at its Annual Meeting on 15 May 2020, as follows:
Murad Qureshi AM (Chair) Andrew Boff AM (Deputy Chair) Siân Berry AM Léonie Cooper AM Tony Devenish AM Nicky Gavron AM David Kurten AM
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4 Terms of Reference
The Committee is recommended to note its terms of reference, which were agreed by the London Assembly at its Annual Meeting on 15 May 2020, as follows:
To examine and report on matters relating to housing in London and to lead on scrutiny of the Mayor’s Housing Strategy.
Lead responsibility for scrutiny of: GLA Land and Property Company; Homes for Londoners Board (HfL); Barking Riverside Limited; Greenwich Peninsula Strategic Board.
5 Standing Delegations
The Committee is asked to note the following standing delegations of authority to the Chair of the Committee:
(a) At its Annual Meeting on 1 May 2013, the Assembly agreed to delegate a general authority to Chairs of all ordinary committees and sub-committees to respond on the relevant committee or sub-committee’s behalf, following consultation with the lead Members of the party Groups on the committee or sub-committee, where it is consulted on issues by organisations and there is insufficient time to consider the consultation at a committee meeting.
(b) At the Plenary Meeting on 6 June 2019, the Assembly agreed to delegate authority to Chairs of ordinary committees, sub-committees and working groups to agree, in consultation with the relevant party Group Lead Members and Deputy Chairs:
(i) The detailed terms of reference for any investigation to be undertaken by the relevant committee, sub-committee or working group within its work programme as agreed by the GLA Oversight Committee, and any related project plans and arrangements for related site visits or informal meetings; and
(ii) The topic and scope for any additional projects to be added to its work programme, where it is not practicable to secure prior approval from the GLA Oversight Committee and subject also to subsequent ratification by the GLA Oversight Committee.
6 Minutes (Pages 5 - 80)
The Committee is recommended to confirm the minutes of the meetings of the Committee held on 21 January 2020 and 11 February 2020 to be signed by the Chair as a correct record.
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7 Summary List of Actions (Pages 81 - 110)
Report of the Executive Director of Secretariat Contact: Diane Richards, [email protected], 020 7084 2956
The Committee is recommended to note the completed, outstanding and closed actions arising from its previous meetings and additional correspondence sent and received, as listed in the report.
8 Action Taken Under Delegated Authority (Pages 111 - 126)
Report of the Executive Director of Secretariat Contact: Diane Richards, [email protected], 020 7084 2956
The Committee is recommended to note the actions taken by the Chair of the Housing Committee under delegated authority, in consultation with party Group Lead Members, namely:
(a) To agree the Committee’s output from the discussion on Affordable Home Ownership at the Committee meeting held on 21 January 2020; and
(b) To agree the Committee’s output from the discussion on Leasehold and Service Charges at the Committee meeting held on 11 February 2020.
9 Impact of the COVID-19 Crisis on Housing in London (Pages 127 - 130)
Report of the Executive Director of Secretariat Contact: Sarah-Jane Gay, [email protected]; 07783805827.
The Committee is recommended to:
(a) Note the report as background to putting questions to the invited guests and the subsequent discussion; and
(b) Delegate authority to the Chair, in consultation with the party Group Lead Members, to agree any output from the discussion.
10 Housing Committee Work Programme (Pages 131 - 132)
Report of the Executive Director of Secretariat Contact: Sarah-Jane Gay, [email protected]; 07783805827
The Committee is recommended to note its work programme as agreed under delegated authority by the Chair of the GLA Oversight Committee on 13 May and 20 July 2020.
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11 Date of Next Meeting
The next meeting of the Committee is scheduled for 10 November 2020 at 11.00am.
12 Any Other Business the Chair Considers Urgent
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Agenda Item 2
Subject: Declarations of Interests
Report to: Housing Committee
Report of: Executive Director of Secretariat Date: 5 August 2020
This report will be considered in public
1. Summary
1.1 This report sets out details of offices held by Assembly Members for noting as disclosable pecuniary interests and requires additional relevant declarations relating to disclosable pecuniary interests, and gifts and hospitality to be made.
2. Recommendations
2.1 That the list of offices held by Assembly Members, as set out in the table below, be noted as disclosable pecuniary interests1;
2.2 That the declaration by any Member(s) of any disclosable pecuniary interests in specific items listed on the agenda and the necessary action taken by the Member(s) regarding withdrawal following such declaration(s) be noted; and
2.3 That the declaration by any Member(s) of any other interests deemed to be relevant (including any interests arising from gifts and hospitality received which are not at the time of the meeting reflected on the Authority’s register of gifts and hospitality, and noting also the advice from the GLA’s Monitoring Officer set out at below) and any necessary action taken by the Member(s) following such declaration(s) be noted.
3. Issues for Consideration
3.1 Relevant offices held by Assembly Members are listed in the table overleaf:
1 The Monitoring Officer advises that: Paragraph 10 of the Code of Conduct will only preclude a Member from participating in any matter to be considered or being considered at, for example, a meeting of the Assembly, where the Member has a direct Disclosable Pecuniary Interest in that particular matter. The effect of this is that the ‘matter to be considered, or being considered’ must be about the Member’s interest. So, by way of example, if an Assembly Member is also a councillor of London Borough X, that Assembly Member will be precluded from participating in an Assembly meeting where the Assembly is to consider a matter about the Member’s role / employment as a councillor of London Borough X; the Member will not be precluded from participating in a meeting where the Assembly is to consider a matter about an activity or decision of London Borough X.
City Hall, The Queen’s Walk, London SE1 2AA Enquiries: 020 7983 4100 minicom: 020 7983 4458 www.london.gov.uk v3/2020 Page 1
Member Interest Tony Arbour AM Jennette Arnold OBE AM Gareth Bacon AM MP Member of Parliament, Orpington; Member, LB Bexley Shaun Bailey AM Siân Berry AM Member, LB Camden Andrew Boff AM Congress of Local and Regional Authorities (Council of Europe) Léonie Cooper AM Member, LB Wandsworth Unmesh Desai AM Tony Devenish AM Member, City of Westminster Andrew Dismore AM Len Duvall AM Florence Eshalomi AM MP Member of Parliament, Vauxhall Nicky Gavron AM Susan Hall AM Member, LB Harrow David Kurten AM Joanne McCartney AM Deputy Mayor Dr Alison Moore AM Member, LB Barnet Steve O’Connell AM Member, LB Croydon Caroline Pidgeon MBE AM Keith Prince AM Murad Qureshi AM Caroline Russell AM Member, LB Islington Dr Onkar Sahota AM Navin Shah AM Peter Whittle AM
[Note: LB - London Borough]
3.2 Paragraph 10 of the GLA’s Code of Conduct, which reflects the relevant provisions of the Localism Act 2011, provides that:
- where an Assembly Member has a Disclosable Pecuniary Interest in any matter to be considered or being considered or at
(i) a meeting of the Assembly and any of its committees or sub-committees; or
(ii) any formal meeting held by the Mayor in connection with the exercise of the Authority’s functions
- they must disclose that interest to the meeting (or, if it is a sensitive interest, disclose the fact that they have a sensitive interest to the meeting); and
- must not (i) participate, or participate any further, in any discussion of the matter at the meeting; or (ii) participate in any vote, or further vote, taken on the matter at the meeting
UNLESS
- they have obtained a dispensation from the GLA’s Monitoring Officer (in accordance with section 2 of the Procedure for registration and declarations of interests, gifts and hospitality – Appendix 5 to the Code).
3.3 Failure to comply with the above requirements, without reasonable excuse, is a criminal offence; as is knowingly or recklessly providing information about your interests that is false or misleading.
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3.4 In addition, the Monitoring Officer has advised Assembly Members to continue to apply the test that was previously applied to help determine whether a pecuniary / prejudicial interest was arising - namely, that Members rely on a reasonable estimation of whether a member of the public, with knowledge of the relevant facts, could, with justification, regard the matter as so significant that it would be likely to prejudice the Member’s judgement of the public interest.
3.5 Members should then exercise their judgement as to whether or not, in view of their interests and the interests of others close to them, they should participate in any given discussions and/or decisions business of within and by the GLA. It remains the responsibility of individual Members to make further declarations about their actual or apparent interests at formal meetings noting also that a Member’s failure to disclose relevant interest(s) has become a potential criminal offence.
3.6 Members are also required, where considering a matter which relates to or is likely to affect a person from whom they have received a gift or hospitality with an estimated value of at least £50 within the previous three years or from the date of election to the London Assembly, whichever is the later, to disclose the existence and nature of that interest at any meeting of the Authority which they attend at which that business is considered.
3.7 The obligation to declare any gift or hospitality at a meeting is discharged, subject to the proviso set out below, by registering gifts and hospitality received on the Authority’s on-line database. The on- line database may be viewed here: https://www.london.gov.uk/mayor-assembly/gifts-and-hospitality.
3.8 If any gift or hospitality received by a Member is not set out on the on-line database at the time of the meeting, and under consideration is a matter which relates to or is likely to affect a person from whom a Member has received a gift or hospitality with an estimated value of at least £50, Members are asked to disclose these at the meeting, either at the declarations of interest agenda item or when the interest becomes apparent.
3.9 It is for Members to decide, in light of the particular circumstances, whether their receipt of a gift or hospitality, could, on a reasonable estimation of a member of the public with knowledge of the relevant facts, with justification, be regarded as so significant that it would be likely to prejudice the Member’s judgement of the public interest. Where receipt of a gift or hospitality could be so regarded, the Member must exercise their judgement as to whether or not, they should participate in any given discussions and/or decisions business of within and by the GLA.
4. Legal Implications
4.1 The legal implications are as set out in the body of this report.
5. Financial Implications
5.1 There are no financial implications arising directly from this report.
Local Government (Access to Information) Act 1985 List of Background Papers: None Contact Officer: Diane Richards, Committee Officer Telephone: 020 7084 2956 E-mail: [email protected]
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Page 4 Agenda Item 6
MINUTES
Meeting: Housing Committee Date: Tuesday 21 January 2020 Time: 10.00 am Place: Chamber, City Hall, The Queen's Walk, London, SE1 2AA
Copies of the minutes may be found at: www.london.gov.uk/mayor-assembly/london-assembly/housing
Present:
Tom Copley AM (Chair) Andrew Boff AM (Deputy Chair) Siân Berry AM Léonie Cooper AM Tony Devenish AM Nicky Gavron AM
1 Apologies for Absence and Chair's Announcements (Item 1)
1.1 Apologies for absence were received from David Kurten AM.
2 Declarations of Interests (Item 2)
2.1 The Committee received the report of the Executive Director of Secretariat.
2.2 Resolved:
That the list of offices held by Assembly Members, as set out in the table at Agenda Item 2, be noted as disclosable pecuniary interests.
City Hall, The Queen’s Walk, London SE1 2AA Enquiries: 020 7983 4100 minicom: 020 7983 4458 www.london.gov.uk Page 5 Greater London Authority Housing Committee Tuesday 21 January 2020
3 Minutes (Item 3)
3.1 Resolved:
That the minutes of the meeting held on 3 September 2019 be signed by the Chair as a correct record.
4 Summary List of Actions (Item 4)
4.1 The Committee received the report of the Executive Director of Secretariat.
4.2 Resolved:
That the completed, outstanding and closed actions arising from previous meeting of the Committee be noted.
5 Affordable Home Ownership (Item 5)
5.1 The Committee received the report of the Executive Director of Secretariat as background to putting questions on Affordable Home Ownership to the following invited guests: Steve Moseley, Group Director of Governance, Strategy and Communications, London and Quadrant Housing Trust; Reuben Young, Director, PricedOut; Peter Apps, News Editor, Inside Housing; Councillor Danny Beales, Camden Council; and Dr Alison Wallace, Research Fellow, University of York.
5.2 A transcript of the discussion is attached at Appendix 1.
5.3 During the course of the discussion, Steve Moseley, London and Quadrant Housing Trust, agreed to provide the following information: Whether London and Quadrant shared owners had the same Right to Manage, Right to Transfer rights that already exist for council tenants; The administration fees to process home improvements to properties at London and Quadrant; Whether London and Quadrant were signed up to Battersea Dogs and Cats Home campaign on Pet-Friendly Properties and responsible pet ownership; and
Page 6 Greater London Authority Housing Committee Tuesday 21 January 2020
The percentage of people who had bought a Shared Ownership home from London and Quadrant who used a solicitor from the recommended panel.
5.4 During the course of the discussion, Councillor Danny Beales, Camden Council, agreed to share whether tenants in Camden had exercised a Right to Manage.
5.5 Resolved:
(a) That the report and discussion be noted;
(b) That the informal Housing Committee meeting held on 4 November 2019 be noted as background to the investigation; and
(c) That authority be delegated to the Chair, in consultation with party Group Lead Members, to agree any output from the discussion.
6 Housing Committee Work Programme (Item 6)
6.1 The Committee received the report of the Executive Director of Secretariat.
6.2 Resolved:
(a) That the work programme be noted; and
(b) That the topics for the meetings in February and March 2020 as agreed at the GLA Oversight Committee on 17 December 2019, be noted.
7 Date of Next Meeting (Item 7)
7.1 The next meeting of the Committee was scheduled for Tuesday, 11 February 2020 at 10:00am in the Chamber, City Hall.
8 Any Other Business the Chair Considers Urgent (Item 8)
8.1 There were no items of business that the Chair considered to be urgent.
Page 7 Greater London Authority Housing Committee Tuesday 21 January 2020
9 Close of Meeting
9.1 The meeting ended at 12:05 pm.
Chair Date
Contact Officer: Jonathan Baker, Committee Officer; telephone: 020 7084 2825; email: [email protected]; minicom: 020 7983 4458
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Appendix 1
London Assembly Housing Committee – Tuesday 21 January 2020
Transcript of Item 5 – Affordable Home Ownership
Tom Copley AM (Chair): I would like welcome our guests: Steve Mosley, Group Director of Governance, Strategy and Communications at London and Quadrant (L&Q) Housing Trust; Reuben Young, Director of PricedOut; Peter Apps, News Editor at Inside Housing; Councillor Danny Beales from Camden Council; and Dr Alison Wallace, Research Fellow at the University of York. Thank you all very much for joining us this morning.
My first question is to Reuben and that is: what is your opinion on whether shared ownership is truly affordable for people on low and middle incomes in London?
Reuben Young (Director, PricedOut): ‘Affordable’ is an interesting word because everything is affordable to someone. ‘Affordable’ means a lot of things in housing. It means affordable to the buyers who purchase it, but the ‘affordable’ word I am interested in is the ‘affordable’ that means it gets public subsidy. Government money goes towards subsidising the cost of shared ownership homes and it goes to a bracket of earners who are not in housing need so much as housing desire. It is a good product for them and it satisfies housing aspiration, which is a good thing, but where it diverts funding away from low-rent homes for people in genuine housing need I think that is a big problem.
Tom Copley AM (Chair): Thank you. Can I bring in our other guests on the subject of whether or not you think shared ownership is affordable?
Dr Alison Wallace (Research Fellow, University of York): I did a recent piece of work about shared ownership markets outside London. That included a quantitative assessment of core and family resources survey which found that new entrants in London were in the top two income quintiles, the top two income groups, where in other places that was not the case and there were more low and moderate-income households. We are actually meeting the needs of a more affluent group of people than in other places. Obviously that is high housing costs as opposed to low incomes necessarily, as it was in some areas, but I think that is a political decision about if you want to fund those people, as Reuben said.
There were other issues as well about whether it is affordable and 32% of shared owners in London said the housing costs were a burden compared to 45% of renters and 24% of mortgages. It is half rent, half mortgage. That was the same proportion as in the North but, as I was saying, that is a function of low incomes rather than high housing costs. In terms of whose needs it is meeting, you can see from the several research projects that I have done that you are seeing people with careers in zones 1 and 2 on a professional career trajectory, compared to people in the outer boroughs and the other bits of the Southeast and East who are in jobs where that is the job and that is the level they will be, and again they are finding it a more difficult thing to sustain.
Councillor Danny Beales (Cabinet Member for Investing in Communities, Camden Council): I would just echo Reuben’s point: obviously, affordable to someone? Yes, but is it really where - particularly with the levers we have as actors of the state - we should be directing our attention? Here we have two hats, both planning authority so we have levers through the planning system to deliver intermediate and shared
Page 9 ownership housing, and also direct deliverer. Camden has its own investment programme building 3,000 homes, of which there are 300 to 500 that are planned to be intermediate.
We introduced an Intermediate Housing Strategy in 2006, recognising that although we initially planned to deliver that intermediate housing as shared ownership it was becoming quite obvious that that was not hitting the group of people who perhaps need the support most, that group of people who will not qualify for the social rent housing we are building but are increasingly being squeezed out of boroughs like Camden. This may be a particularly inner London perspective but I think as the housing market changes and prices increase across London it is going to be increasingly a London-wide perspective.
Average house prices in Camden are somewhere around £750,000 for a reasonable small property. We found an example in Fitzrovia: average market value for units of shared ownership of £902,000. The incomes of those accessing those properties was in excess of £50,000 and they had £54,000 of equity to put in it. For us this was not the particular group who were the priority for us in terms of public subsidy and support, so our Intermediate Housing Strategy shifted our approach away from shared ownership to an intermediate ‘Living Rent’, as we call it, Camden Living. We set up a wholly owned company for our direct delivery but also expect the private sector to deliver intermediate rent going forward, not shared ownership.
Tom Copley AM (Chair): Could you tell us how your Camden Living Rent differs from, say, the Mayor’s London Living Rent?
Councillor Danny Beales (Cabinet Member for Investing in Communities, Camden Council): There is no staircasing or shift to owning any part of the property in future. It is a three-year renewable tenancy. It is set at a proportion of income. It is very reasonable. The target group for the product is a household income of £30,000 to £40,000, so very reasonable. So far, we have directly delivered almost 70 on two schemes and the results of that are quite positive. 63% work in public sector or social value roles, as we call it: 36 health workers, 12 education workers including seven teachers, four police officers, and one-quarter are sons and daughters who have moved from council estates. Our estimate is that it is a product that is working for the group of people who would not qualify for social housing but were increasingly finding it difficult to live in Camden.
One of the challenges we find, both in discussing it with the private sector and also ourselves in delivering it, is that the subsidy system does not perhaps incentivise it as much as it could. The grant available for intermediate housing is flat, no matter how affordable it is or what type of product it is. As a builder, there is an incentive to deliver shared ownership sometimes because you immediately can extract a capital receipt back into your programme and back into reinvestment, which is not the case for this sort of product. Our feeling is that it is working for the squeezed Londoners who our public institutions and our private institutions are saying are really struggling to be able to live and work in central London.
Tom Copley AM (Chair): In terms of the unaffordability of shared ownership, is the issue, in your view, that people cannot afford to staircase or people cannot afford the initial stake to begin with, or both?
Councillor Danny Beales (Cabinet Member for Investing in Communities, Camden Council): I think in Camden it is also that former point as well: it is just so much, the value, that a 25% or even a 10% stake in a property is a lot for lower and middle-income groups on average incomes. As I said, in Camden the evidence suggests the people accessing these properties are earning £50,000, £60,000, £70,000. That is not an average income by any means. As I think the other speaker mentioned, there are clearly some long-held issues for those in shared ownership of the ability to move, the ability to staircase effectively, hidden costs and charges that are not always obvious, service charges, so there are also problems with the product itself but I think our Page 10 primary concern in Camden was that first question of: is this genuinely an affordable product? Is this the priority for the public sector? I think we answered no on those things.
Tom Copley AM (Chair): Thank you.
Siân Berry AM: Obviously I am declaring an interest which is my interest normally, I am a Camden councillor so I know quite a lot about Camden’s policies and obviously, Danny, you are the Cabinet Member for Planning and the Cabinet Member who works on the delivery for Camden and you have policies in both areas. I am not sure that we have quite drawn out the distinction there that you have a planning policy that is against shared ownership and also your own delivery choices are different. I just wondered if you could say a bit more about whether you have succeeded in reducing the amount of shared ownership in planning applications through your policy.
Councillor Danny Beales (Cabinet Member for Investing in Communities, Camden Council): Yes, that is right, Siân, thank you. The Intermediate Housing Strategy is a broader policy that applies to our approach to planning. We, as I said, in discussions with developers going forward, are very clear that our view is that shared ownership is not an affordable product in Camden. We want an intermediate rented product, ideally in line with our Camden Living Rent bands and rates. Obviously, there is always discussion in terms of viability of schemes and those rates may vary and the rented product may vary, but that is our preference.
We have actually successfully defended this at appeal. A housing association unfortunately - I will not name them because they have changed their approach since - decided not to proceed with that advice and proceeded with a very low affordable percentage of their scheme, below policy, but also shared ownership despite our policy. We went to appeal and the Inspector clearly said, “Camden has a policy. It is evidence-based. This product is not affordable”, and their appeal was dismissed. Since then we have not had any issues either with that association or any other in Camden, which is really pleasing.
I think the facts are there and the Inspector could see the logic of the policy. It was based on evidence and it had been delivered by Camden in practice so it was hard to argue against.
There are some legacy schemes, schemes that had planning permission prior to the policy, that worked through the system. It can take a long time to work through the system. But what we are doing is proactively engaging with those schemes and negotiating with them after planning permission and have been successful, albeit not in switching all ownership to rent but some, and we have also had the ability to offer additional affordable housing funding to enable that as well.
Nicky Gavron AM: Some of the questions about affordability have been answered but am I understanding this correctly then, that you are doing much more London Living Rent than you are doing shared ownership?
Councillor Danny Beales (Cabinet Member for Investing in Communities, Camden Council): It is a Living Rent product. It is a slightly different Living Rent product in that - everyone likes to have their own brand - it is Camden Living Rent. My understanding is that it is below London Living Rent rental values.
Nicky Gavron AM: What happens to families in Camden in terms of either shared ownership or any kind of intermediate? Are you providing family housing?
Councillor Danny Beales (Cabinet Member for Investing in Communities, Camden Council): It is a real challenge in Camden. We have, I think, the lowest birth rate in London. We have decreasing pupil numbers and it is a real challenge for our schools at the moment. That, we feel, is driven largely by the Page 11 housing market but there are other factors. We are prioritising delivering social rent properties first and those properties are largely family units. We then prioritise intermediate rent units and again would prioritise family-sized units. Like anything in a scheme, there will be a unit mix. I think our priority order goes into that process, so the distribution of family units on a scheme would ideally be first through the social units, then through the intermediate units, then the private units last. The private units normally are studios and one-beds, some twos.
Nicky Gavron AM: I get it. OK. In terms of the intermediate products that you are offering, do they convert into home ownership at some point?
Councillor Danny Beales (Cabinet Member for Investing in Communities, Camden Council): No, they are a three-year tenancy that is renewable. It is purely a rented product. They are renewable if the families are still meeting the criteria, which is living or working in Camden and ideally earning around £30,000 to £40,000 household income.
Nicky Gavron AM: Right, so they are not routes to -- what are the routes to affordable home ownership in Camden, if any?
Councillor Danny Beales (Cabinet Member for Investing in Communities, Camden Council): It is a challenge, is it not? We made the judgement that shared ownership or subsidised market sale, while yes, it is a route to home ownership, clearly was not a route to home ownership for lower or even middle-income families. Our question was whether those people who were earning £50,000, £60,000 or £70,000 and who had £50,000 of equity really needed Camden to subsidise them above them all other families. Our judgement was no, that there are other routes in London and in Camden to a safe, secure and affordable home for those families. It is a difficult decision. Ideally we would like to be able to offer a broader mix but the limits we have in terms of national funding and grant funding mean we do have to make priorities.
Tom Copley AM (Chair): I will finish this point around whether or not shared ownership is affordable. I will come to Peter [Apps] first and then Steve [Moseley] to finish off.
Peter Apps (News Editor, Inside Housing): Just for any of the panel members who do not know, I think probably the main reason I was invited today, apart from working at Inside Housing, is that I am a shared owner myself. I brought a property in December 2018.
Just to add to what the other panellists have said, just a couple of brief observations. My experience of searching for a home confirmed the long-held view I think there has been in the sector about shared ownership, that it is still affordable for people on reasonable incomes in outer London boroughs but it is quite unaffordable in inner London boroughs. Certainly that was the case for us when we were looking for a place and we probably fall into the middle range of the salary banding. I do not think that is reflected in new build strategies. A lot of the properties that were coming onstream were being built still in areas that I do not think would be affordable to shared ownership buyers and I am not entirely sure why that is the case. It strikes me that the sector has known for a long time that building shared ownership in zone 1 and 2 is not going to hit the target market but they still seem to be doing it.
I was also frustrated on a number of schemes that they had baked-in service charges that took schemes that would have been affordable into an unaffordable bracket. For example, because of including concierge services or other amenities which I think were there to make the schemes more attractive as private sale options, there was a monthly set service charge that took it completely out of our reach and I think would do for a number of other shared owners as well. Page 12
The last point: I would suggest that the panel might have a look at some research we did as Inside Housing back in 2014 into the amount people were putting down as deposits for shared ownership because I think the only way that sales are secured in boroughs like Westminster with a salary band of £90,000, is to put an enormous chunk of equity in to reduce the mortgage. We found evidence of people putting in up to £150,000 cash in order to buy the shared ownership property. Someone might be in a bracket that you want to help on their salary but absolutely not in terms of the amount of equity they can put in. There are probably quite a lot of shared ownership sales going through which are being achieved through a large cash sum at the start because if you can only get a mortgage for four and a half times your income, how you can buy 50% on a £1 million shared ownership home beats me.
I think those are some things which are sometimes a little under-discussed in the affordability debate.
Tom Copley AM (Chair): Thank you. Finally, coming to you, Steve, perhaps in particular you could address this inner/outer London point and whether or not providers should be building shared ownership in zones 1 and 2 now.
Steve Moseley (Group Director of Governance, Strategy and Communications, London and Quadrant Housing Trust): My views reflect a number that the panel have expressed. It is affordable to a very particular group. That is a middle-income group, it is not a low-income group.
I will start with L&Q’s experience so far. Last year the average single purchaser buying one of our shared ownership homes was on £35,000, which is around about the middle income of Londoners. For households it was £50,000. We have seen deposit levels of around one-fifth of the level that you would see from first home buyers not with assistance entering the market, and obviously first-time buyers - and the Greater London Authority (GLA) data supports this - are substantially higher than those levels that we are seeing. It absolutely operates a space, but it operates a space between those who can afford to buy outright and in the middle. It is a good middle income in London.
Our figures in part reflect where we work. We tend to work generally outside zones 1 and 2. The average sale price of a shared ownership home that L&Q delivered last year was £430,000, so that is clearly not in the same benchmark as those figures that we have talked about. There are some genuine challenges. We ask ourselves that question when we are delivering shared ownership, whether it works in locations. On some locations we do not provide it if we do not think that it can stack up and it is reasonable.
It also does come back to Councillor Beales’ point around the funding. The funding is flat and fixed. It is a pretty low level, to be honest, for the type of product being delivered. £28,000 in grant funding is not going to deliver a proposition in very high value areas that you could genuinely stand back and say is affordable. I think that is a question.
For London as a whole it is helping households within that £25,000 to £50,000 barrier, which I would say is middle income. It is performing a role at the moment, but over the past few years, even though our deposits are substantially less than the market, we have seen them increase significantly as house prices increase.
Tom Copley AM (Chair): Do you think, therefore, potentially in future funding settlements with the GLA that perhaps there should be a policy of not funding shared ownership in most of zones 1 and 2? Do you think that should be an explicit policy, if it is not really delivering affordable housing?
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Steve Moseley (Group Director of Governance, Strategy and Communications, London and Quadrant Housing Trust): Possibly, it would need to be looked at in the round and whether you could, for example, give a greater level of funding to reduce the shared ownership unsold equity rent requirement that makes it affordable, but clearly that has to be a judgement. If we are delivering home ownership in that, it has to meet that target market, and if we are pushing at the edges of it; sometimes we do go to higher incomes but they tend to be for the larger homes that we are delivering. If it is a larger family home, I think there is more of an argument that you could do that. Rather than a blanket, “It should not be in those areas”, I think perhaps a more nuanced view around if there is something in policy terms that can be done to make sure that it is affordable when it is delivered in those areas.
Tom Copley AM (Chair): Are you finding, when it comes to resales, for example, even if it was affordable when it was first built, that by the time someone comes to sell, if the value has gone up significantly in that area, they are struggling to find anybody who can then afford to buy the property who is within that £90,000 household income?
Steve Moseley (Group Director of Governance, Strategy and Communications, London and Quadrant Housing Trust): We have not found that to date. There is quite an active secondary market in shared ownership, so people do not have problems selling their homes. They can sell the share and people are quite happy to buy a share in a home. There is certainly no evidence from us that we have properties that are sticking through that. Our average time to sell a shared ownership property when it comes through us is five weeks, which is substantially quicker than it would be on the private market. It is not something we are seeing at the moment. I accept that if you have a lot of those very high value properties it might be a challenge going forward in the future.
Tom Copley AM (Chair): I want to just turn now to the issue of whether or not shared ownership is effective at bringing people into full ownership and I want to come to you, Alison, for this. How effective do you think it is at getting people into full ownership? What proportion of people actually end up buying the full property in the end?
Dr Alison Wallace (Research Fellow, University of York): The data is lacking to answer that question easily and has been for a long time, unfortunately, but all the evidence that has been attempted so far points to quite a low rate, 4%, 7%, 11%; different figures have been put on this in the past.
However, I think the issue of staircasing is hugely important, and one of the reasons it is really important is the sales material. From all the interviews I have done, which probably add up to quite a few hundred shared owners, it is hugely important in their appetite to buy because the promise of full ownership hangs over the purchase. However, there are obviously multiple barriers to staircasing that are identified in a few things. The first one, especially in London, is that house prices rise faster than incomes and people never catch up. That is particularly an issue, again, if people are not on a professional career path and house prices run away with them.
The way people do staircase is that they become a couple. London has the highest rate of single purchasers and I think that is also an issue because in other places it has taken two salaries to buy and in London, because people are on higher incomes, they are buying alone, but obviously you cannot make people partner as a policy response. The other way people move and become homeowners is that they have access to move into a cheaper area. That fits into a pattern of population turnover within London, that people might come in their 20s and move out to the suburbs or the southeast. That is an option there for London shared owners. The other option, as people said, is through inheritance with which they might be able to plug that gap between their wages and house prices. Page 14
There are also administrative barriers. A lot of housing associations charge you £200, £175 - whatever the charge is - for your valuation before you even have any idea about what price your house is, how much your mortgage is or what the impact will be on your rent, for example. You are having to pay an upfront cost before you even know the rudimentary things about what the next step might be.
Tom Copley AM (Chair): We are going to be coming on to the issue of fees later in the meeting.
Dr Alison Wallace (Research Fellow, University of York): Yes, OK. Somehow some associations pay those things, but ways of getting over that are staircasing calculators. I am sure it is not beyond anyone to do an Excel spreadsheet where people can plug in their rent, mortgage costs and house values. There are also automated valuations that are becoming more prevalent. That might be used. People have mentioned a nervousness that higher shares may deter resale but also people might decide, because it is less cost to them, to pay down their mortgage to increase their equity rather than buy an additional share.
Tom Copley AM (Chair): I know some friends who have just bought shared ownership and they were advised not to go over 50% because they would find it difficult to then sell, unless they were to go to 100%. Either go to 100% or do not go over 50%.
Dr Alison Wallace (Research Fellow, University of York): Yes, exactly, and whether that is evidenced in the resales; I know there are mechanisms by which the housing associations could buy back a bit of the share to offer it at a lower rate but then they have to have capital not allocated for that.
The point I also wanted to make about staircasing and affordability is the terms on which shared ownership is being made affordable for people. As with other first home buyers, there is a preponderance now of 30 or 35-year mortgages. Not only have lower interest rates and pretty stagnant wages until recently meant that the cost burden of home ownership lasts for a lot longer than it did certainly when I bought, when your wages and prices went up much more quickly, now that burden lasts longer and we are adding another 10 years onto a younger cohort’s mortgages. That scope to take out additional loans later in their journey of home ownership has already been used. That joker, as it were, has already been used to make the initial purchase affordable, let alone later purchases, and I think that is quite an important thing too. It could affect pensions as well as saving for staircasing.
Tom Copley AM (Chair): Do you think the GLA should collect data on staircasing? We do not at the moment.
Dr Alison Wallace (Research Fellow, University of York): Yes, I do, definitely. There should be greater resources put into shared ownership data. It has been a cry for decades, really, and Government have not addressed it either.
Tom Copley AM (Chair): Steve, could you tell us what proportion of your shared owners end up staircasing to 100%?
Steve Moseley (Group Director of Governance, Strategy and Communications, London and Quadrant Housing Trust): Certainly, on the point about the data, there is no universal data around this although it is something that the National Housing Federation are actively looking at at the moment, trying to get better data on it.
Staircasing rates vary. Based on last year’s data, around 8% of our owners staircased in that year. Page 15
Tom Copley AM (Chair): To 100%?
Steve Moseley (Group Director of Governance, Strategy and Communications, London and Quadrant Housing Trust): Of those, 60% staircased to 100%. The rest--
Andrew Boff AM (Deputy Chair): 60% of 8%?
Steve Moseley (Group Director of Governance, Strategy and Communications, London and Quadrant Housing Trust): That is a yearly figure. It has generally, over the past five years, been running at about 6% or 7% of shared owners staircasing every single year. We are seeing a healthy level of staircasing availability coming through. Mortgage availability has a key part in that. It is affordable to staircase at the moment. If people do it, they are most likely to do it in one step. If people staircase, the average year is around year 10 in a property. Very few people do it before year 4. It is an active market at the moment. I think that pattern, speaking to colleagues across London, is repeated, that we are seeing that.
It fluctuates with people’s confidence in the housing market. Even though it is cheaper to staircase when prices are going down, generally people staircase when prices are going up. It is a reflection of the market and certainly the low lending regime. When we had the market crash it would probably drop down to about 2% for that yearly rate. We have that churn of people who are buying and then other people who are selling their share out at that stage. But yes, I agree, more data on that would be useful.
Also - possibly something we will touch on later - I think one of the key challenges is clearly the transaction costs around it. Some of those are on the basis of the funding agreements that we have which are set out with Homes England, so they are effectively part of the funding guidance that determines the way in which we would assess that and we have to have a Royal Institution of Chartered Surveyors (RICS) valuation. It is an area that the Government is looking at in their consultation at the moment. I think we can fully support that.
It is a choice. We do have plenty of shared owners with us who are happy to maintain their equity share, as [Dr] Alison [Wallace] described, at a time when perhaps they are living in a one- or two-bed property, and they are happy to sell that share and move further out at different times. It is all down to personal choice. We certainly present it as something we would like to make as easy as possible, but it is not the be-all and end-all. If people choose not to staircase then that is very much a choice for them.
Tom Copley AM (Chair): Would anyone else like to comment on staircasing?
Councillor Danny Beales (Cabinet Member for Investing in Communities, Camden Council): It is a sort of tangent point, if you would indulge me, but I think again we have to ask if the ultimate aim is for people to staircase to 100% and to own the property outright. Fundamentally we see that property no longer being affordable in perpetuity. It is returned to the market value, it is their asset and it is then transferred at market value on and on and on. That, again, is one of the challenges we see with shared ownership. If it truly is a vehicle for people to fully staircase to own their property outright, it enables potentially one person to access an affordable product but then no more. Again, in a system with very limited grant, is that the best use of public grant, to subsidise one group of people for one period of time?
Steve Moseley (Group Director of Governance, Strategy and Communications, London and Quadrant Housing Trust): Can I just come back on that point? Just in terms of staircasing, it is important to say that whenever anybody does, the grant is always recycled back and there are rules around how that is
Page 16 used. For example, since 2017 L&Q have used £10 million of recycled grant from staircasing for further affordable housing. It is never lost. It is recycled back into the system.
Reuben Young (Director, PricedOut): Just one more point on how shared ownership is an access to real ownership. The staircasing numbers are pretty low. The way people access home ownership is shared ownership is they wait for the share of their property to rise in value and then, exactly as the other panellists said, they use that equity to then move to a bigger house somewhere else. This is predicated on rising house prices. In England and the United Kingdom (UK) we are still addicted to rising house prices and shared ownership is symptomatic of that completely.
Peter Apps (News Editor, Inside Housing): A very brief point. If I wanted to staircase right now, the chief barrier would be the fact that I cannot borrow any more money because I took, as [Dr] Alison [Wallace] said, a 35-year mortgage which was as much as the bank were willing to lend me. To get a higher mortgage I would need to go back to the bank and I would need a big pay rise from Inside Housing if I am going to do that. But yes, if you have taken your maximum capacity in terms of a mortgage to buy the place I do not see how you could be expected to staircase up any time soon.
Tom Copley AM (Chair): Finally, we have mentioned collecting data but is there anything else the Mayor can do around staircasing that would help? Any thoughts on that? Steve?
Steve Moseley (Group Director of Governance, Strategy and Communications, London and Quadrant Housing Trust): Just to say that there has been a consultation at the end of last year. The Government is taking forward proposals around that and is looking at it seriously. Clearly there is work already in train around that, including looking at other models out there. Another provider uses a model where they allow staircasing in increments of 1% each year. Metropolitan Thames Valley have created a model that allows them to do that. I think that is the route to increasing staircasing.
Andrew Boff AM (Deputy Chair): Specifically, can the Mayor do anything about encouraging the data collection? We have heard a general criticism of the data collection.
Steve Moseley (Group Director of Governance, Strategy and Communications, London and Quadrant Housing Trust): He could make a requirement around it. I mean we all hold it, but we all hold it individually. We are funded by the Mayor to deliver programmes and if that was an outcome of it, we provide central collection data on average share purchase and every element of it, there just is no current requirement to provide it post-sale. If there was, I think we would be quite happy to support that.
Andrew Boff AM (Deputy Chair): You would not get upset by being asked for that requirement?
Steve Moseley (Group Director of Governance, Strategy and Communications, London and Quadrant Housing Trust): The questions you are asking are the same questions that our board would be asking us as a registered provider, so absolutely not.
Tom Copley AM (Chair): Brilliant. Yes, Danny?
Councillor Danny Beales (Cabinet Member for Investing in Communities, Camden Council): The Government’s consultation has been touched on, reducing the initial stake to 10% and then the bands of staircasing to a minimum of 1%. I do not think there is a clear proposal of how we are going to a system of fair transaction fees that generally make that a practical solution to most lower-income people. Obviously it is not directly within the Mayor’s gift or the GLA’s gift, but I think making representations that if that is a model that Page 17 is going to be adopted we do have to have a fair fees and charges approach that actively matches cost to enable staircasing.
Tom Copley AM (Chair): We have some questions coming up later in the meeting specifically on the Government’s proposals. I think I will move us on there. We have strayed over into some of the other but, Andrew, you are coming in next.
Andrew Boff AM (Deputy Chair): Is anybody able to outline in a nice, easy way what the legal status of a shared owner is? Are they actual owners? Are they subject to eviction and loss of their investment if, for example, they do not pay rent? Dr Wallace?
Dr Alison Wallace (Research Fellow, University of York): Yes, shared ownership is a landlord/tenant relationship and it is a leasehold. What you have purchased is not the property, what you have purchased is permission to occupy that property for a certain amount of time, and as such it is inherent in shared ownership, especially for flats, all the weaknesses of the leasehold tenure, which is subject to huge attention at the moment. I think there are lots of issues. In terms of repossession, which you mentioned, that is at odds as well because you could use ground 8 [under Schedule 2 of the Housing Act 1988] to repossess, although some housing associations do not use it and there are agreements with the lenders in terms of the mechanisms that will go through for housing associations to take back the properties.
But increasingly we will see shared owners without mortgages. There are a lot of people entering shared ownership after relationship breakdown, taking equity sums to pay the purchase bit and then just paying the rent. The issue where people’s equity is at risk through the Richardson v Midland Heart court case is still unresolved and I think it is an anomaly that if it is ownership then lenders have to go through discretionary processes but the power is still there for housing associations to go through mandatory routes to possession.
There are also issues about the legalities and how that is actually lived. Through our research, because shared ownership has been constructed as a home ownership and sold as such at one time -- they have moved away from it now, I sense, but at one time there were a lot of things in marketing that said, “It is literally just like home ownership”, which is a bit of lazy copy because it is not literally the same. People’s ability to be able to call themselves homeowners is hugely powerful for people and although there are problems with it, there is not entirely no substance to it because people have more control and autonomy, particularly if they are in a house rather than a flat, and all those things that we associate with home ownership.
On the last point on the legalities: I think there is an issue from the development stage to how it becomes the shared ownership product. There are lots of different stages of legal processes that the properties go through, from how the head lease is constructed and passed to the association rights with the management companies, and the housing associations have a whole heap of different leases with different structures about whether shared owners in blocks are able to have rights to the management company, voting rights and things like that over how their home is controlled. I think housing associations could do a lot more to iron those out at the actual design stage, to ensure that shared owners are included in the block management and have rights to attend. Sometimes the housing association is just counted as one member per vote and it is not shared out between the other shared owners, so they are written out of a formal say over how their home is controlled.
Andrew Boff AM (Deputy Chair): I am not going to impinge on the next question, which my colleague is going to ask in the same sort of area, but is it fair therefore to call -- we are using the term ‘shared ownership’ -- is that an accurate term to describe what we are talking about?
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Dr Alison Wallace (Research Fellow, University of York): It is a landlord/tenant relationship, but then so is leasehold. If you just bought an open market flat then we as a society would call that ownership but, as I said, you are not owning the property, you are owning permission to live in that property for a fixed period of time, which is different to freehold ownership. We have a problem in England and Wales with our structure of land ownership. That could be resolved with commonhold, but it did not take off. With all the investigation of leasehold, maybe there could be more effort on the part of housing associations to explore whether they could offer it as commonhold. I do not know what the legalities of that are but we did look at the lease and everything when we did our research. I did it with two professors from law schools.
Nicky Gavron AM: It just leads on from that, really. Perhaps I will ask Peter Apps. We have just been hearing about how it is not really ownership. Do you think then it is misleading to market shared ownership as home ownership? Would it not be better, perhaps, to market them as an assured tenancy?
Peter Apps (News Editor, Inside Housing): I suppose it depends what you mean by ‘better’. I know the Advertising Standards Agency sanctioned Notting Hill Genesis, I think it was, last year for being too loose with the term ‘home ownership’, and I think that that was fair enough. To first-time buyers who probably do not know an awful lot about the housing sector, the term ‘shared ownership’ is really confusing and they need an explanation of what it is. You could go two ways with that: either you can disguise the negative elements and try to persuade people that it is a great option for them, or you can emphasise the things that are difficult about it so that people come in with their eyes open.
I think calling it an assured tenancy would have the same problem as shared ownership because I do not think anyone knows what that is. You need to find a way of describing it that is plain English. When I talk to people about it, I tend to call it ‘part-buy, part-rent’, part-buy because you are buying a leasehold and part-rent because you are renting it, which to me is the most plain English way of talking about it, and I think it would help people grasp what they are dealing with a little bit better. ‘Shared ownership’ is clumsy in a lot of ways. I do not think it helps people understand it and I do think it obscures some of the more difficult parts.
Nicky Gavron AM: Do you want to add anything more, Andrew, just on that point? Could it be ‘shared equity’? Could it not be called something else?
Andrew Boff AM (Deputy Chair): Yes. We got a lot of feedback when we had our session with people about shared ownership that some people were quite furious that they were describing it as ownership. Some felt, not all, that the product had been misrepresented, I think, by using that word. Do you understand the feelings of people in shared ownership when they come back and say, “This is not really ownership”?
Peter Apps (News Editor, Inside Housing): In my experience the things that people are angriest about tend to relate to service charges, lease extensions, the difficulty selling --
Nicky Gavron AM: I am going to go on to talk about that, yes.
Peter Apps (News Editor, Inside Housing): I know we are going to hit those things, but I think those are the things that really need to be explained to people upfront. A more theoretical discussion about whether it is ownership or whether it is, in law, a leasehold, matters less to people than whether or not they are going to get a huge bill for a lift replacement.
Nicky Gavron AM: I think it comes back to that other point that was just made about control because people did not feel -- ownership implies some sort of control and they often did not feel they were in control for all sorts of reasons. We could just move on to those because at the open mic session they were very upset about Page 19 the lease extensions and not knowing enough about lease extensions, not knowing enough about marriage value, and you have just -- am I right, Peter Apps, that you have experience of shared ownership personally?
Peter Apps (News Editor, Inside Housing): Yes, I am a shared owner, yes. I bought a place in December 2018 so I am currently with a large London housing association. Me and my wife have a house.
We had a lot of difficulty in the buying process for a previous place that we did not actually end up getting around lease extensions. It was incredibly difficult and it came even as a surprise to me, as someone who knows more than the man on the street about the London housing association sector; both how much it cost and how inflexible paying for it was. In order to get the property, because it was 82 years [remaining on the lease] and the mortgage lender wanted it to be extended, we were asked to pay a sum in the region of £11,000, which we could not afford.
I just do not understand how people can go into this owning a 99-year lease on a property, or in many cases a 125-year lease on the property, without it being properly explained that you need to save now for the extension because it is going to cost an awful lot of money. It seems to come completely out of the blue and there seems to be a kind of residual expectation in the sector, not just among housing associations but among landlords of leaseholders full stop, that people just have that money lying around to extend a lease. People do not. It will make people bankrupt and they will lose their homes.
It is a really difficult question. I also do not think it is particularly difficult to solve. Some sort of payment plan. You are already putting in monthly payments to the organisation. You could surely extend that over three, four or five years. But it just seems to be, at the moment, the way we solve the issue of leasehold extensions is to slap a bill on the person who is unfortunate enough to have bought a house without fully understanding what they were getting, and I do not think that is going to just create ill will; it genuinely ruins people’s lives if they do not have the money necessary to pay it.
So, yes, in my experience speaking to shared owners and in my experience with shared ownership, it is those kinds of things, where there are vast sums of money that you do not have and that you did not expect to have to pay, that upset people, and the more theoretical discussions, while there are issues of control -- for example, in my lease I have to agree what colour I paint the walls with the landlord, I am not allowed to have pets and that sort of thing. All of those things are annoying, but they are nothing compared to an enormous invoice.
Nicky Gavron AM: Other members of the panel might have something to say about this.
Reuben Young (Director, PricedOut): It is a problem with leasehold generally. It is absolutely insane that we live in a society where, presumably through some hangover from feudal times, you cannot actually fully own the place you live if you live in a block. I understand that it is inherently difficult if you have a block of flats, for example, and someone has to take control of the exterior of the building, the structure of the building and of the land, but why do we not do it like every other country in the world, pretty much, and have a commonhold system where the occupiers themselves club together and run the building and manage the building themselves? We are one of the only countries in the world that does this. It is not just shared ownership; it is leasehold generally. It is absolutely mad.
Tom Copley AM (Chair): Our next investigation is going to be into that very issue of leasehold.
Reuben Young (Director, PricedOut): Great.
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Dr Alison Wallace (Research Fellow, University of York): Just a quick point on the issues about the legalities of marriage value and things like that. You might be talking about what information people get before they purchase but one of the big things that came out of our study was how little advice and guidance they received from their solicitors. Although it is an empirical question, gone are the days where the solicitors would go through every clause and see what it might warn you of or what it might mean for the future. It is a bit more of an administrative process.
Tom Copley AM (Chair): Really?
Dr Alison Wallace (Research Fellow, University of York): This is what people have said.
Tom Copley AM (Chair): Gosh.
Dr Alison Wallace (Research Fellow, University of York): There were things in the lease they evidently did not understand but the solicitors had not done an awful lot of work to explain all the different ins and outs of the lease. We had a few people who were unhappy about that.
Just generally the housing associations sometimes - not all - were a bit caveat emptor. They did give lots of information to people at the beginning of the sale, often, though, on a tick box 10-minute thing, going through explaining what the basics of shared ownership were; or, again, doing a tick box but in a shiny lovely kitchen where you are a bit emotionally committed thinking, “This could be mine”, and not quite taking it in. The landlords also presumed that the conveyancers were explaining all the ins and outs, where people got a very rudimentary service. The panel of solicitors was chosen by the housing associations we worked with because of the speed with which they could complete from the provider’s point of view rather than the purchaser’s point of view. I guess it is one of those things where you get what you pay for and I think it would be an interesting area to look into as well.
Peter Apps (News Editor, Inside Housing): I would just briefly say that that is completely reflective of my experience. There was no explanation from the lawyers or the housing association of what a lease is, what it means and what the obligations are.
Tom Copley AM (Chair): Goodness me.
Nicky Gavron AM: Yes. Not good.
Councillor Danny Beales (Cabinet Member for Investing in Communities, Camden Council): I think there is, around lease extensions, a clear gap in national guidance where greater standardisation of approach would be helpful. To link with the previous question, if the Mayor is using grant funding, potentially again to build this approach into the use of that grant funding where shared ownership is being built.
What strikes me in the debate around leasehold and that nature of selling the dream that is not quite true, there is still the belief of an obsession around home ownership but what comes back often to the core of the discussion is people who are in desperate need of stability and security as fundamentals. That is often expressed through home ownership or shared ownership but there are other ways of offering people security and affordability for them and their families that are not necessarily ownership or part ownership.
Again, other countries in Europe, we have mentioned, do offer longer-term security through other rented forms of accommodation. We cannot lose sight of that. We are finding the demand is just as strong for that sort of product, the Camden Living longer-term tenancies with stable rents that are renewable. We have our Page 21 own list for that product and close to 1,000 people have signed up who are eligible and interested in that housing. There clearly is demand for stability of a different sort.
Nicky Gavron AM: Can I just say, Danny, what you are talking about is a cultural shift. Are you using that language when you market? It is very interesting, what you are saying.
Councillor Danny Beales (Cabinet Member for Investing in Communities, Camden Council): The challenge we have is that we cannot market it too much because there is not enough stock to meet demand. As I say, we have close to 1,000 people living and working in Camden who are interested. We have delivered 70 so far and we have a pipeline of 300. We would like to grow to 500. Obviously, there are other -- section 6 gain as well. Demand is exponential. Currently the supply is not meeting that so we have not aggressively marketed the product in those terms, but clearly Londoners, particularly families, want stability and long-term security for them and their children where they are going to go to school. Again, it sometimes feels like shared ownership might be that way to get it - you have more of a stake - but there are lots of problems that come with that model, we believe, and it is not necessarily hitting the right people. There are other ways.
Nicky Gavron AM: Yes. It was just the idea that you could market alternatives as giving the same, in fact better --
Councillor Danny Beales (Cabinet Member for Investing in Communities, Camden Council): Yes. The Camden Living model, we are really clear the things we do sell are longer-term tenancies, stabilised rents, upfront freeze in charges and service charges are all clear. All of those things that Londoners, I think, want.
Léonie Cooper AM: I completely agree with you that it is important that conveyancing solicitors should give good information but I do think if you are undertaking what will probably be the most expensive purchase that you will ever make during the course of your life - unless you buy a very expensive car, which would be the only other thing - that there is an element of people needing to take a lot of responsibility for looking into the small print, effectively going around and kicking all the tyres on the car but in a property context.
The question I actually wanted to ask was really to Steve Moseley, and that is: what length leases do you offer? Do you offer 999 --
Tom Copley AM (Chair): We will come back to that in your section and I will just bring in Assembly Member Berry now because you indicated.
Siân Berry AM: Just a couple of technical questions. Being a private renter myself, I have no idea about this home ownership business or what it involves. What are the structures of the payments to solicitors? Is it a flat fee and therefore you just get what you pay for, or is there a commission basis to that?
Steve Moseley (Group Director of Governance, Strategy and Communications, London and Quadrant Housing Trust): I will respond. We maintain a panel of solicitors and so there is a flat fee around that. Our buyers are free to get advice from wherever they choose. We strongly recommend that they do get legal advice. The reason that we have the panel that we do is because they are all experienced in shared ownership so they have been delivering in that area and they understand the lease.
I think a related point to that, important to make, is that we use a model lease. As part of the funding, the fact that this is publicly funded, there is a model lease that is provided by Homes England and the GLA that we all use. We are strongly recommended not to use anything else outside of that. It has fundamental clauses in there which have been agreed both with Government and with lenders to ensure that it is a product that they Page 22 will lend on. There has been a move over the past few years to continually look at that lease. There are a number of things that were in it before that have been removed from it to simplify it as much as possible. There is further work to do on that. But providing new shared ownership now, today, that is funded by the Mayor, that should all be on the basis of that model lease.
Siân Berry AM: So, if you wanted to find out more about it, you could find a detailed rundown of every part of that model lease in some kind of Government guide? You are not relying on your solicitors to do that?
Steve Moseley (Group Director of Governance, Strategy and Communications, London and Quadrant Housing Trust): Yes, there is a plain English explanation of it. Those leases are provided for houses and flats. They are publicly available. They are on Homes England’s website. As part of the process, we would normally expect our solicitors to give a plain English run-through to the buyer of what that means and what their responsibilities are. Clearly we have heard from others on the panel there is a different experience of that and plainly if our panel solicitors were acting in that way, giving a brief five-minute run-through, I would be very disappointed.
Siân Berry AM: OK. My second question is: do shared owners have the same Right to Manage, Right to Transfer rights that you do for your blocks in, say, a council block? Tenants and fully owned leaseholders, they have a --
Tom Copley AM (Chair): That does not apply to housing associations, does it?
Siân Berry AM: That is my question. Does it apply to shared ownership as a thing or is it dependent on who the owner is, if you see what I mean?
Tom Copley AM (Chair): I see, yes.
Siân Berry AM: It does not apply at all to housing associations?
Steve Moseley (Group Director of Governance, Strategy and Communications, London and Quadrant Housing Trust): I would be happy to come back to the Committee with that. I do not know the answer on that.
Siân Berry AM: Yes, because that is possibly -- you say, “Why don’t we have things that are built as commonhold?” but you can seize it into commonhold if you are a council tenant, can you not, essentially?
Dr Alison Wallace (Research Fellow, University of York): One of the housing associations I have worked with said they had been facilitating residents to take over the management and buy the freehold jointly of a block. It was outside London. I think if it happens, it happens rarely. They were quite alert to the fact that the owners did not always have as much say over their blocks as other leaseholders and if people came forward, they would facilitate and broker with the freeholder to exit their role and the freeholders. I think it is probably quite rare.
Siân Berry AM: That was done through negotiations, not through having a right?
Dr Alison Wallace (Research Fellow, University of York): Yes, but they exercised their Right to Manage. Well, they do not have a Right to Manage but they tried to broker it nevertheless.
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I had some other things to say about the savviness or otherwise of shared owners if that is all right because obviously, yes, it is a big purchase. Some people will look into it in huge detail, but some people are more risk-averse than others and are more savvy consumers than others. Financial inclusion literature says there is a bit of a social gradient to people’s understanding of complex finances, products and things like that and also that we learn to be good homebuyers over the course of our lives. We buy jumpers or clothes every month, but we rarely buy a house, so only a few occasions in our lifetime. This is all evidenced. I know a few years ago, [The Rt Honourable] Sajid Javid [MP, Chancellor of the Exchequer and former Secretary of State for Housing, Communities and Local Government], was doing a thing about improving the home buying experience. Part of that was about the information given to people, but it seems to be something that has dropped by the wayside with all the political turmoil and things.
What is interesting is lots of buyers I have talked to about what information they have drawn upon and how they made their decision to buy, whether in the open market and shared ownership. Some people put a lot of faith in what the professionals tell them and will cede, “I don’t understand mortgages. I left it all to the broker” or “I didn’t understand. The housing association gave me enough information”. Of course, if you do not know some information, you do not know what was not told to you or explained at the time.
One thing I just wanted to flag up was the issue of home ownership education and counselling. In the United States, for assisted purchases they give help with down payments and cheaper loans and things for people to buy. It is compulsory to go through home ownership education and counselling in eight hours in a classroom or online, increasingly online. There is a big demonstration project going on to see what the benefits are over time. The evidence so far suggests people become better informed, improve their credit score because they get taught how to manage their finances and they know who to go to if they get into trouble with their loan and mortgage. For a whole range of low-cost home ownership products in the UK, there is some space where we could do something along those lines as well.
Siân Berry AM: Just to check, Danny, Camden does not have any shared ownership that it directly provides at all, does it? Do you know if any councils do?
Councillor Danny Beales (Cabinet Member for Investing in Communities, Camden Council): We have some legacy units from the beginning of our building programme before the intermediate housing policy came in. There is a handful of shared, off the top of my head I think probably about five to seven units.
Siân Berry AM: Do they have the same rights as other leaseholders?
Councillor Danny Beales (Cabinet Member for Investing in Communities, Camden Council): I think potentially at Holly Lodge in Highgate in your ward.
Siân Berry AM: You did some shared ownership there?
Councillor Danny Beales (Cabinet Member for Investing in Communities, Camden Council): I think so. It was not personal. I think it was one of the early schemes, so there are some there.
Siân Berry AM: OK. Some of the blocks there have tried to do Right to Manage, have they not?
Councillor Danny Beales (Cabinet Member for Investing in Communities, Camden Council): Not to my knowledge, they have not, no, but I am happy to provide detail.
Siân Berry AM: Yes, I would just like clarification on that. Page 24
Tom Copley AM (Chair): Do you want to take us into your next set of questions now, Assembly Member Berry?
Siân Berry AM: Yes. Obviously, this is to Steve. I think he is the best person to explain this to us. When somebody buys, they are obviously paying their mortgage. They are also paying rent on the part of the home they do not own. How do you calculate that level of rent for somebody?
Steve Moseley (Group Director of Governance, Strategy and Communications, London and Quadrant Housing Trust): Again, this is stipulated within the funding guidance and it can be a maximum of 2.75% of the value of that unowned share. It is increased by inflation annually and if somebody staircases then it reduces down by the appropriate amount. It cannot be higher than that level and there are occasions when it is lower. Particularly in respect of London in some very high-value areas, we will see shared ownership rents that are lower than that to meet local affordability criteria set by the local authority. They can be down to 1%, but 2.75% is the general standard.
Siân Berry AM: That is 2.75% per year of the part of the home they do not own?
Steve Moseley (Group Director of Governance, Strategy and Communications, London and Quadrant Housing Trust): Yes.
Siân Berry AM: If the average house in London is, what, £500,000 and three-quarters of that is £300,000, you are paying 2.75% of £300,000 per year?
Steve Moseley (Group Director of Governance, Strategy and Communications, London and Quadrant Housing Trust): Yes.
Siân Berry AM: It is not a very high rent then.
Steve Moseley (Group Director of Governance, Strategy and Communications, London and Quadrant Housing Trust): It is not high rent, no.
Siân Berry AM: It is much less than a private rent?
Steve Moseley (Group Director of Governance, Strategy and Communications, London and Quadrant Housing Trust): No, it is subsidised and the grant is a subsidy to keep that low.
Siân Berry AM: It is a few hundred pounds a month on top of your mortgage that you have to pay?
Steve Moseley (Group Director of Governance, Strategy and Communications, London and Quadrant Housing Trust): Yes. We are in a period where mortgage rates are incredibly low as well. In the past, mortgage rates would be significantly higher than the rent, but it has been set at 2.75% for some time.
Siân Berry AM: That goes up, you said, by inflation?
Steve Moseley (Group Director of Governance, Strategy and Communications, London and Quadrant Housing Trust): Yes.
Siân Berry AM: Is that Retail Price Index (RPI)? Page 25
Steve Moseley (Group Director of Governance, Strategy and Communications, London and Quadrant Housing Trust): RPI plus 0.5%, I believe.
Siân Berry AM: RPI plus 0.5%?
Steve Moseley (Group Director of Governance, Strategy and Communications, London and Quadrant Housing Trust): Yes, I believe so.
Siân Berry AM: That is by law that you cannot go higher than that?
Steve Moseley (Group Director of Governance, Strategy and Communications, London and Quadrant Housing Trust): One of the reasons we use a lease within shared ownership is to stipulate the things that we can and cannot do. The rent and the rent proportion are specified within the lease, so we cannot alter that. At the moment, at the time that it is bought that cannot be altered. That is set within the lease.
Siân Berry AM: That does not go up with the increase in house values? The amount when you bought it is --
Steve Moseley (Group Director of Governance, Strategy and Communications, London and Quadrant Housing Trust): When you bought it, yes.
Siân Berry AM: OK. Then the other thing that we have discussed is fees for increasing your equity, your share and all of those things. We have also heard about fees being charged for shared owners to make changes to their homes.
Steve Moseley (Group Director of Governance, Strategy and Communications, London and Quadrant Housing Trust): Yes.
Siân Berry AM: Is that something that L&Q does and what justification can there be for that? That sounds a lot like the charges to make further copies of your lease when you are a private renter. It does not sound very fair.
Steve Moseley (Group Director of Governance, Strategy and Communications, London and Quadrant Housing Trust): Yes, we do charge. We publish those charges on our website and we charge for a range of things. We have an in-house home ownership leasehold team that is responsible for dealing with any changes, and changes that people might make to their house could go from something very small to larger alterations. In those cases, we need to make sure that legally that is reflected and that they have got the right building permissions. We still have an interest in the property, so we need to ensure that the security of that is maintained. That is the reasoning behind it.
Siân Berry AM: It is an administration fee for your team to check --
Steve Moseley (Group Director of Governance, Strategy and Communications, London and Quadrant Housing Trust): It is an administration fee to process.
Siân Berry AM: -- that changes that are being made are OK?
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Steve Moseley (Group Director of Governance, Strategy and Communications, London and Quadrant Housing Trust): Yes.
Siân Berry AM: To what level of change does that descend to? What is the least dramatic thing that you would charge that fee for doing, if that makes sense?
Steve Moseley (Group Director of Governance, Strategy and Communications, London and Quadrant Housing Trust): I would have to come back to you on that.
Siân Berry AM: Could you get a new kitchen or, no, you could not get a new kitchen without getting permission?
Steve Moseley (Group Director of Governance, Strategy and Communications, London and Quadrant Housing Trust): I would not be able to confirm that. I would have to come back to you on that.
Siân Berry AM: This sort of arrangement, is that covered in the standard lease? We could look up those rules of the changes you are allowed to make to your home?
Steve Moseley (Group Director of Governance, Strategy and Communications, London and Quadrant Housing Trust): Yes, that is all covered in the lease. Yes.
Siân Berry AM: It defines what? You could change a window or a door? Give me a general sense of what you can and cannot do without paying a fee and getting permission.
Steve Moseley (Group Director of Governance, Strategy and Communications, London and Quadrant Housing Trust): One of the reasons that we ask people to contact us is at the point that they staircase, if they made an improvement to their property -- let us take a kitchen. If they have made an improvement to their property, then we will record it on our system. At that point, we will ask a valuer to discount it from the value of the property. Effectively, if that has improved the value of their property they would take that off at the point of staircasing, so that people are not being penalised for improving their own home and they get the benefit of it. That is one reason that we have to record it.
Siân Berry AM: It is because improvements count towards equity --
Steve Moseley (Group Director of Governance, Strategy and Communications, London and Quadrant Housing Trust): In staircasing, yes.
Siân Berry AM: -- as well as the fact that your team needs to check it is done properly?
Steve Moseley (Group Director of Governance, Strategy and Communications, London and Quadrant Housing Trust): Yes.
Siân Berry AM: We are talking about more dramatic changes then than replacing the doors? I still cannot quite get a handle on what changes. What did we hear in the --
Tom Copley AM (Chair): We heard Notting Hill Genesis, for example, charged £250 to get a letter saying that you can change your kitchen. It seemed to us to be them getting money for nothing. If you are going to pick a kitchen out of the Magnet catalogue or whatever, it does not seem to require a letter from the housing
Page 27 association to say you could. I could possibly understand if you wanted to knock a wall through, that the freeholder --
Siân Berry AM: Or if it was the heating or electrical system, but, yes, if you are just installing cupboards --
Tom Copley AM (Chair): -- would need to do some checks and make sure that you were not destroying the fabric of the property, but if you are just installing a new kitchen, I was not clear why there would be a £250 fee. I know this was Notting Hill, not you.
Steve Moseley (Group Director of Governance, Strategy and Communications, London and Quadrant Housing Trust): Yes, and I do not know what our fees are on that. We have a range of fees that we charge, and I am happy to come back to you and provide what they are. The reason that we do it is we still have security of that property, we need to ensure that, certainly in terms of substantial changes, they are done in the right way, and as I said, if people wish to improve their properties there is a mechanism where that is taken off at the point of staircasing so they are not paying for it twice.
Siân Berry AM: One of the things that we are all talking about at the moment is improving the energy efficiency of homes and there are lots of schemes where you might get given energy efficiency improvements for free. If obviously you then have to pay a charge in order to get that, that is a disincentive to that kind of thing.
Steve Moseley (Group Director of Governance, Strategy and Communications, London and Quadrant Housing Trust): I would hope we would take a balanced view on that. Certainly, we are in the interests of covering our costs of having a team that is there, available to answer these enquiries. We do not use it as a profit-generating source of income and that is certainly not our intention.
Siân Berry AM: OK, we will look at that further. Peter, earlier you said you were not allowed pets. In a house? That seems excessive. Do you have any comment to make on the conditions that you have noticed being imposed on people and whether they are justified?
Peter Apps (News Editor, Inside Housing): Yes, I do. I do not think it makes sense for that restriction to be in place. It is a completely self-contained house. I also do not think that my landlord would find out if I bought my son a guinea pig. From talking to the people who were selling property about that and speaking to my lawyers about it, it was something that was in the lease. They had a standard form lease, I think similar to what Steve [Moseley] was talking about. They applied it to a number of properties, which cut across some where they did not want pets and some where they did, and so rather than altering it, they just were handing everyone the same thing.
I have not bumped into any of those issues yet, but I have only been living in the house for a year. Five or 10 years down the line, I might find that more frustrating. I have not felt like the housing association is going to police it particularly officiously, unless I start doing things that are completely outrageous. If you are selling something as ownership, you should probably offer ownership and that means as little control as you can possibly stomach. That is certainly not the kind of black and white terms of my lease, although in terms of the actual experience of living there, it has been a little bit more like that.
I did briefly just want to say something on Léonie’s [Cooper AM] point earlier as well about the caveat emptor point and whether or not shared owners should be just doing more research on this sort of thing. You really do need to understand that by the nature of the product you are almost exclusively dealing with first-time buyers,
Page 28 who have no experience of the property market and probably no knowledge of leaseholds and what it entails. People do really want to ask the right questions but they do not know what questions to ask.
I felt personally, even as someone who works within the sector, it would have been quite helpful if the GLA, as a kind of third party which is not selling this product but overseeing it, had published a list of things that you need to know before becoming a leaseholder or a shared owner and was actively directing buyers to that. The housing association people you deal with - and I am not saying this as a criticism of them - are a sales team who have sales targets and it is naïve to expect them to tell you the warts of a product that they want you to buy. You have probably also been hit by marketing, some of it from organisations describing their stuff as ‘ownership’. I do not know why you would go in and say, “Oh, is it really ownership?” There is a real space there for just some public body to step in and say, “Here’s a list of 10 things you need to know about leasehold. If you’re comfortable with it, then go for it; if you’re not, then maybe this product’s not for you”. Just expecting people who are first-time buyers, whose parents do not necessarily own their own homes either, to work all this stuff out for themselves is a recipe for disaster.
Siân Berry AM: Yes. Thank you, Peter, and it does seem obvious that if we are funding it from the GLA we should be providing the right amount of information.
On the question of changes to the homes, I just wondered if [Dr] Alison [Wallace] or Reuben had anything to add about the conditions that are put on people’s activities within the home.
Reuben Young (Director, PricedOut): It makes complete sense that a housing provider, who has a long-term interest in the asset, will want to be notified and give permission in cases where it is a structural change. It does not make sense to me that the leaseholder has to pay for that, and again this is a leasehold problem; this is not a shared ownership problem. If you are a full owner in a leasehold flat you face exactly the same charges, which by the way are levied on you even if the landlord says “No”. It is not a shared ownership problem; it is a leasehold problem. As you say, Siân, it is exactly like tenancy fees for photocopying and the rest. I think housing associations could probably easily absorb that themselves.
I would also go even further than Peter [Apps] on pets. I think pets should be allowed everywhere. It makes no sense to me that in the private rental sector you are not allowed to do what you want with your home as long as it is not affecting the built product.
Siân Berry AM: That is a good point, that because the housing association has the long-term interest in the property it is their job to keep an eye on it and not just charge everything to the shared owner. That is a really good point. Alison?
Dr Alison Wallace (Research Fellow, University of York): Yes. The only issue with that is I talked to lots of people who bought their shared ownership home 10 or 20 years ago who said that their housing association took no interest whatsoever in the state of the home and a few of them had serious disrepair. They had bought these homes through the Do It Yourself Shared Ownership scheme from the days of yore, where you could buy off the open market, and then bought them as resales. These properties did have disrepair, which also affects the value of the property, but that is where they became frustrated with the ‘shared’ epithet because nothing was shared.
As for the issue with permissions and fees, I have talked to people who have had permission but much lower, £25 to put up a shed in the garden and things like this, which seems to be taking the bureaucracy slightly far. That is not to say that is across the board. One thing to underline here is that the housing association practices will probably vary quite a lot. As Steve [Moseley] said, a good way to approach improvements that Page 29 the purchasers have done is that you discount that from the final valuation if they were staircasing or selling, but not all housing associations do that. If you put in a £10,000 kitchen, some would still split that and if it increased the value by £10,000 they would still take whatever the proportion was of that uplift. I think there is a lot of variety of practice.
Siân Berry AM: We will probably try to find out a bit more about that.
Tom Copley AM (Chair): Yes. I am glad you have raised pets, Assembly Member Berry.
Siân Berry AM: It is a bit of an obsession of mine.
Tom Copley AM (Chair): Battersea Dogs and Cats Home has a great campaign on pet-friendly properties and responsible pet ownership. Steve, do you know if L&Q is signed up to Battersea’s campaign?
Steve Moseley (Group Director of Governance, Strategy and Communications, London and Quadrant Housing Trust): I am afraid I do not know.
Tom Copley AM (Chair): All right, OK. If not, it is a great thing to sign up to.
Siân Berry AM: It is, yes.
Steve Moseley (Group Director of Governance, Strategy and Communications, London and Quadrant Housing Trust): I will look into that.
Tom Copley AM (Chair): Pets are very good for mental health. Assembly Member Gavron, you wanted to come in.
Nicky Gavron AM: On the home improvement side, I wanted just to put that I think possibly - I need to be reassured - there is a case for charging if what the home improvement leads to is an inspection. We have heard a lot, because of Grenfell, Lakanal and so on, about leaseholders being involved in structural improvements, which means changes of doors where they do not become fire doors, breaking the fire wall and so on through certain structural improvements, changing the insulation. I just wonder what comment you might make about that because there should be some kind of inspection. Who is going to answer? Is there an inspection and do you charge for it? I think I will ask L&Q this.
Steve Moseley (Group Director of Governance, Strategy and Communications, London and Quadrant Housing Trust): Yes, OK. In terms of fire regulations, we have leaseholder properties with cladding on at the moment and we are removing that. We are not charging that to the leaseholders. We are the building owner and therefore it is our responsibility to ensure that that is safe. In terms of cladding, we are not passing on any of those costs to our leaseholders.
Nicky Gavron AM: I am talking about inside, actually. Fire walls, all sorts of home improvements inside can lead to fire issues.
Steve Moseley (Group Director of Governance, Strategy and Communications, London and Quadrant Housing Trust): Yes. I think if there is, we have the responsibility for carrying out fire risk assessments. I am not aware that we are charging on the costs of those fire remediations to our leaseholders.
Nicky Gavron AM: OK. It is just something and when we come to leaseholders we might look at that. Page 30
Tom Copley AM (Chair): OK. We will move on to our next section and that is being led by Assembly Member Cooper.
Léonie Cooper AM: Yes, but just before I come to that, just on the business of charging money to leaseholders or shared owners for making changes - and Assembly Member Gavron has just touched on it - I may be the only person in the room who has managed large numbers of properties, tenanted, leasehold and all the rest of it. If you are going to charge £250, it is probably because you need to get a surveyor to come around and have a look.
Nicky Gavron AM: That is what I thought.
Léonie Cooper AM: With the best will in the world - I understand about just changing kitchen cupboards - there have been plentiful examples in the past, particularly when mortgage rates have been higher, when people have done things like removed Neff ovens and expensive kitchen equipment. This may not be so common at the moment because mortgage rates are so low. That is why a lot of landlords will reserve the right to come around and conduct an inspection, because of the state of a beautiful kitchen or even downgrading from something that is high quality to a Magnet kitchen, or other brands available. People have just removed them and have then sold them because they have got into trouble with paying their mortgage. There have been examples of that. I think a £250 charge for a surveyor to come around to make sure that the ducting that you are putting in is not breaching the fire regulations -- kitchen are not just cupboards. They include electrics, water.
Nicky Gavron AM: That is what I was thinking.
Léonie Cooper AM: A lot of other things go on in kitchens and I think that is where it has originally come from. Shared ownership has been around since 1979; it is not something that landed last week. Now if someone is charging £250 and all they do is send out a letter and they do not bother to do the inspection, then I think the person who is being charged in that way has a pretty good argument for arguing against it. Anyway, I just wanted to say that.
Nicky Gavron AM: That was very helpful, thank you.
Léonie Cooper AM: Just to come back to the point on pets, I think not having poisonous pets or pets that cause annoyance to neighbours. I may also be the only person who has managed properties outside of London where we had clauses where you could not own ponies or pigs because there were large, green spaces outside people’s properties. I was working in Hastings and I believe that people wanted to put lots of ponies and horses there. Also, poisonous pets. I am very much in favour of pets that do not interfere with the peace and quiet of adjoining neighbours, but there have been lots of examples of people with snakes, for example, which have then escaped from one flat and got into another flat. It is unpopular with people’s neighbours to wake up and find that they are being squeezed by an anaconda. I cannot think why. Can you? I am going to stop talking about --
Tom Copley AM (Chair): There are quite extreme examples there, Léonie. I was thinking more of getting a cat.
Léonie Cooper AM: Not annoying your neighbours is a general principle. I am very fond of cats and dogs and I think anyone who wants a cat or dog or anything else that cannot escape through tubes into somebody else’s house and do that sort of thing should do. We have just had a whole load of baby pythons in Battersea Page 31
Park, for example, not far from Battersea Dogs and Cats Home. It was clearly someone whose python was producing new pythons and they had to get rid of them somewhere. Anyway, that is neither here nor there. I do not know that they were a tenant or, indeed, a leaseholder or a shared owner.
Coming back to the issue of the length of leases, do you think it would be fair - and I start with Steve Moseley - to say that they should be a minimum of 125 years and also to make it much more explicit about the costs that might be involved in people extending them? How long are the leases that you offer?
Steve Moseley (Group Director of Governance, Strategy and Communications, London and Quadrant Housing Trust): We offer 125-year leases as standard.
Léonie Cooper AM: That is your standard.
Steve Moseley (Group Director of Governance, Strategy and Communications, London and Quadrant Housing Trust): Again, the funding guidance requires a minimum of 99, but we as a --
Léonie Cooper AM: When you say your “funding guidance”, you mean from your lenders who are putting --
Steve Moseley (Group Director of Governance, Strategy and Communications, London and Quadrant Housing Trust): No, from Homes England/GLA.
Léonie Cooper AM: Homes England/GLA.
Steve Moseley (Group Director of Governance, Strategy and Communications, London and Quadrant Housing Trust): The funding guidance to receive grants is that it cannot be less than 99 years, but we grant 125 years. Generally, if you are buying a leasehold property on the private market that is what would be granted, so we follow that.
Léonie Cooper AM: Could you offer more? Could you go for 999 or 250?
Steve Moseley (Group Director of Governance, Strategy and Communications, London and Quadrant Housing Trust): Yes, I think it is a really good question. In some cases, we are restricted because we are not the freeholder and so that depends on what we can offer. I know it is a point of concern and it is something that we have to take seriously. If there was a move to raise the minimum level, then I think we would be supportive of that. We are certainly not in the position of wishing to generate any income out of lease extensions and to see them run down, on the basis that we want it to be as long as possible. We have no business stream out of this at all. If we could, I would welcome longer leases.
Léonie Cooper AM: Peter [Apps] definitely referred to the idea that it might cost £10,000 or £11,000 to extend a lease. That seems very onerous to me and I can see Peter is nodding. Not everybody has £10,000 or £11,000 lying around at home.
Steve Moseley (Group Director of Governance, Strategy and Communications, London and Quadrant Housing Trust): No.
Léonie Cooper AM: In fact, most people probably do not. Let us face it.
Steve Moseley (Group Director of Governance, Strategy and Communications, London and Quadrant Housing Trust): I agree. The number of lease extensions that we have had in our shared Page 32 ownership portfolio is very, very small, 17 last year out of a portfolio of 9,000 homes. We are actively contacting some of our other leaseholders where we think they are getting to the 80-year limit and advising them to extend before that. As I said, we have responded to a Competition and Markets Authority enquiry on this and made it really clear this is not our business. We are interested in people accessing home ownership, not generating income out of leases. Where we have to charge it as a result of an extension, then we have to do that, but longer leases I have absolutely no issue with.
Léonie Cooper AM: You seem to be being pretty clear that L&Q does not see charging for extensions as a sort of income business stream and that you are keen to get people to extend because obviously once you get below a certain number of years --
Steve Moseley (Group Director of Governance, Strategy and Communications, London and Quadrant Housing Trust): It goes up.
Léonie Cooper AM: -- it is quite hard to re-mortgage or sell, in fact.
Steve Moseley (Group Director of Governance, Strategy and Communications, London and Quadrant Housing Trust): Yes.
Léonie Cooper AM: Do you know if that is the same with, I do not know the G1, G2, G15 as it used to be?
Steve Moseley (Group Director of Governance, Strategy and Communications, London and Quadrant Housing Trust): G15.
Léonie Cooper AM: It is still the G15, even though there are only --
Steve Moseley (Group Director of Governance, Strategy and Communications, London and Quadrant Housing Trust): It is still the G15. Although there are fewer of us, it is still the G15.
Léonie Cooper AM: There are only six members now, yes.
Steve Moseley (Group Director of Governance, Strategy and Communications, London and Quadrant Housing Trust): I do not know. I do not know their policy on it.
Léonie Cooper AM: It is not something that has been discussed there or you just do not know if it has --
Steve Moseley (Group Director of Governance, Strategy and Communications, London and Quadrant Housing Trust): No. No, it is not.
Léonie Cooper AM: Perhaps we could find out because obviously a lot of the Mayor’s funding has been allocated to G15 members. It strikes me if we have a G15 policy as well as a Homes England and a GLA policy on extending leases, then we actually get around this need for having a discussion about whether £10,000, £5,000 or tuppence halfpenny is a good amount for doing the extensions.
Steve Moseley (Group Director of Governance, Strategy and Communications, London and Quadrant Housing Trust): I agree, and it is a bit of an anomaly as well that the model lease says “minimum 99”. That would be an easy thing. If we are offering greater than that level as a standard, then it should at least catch up to that.
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Léonie Cooper AM: I am not going to ask about all the ins and outs of what L&Q does in terms of making sure that shared owners are well-informed because I think we have actually explored that area. We have also talked about the fact that you have a panel of solicitors, but people are also free to select their own solicitors should they so wish. Do you happen to know if that is common to the rest of the G15 as well?
Steve Moseley (Group Director of Governance, Strategy and Communications, London and Quadrant Housing Trust): Yes.
Léonie Cooper AM: Everybody would say, “Here is a panel of” --
Steve Moseley (Group Director of Governance, Strategy and Communications, London and Quadrant Housing Trust): I do not think anybody would compel to use a particular solicitor.
Léonie Cooper AM: No.
Steve Moseley (Group Director of Governance, Strategy and Communications, London and Quadrant Housing Trust): We encourage because we have solicitors that are experienced with shared ownership. It goes back to the point that if someone does not understand that or thinks it is a normal lease and does not understand the variances around it, they might not get the best advice.
Léonie Cooper AM: Coming back to the point about what people know about part-buy, part-rent, it is quite a complicated first tenure and it must also be a slightly more complicated thing for a conveyancing solicitor. Presumably the people on your panel are people who know the ins and outs and are in a better position to be able to advise people. Is that a point you make to people when they are selecting who they might ask for their conveyancing advice?
Steve Moseley (Group Director of Governance, Strategy and Communications, London and Quadrant Housing Trust): Yes. We publish the panel. We make it very clear why we have chosen them - they have a long history in shared ownership and they understand it - but not to the extent that we would say that you have to use these. We also make it clear that we have selected them because we have negotiated. Because of the volume of work they do with us, they deliver lower fees. We are transparent around what those fees would be.
Léonie Cooper AM: What percentage of the people who are part buying, part renting from L&Q would use solicitors from the L&Q panel?
Steve Moseley (Group Director of Governance, Strategy and Communications, London and Quadrant Housing Trust): I could not give you the exact percentage, but it is very high.
Léonie Cooper AM: Very high. Would you be able to write to us afterwards and give us that figure?
Steve Moseley (Group Director of Governance, Strategy and Communications, London and Quadrant Housing Trust): Of course I would.
Léonie Cooper AM: I thought that might be the case, particularly, obviously, if there is a cost thing. Are people told when they are purchasing their share about the implications of it should they ever need to extend? Are they given all this information right at the beginning?
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Steve Moseley (Group Director of Governance, Strategy and Communications, London and Quadrant Housing Trust): Yes.
Léonie Cooper AM: Yes, OK. On the issue of service charges, which we have touched on a tiny bit, shared owners, although they are part buying and part renting, are responsible, even though they do not have 100% rental, for 100% of the service charges. Do you think that is fair?
Steve Moseley (Group Director of Governance, Strategy and Communications, London and Quadrant Housing Trust): The service charges, for a start, are regulated. We are charging back services that the shared owners are receiving and, on that basis, it is fair that they pay the whole amount. If you were a private rent tenant in that block you would also be charged back the full amount of the services included in your gross rent because you are receiving them. We are charging back what people are owning. The fact they have a mortgage on 25% does not mean they are not receiving the full services from that. In terms of a position, I think it is fair.
We clearly have a challenge to try to keep service charges as low as we possibly can. There are regulations about what we can and cannot charge for.
Léonie Cooper AM: You are crossing back into the point that Reuben [Young] has made quite eloquently throughout that in some senses, part-buy, part-rent, the arrangements are not that different from people who are a full leasehold purchaser of a flat in a block. All those people, even though all they are doing is buying and not renting anything, would be paying all the service charges for that block between them.
Steve Moseley (Group Director of Governance, Strategy and Communications, London and Quadrant Housing Trust): Yes.
Léonie Cooper AM: In that sense, the fact there is a bit of buy as well as a bit of renting is neither here nor there.
Steve Moseley (Group Director of Governance, Strategy and Communications, London and Quadrant Housing Trust): Absolutely. It is consistent with other leasehold tenure.
Léonie Cooper AM: Whether that is generally fair for either target or tenure is an entirely separate point. In line with the Mayor’s Shared Ownership Charter for Service Charges, are you taking steps to review your service charges on a regular basis to ensure that ongoing costs are minimised and possibly even reduced? You said you would like to keep them to a minimum. Obviously, it is a very regulated area. Have you been able to reduce at all?
Steve Moseley (Group Director of Governance, Strategy and Communications, London and Quadrant Housing Trust): Slightly, in some cases, we have, yes. This is through procurement. We are always trying to ensure that the services we deliver, we can deliver as cheaply as we possibly can. Those service charge accounts are scrutinised. They are signed off by our auditors to show they are effective and a true record. As I said, they are covered by legislation in terms of what we can charge as well. It is fair to say that particularly in London, if you think about some of the mechanical and electrical equipment we have, combined heat and power, certainly the costs around those have created high service charges in cases and some schemes.
We are trying, as much as possible, to actively design out those charges. We will not put in facilities for the sake of it. Peter [Apps] raised an important point about things like concierges when they get put in. I will give Page 35 you an example around gyms. We never put things like that as standard into our service charge because we think that should be a choice for our shared owners to pay. It is always our position that we will try to keep it as low as possible and that we will not throw in those extra services. If there is a choice of something and they want to join a gym, then they have the opportunity to do that, but we would not bake it into the service charge.
Léonie Cooper AM: You will obviously be writing out to people with the estimated service charges once a year and then you will be writing out to them subsequently to say, “These are the actual costs that we incurred” and then doing that balancing exercise between them.
Steve Moseley (Group Director of Governance, Strategy and Communications, London and Quadrant Housing Trust): Yes.
Léonie Cooper AM: When you write out to people about the service charges, either estimated or actual figures, are you also encouraging them to take out contents insurance because they are also part buying buildings insurance as well? I am aware there is an issue of underinsurance amongst a lot of housing associating tenants. It is very important if you are part purchasing as well as part renting. It is important for everybody, obviously. Is that something you are regularly encouraging people to do?
Steve Moseley (Group Director of Governance, Strategy and Communications, London and Quadrant Housing Trust): I do not know if we are regularly encouraging it. I know that we make a particular point of it at the point of purchase, making clear that we are responsible for the building insurance and that is charged back but they need to arrange their own contents insurance. It is displayed within all our literature. Whether we follow up that part to the service charges, I do not know.
Léonie Cooper AM: Yes. You would not be able to tell us what percentage of your shared owners might have proper insurance arrangements in place?
Steve Moseley (Group Director of Governance, Strategy and Communications, London and Quadrant Housing Trust): I would not, no.
Léonie Cooper AM: Is that something you have ever noticed that you have been encouraged to do, Peter? Are you aware that others are encouraged to get their property and its contents insured?
Peter Apps (News Editor, Inside Housing): That did happen, yes. It came from the mortgage broker.
Léonie Cooper AM: From the mortgage broker.
Peter Apps (News Editor, Inside Housing): I believe he would have also secured commission on the insurance.
Léonie Cooper AM: However, it is still worth taking out insurance.
Peter Apps (News Editor, Inside Housing): Yes, absolutely.
Léonie Cooper AM: You obviously do not have to take it out from the person that is renting.
Peter Apps (News Editor, Inside Housing): No, of course not. It was mentioned and we were encouraged to do that but, yes, it was the broker. Page 36
Léonie Cooper AM: Insurance is obviously something that should be encouraged as much as possible. That is the end of my questions. Thank you.
Tom Copley AM (Chair): Thank you very much. I have a question now for Alison about the recommendations you made back in 2015 about reforming shared ownership, particularly around making marketing material more explicit that full ownership might be untenable for some people, increasing data collection on shared ownership, including what type of housing tenure people move into when they leave shared ownership. Have there been any changes on these issues since you made these recommendations?
Dr Alison Wallace (Research Fellow, University of York): Sorry, I was reminding myself of what they are as well. In terms of marketing, just yesterday, the National Housing Federation made a whole new thing about sales and marketing literature, about explaining that you do not share with a person, with a friend. It is shared between the housing association and the purchaser.
Again, it is all about sales and marketing. There is a lot of effort goes into sales and marketing without the boring explanations of all the different things you have to think about if you are purchasing from an independent point of view.
I do sense there has been a bit of a change in marketing about literally ‘shared ownership’ and moving towards the part-rent, part-buy. It is a very live issue. I have been in housing associations and focus groups with providers and they debate it endlessly. People say it is not shared and it is not owned, but then they say a lot of people still do know what that product is. They are nervous. Having been through different heaps of low-cost home ownership rebranding and things, people are a bit nervous to move away from that. I sense there is some change but not in terms of the detail, is the upshot of that.
In terms of social businesses, this is one of the recommendations. I am not sure of that. I have done work since this report, but it was again on accessing people outside, therefore, I cannot comment whether that is particularly changed or not.
Tom Copley AM (Chair): Sure.
Dr Alison Wallace (Research Fellow, University of York): Conveyancing, I have mentioned already. Leasehold reform, we have talked about.
Lender/provider communication. Yes, there is an issue. I am bidding for some work at the moment about looking at whether shared ownership products are a safer way to enter ownership than the open market for low to moderate-income households because this was quite interesting, the variety of ways that arrears and possession are managed. There were instances of lenders, if it was repossessed, wanting to execute the mortgage protection clause and get any losses back from the housing association, which would then be put on the account of the purchaser but without much challenge. Some of the challenges one of the associations offered to lenders there was in the favour of the purchasers. That seemed like quite good practice.
There were issues as well about capitalising rent arrears, because the housing associations routinely wrote to the lenders to pay off any rent arrears but then that is increasing their debt with interest. I suspect that might need relooking at again with lenders. It may not be in the best interests of the tenant. They are effectively borrowing that money to repay the housing association. Looking a bit more at that issue would be beneficial but it has not come out in enough detail from the studies I have done so far.
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Staircasing, we have already talked about this. Third party managing agents, I talked about. We had problems with the head lease that you might staircase to 100% and still not have member rights over the management company and things like that if the housing association is not freehold and things.
I am going on a bit. We have talked about some of the other things.
Tom Copley AM (Chair): That is fine, thank you very much. We will move now into the last set of questions, which is Assembly Member Devenish.
Tony Devenish AM: Thank you, Chair. What impact would the Government’s proposals to reduce the initial stake required from 25% down to 10% have on shared owners? Anybody can start.
Peter Apps (News Editor, Inside Housing): One of the interesting points on this for me is relating back to what [Councillor] Danny [Beales] was saying earlier about potentially offering Living Rent-type models with long-term security of tenure. For us, the only reason we were looking at shared ownership was because myself and my wife were becoming parents and it was the only way we could find a property in London that would get us through. We knew we would be living there throughout my son’s primary school. Shared ownership was the only option.
Once you get down to 10% ownership, you are offering that security and that is something people will want. Surely there are other ways of offering that security. I am not sure getting the 10% is the thing; you would get a lot of appetite for it but I think the people that would be coming would be people who want security, not people who want 10% of their home. In designing housing schemes, you could easily offer that and think it was a roaring success because you would have people queuing round the block for it, but you would probably need to be asking yourself the question of why they were queuing. It is because it is the only option in London to live in an area for a long period of time.
Reuben Young (Director, PricedOut): That is absolutely right. Luckily, the Government is committed to ending section 21 now and we might see the need for shared ownership to be more accessible, dropping more, hopefully, if that eventually happens.
Steve Moseley (Group Director of Governance, Strategy and Communications, London and Quadrant Housing Trust): I would support what both Peter [Apps] and Reuben [Young] have said. 25% instinctively felt, to me, the right level, particularly with the discussion we have just had around service charges. When you get down to 10% there is a question about whether you are helping marginal households into homeownership. I would prefer that if this was about making it more affordable, it focuses the cost of the rent and maybe a grant going into that to reduce the overall cost rather than an ever-lower level. I do not know what the magic level is that looks and feels like ownership but 10% feels low, to me.
Dr Alison Wallace (Research Fellow, University of York): I wanted to comment as well, to reflect what people have said, that you are trading 10% equity share which would not be 10% equity share; it would be 5% of 10% if you are putting down a 5% deposit for repair responsibilities, upkeep, insurances and all the rest of it. Again, the danger is drawing in people for whom it is not the best place to be and not the best tenure in that there are other arrangements, as people have said, that might meet their needs better. I think that is an important thing.
There is also an important point in London that across the country, the shares people have bought, buying shared ownership; you would think London was the most expensive place where people are buying lower shares, but that is not necessarily the case. We talked about people being on higher incomes and things. Page 38
Tony Devenish AM: OK, thank you. What impact might the Government proposal to allow people to staircase in 1% increments rather than the current 10% increments have on shared ownership, do you think? Again, anybody could start.
Peter Apps (News Editor, Inside Housing): To fix that, you would first have to fix the transaction costs part of it because if you are paying many hundreds, if not thousands of pounds to just get out of bed and staircase and so on, staircasing increments of 1% does not make sense. As we talked about earlier, most people staircase, when they do staircase, straight to 100% if ever they do. I do not see the benefit of it at all.
Councillor Danny Beales (Cabinet Member for Investing in Communities, Camden Council): I own 55% of the home. I would feel absolutely no different about my life in any way if I owned 56%. I cannot see the benefit myself.
Tony Devenish AM: OK, that is unanimous. The Government is looking to reform the leasehold system but not for shared ownership. Does the leasehold element of shared ownership need reforming in your opinion and, if so, what alternate arrangements would you suggest? Go on, Steve, you can start this time.
Steve Moseley (Group Director of Governance, Strategy and Communications, London and Quadrant Housing Trust): My view around leasehold and shared ownership is that it is an effective way to deliver this product. It is far more effective and flexible. A home ownership approach is that you use equity loans. The lease in itself enables the fact that you can staircase up throughout which is not the same where you have an equity charge on the property.
As a construct, it is effective, and it does what it needs to. We do not maintain a lease when we do not need to, therefore, if it is a house, the moment that a shared owner staircases then the lease extinguishes and they get the freehold. We are using it purely to enable that transaction to happen. It has been around for 35-plus years. We have been delivering it since 1985. The lenders like it. It is now the case - and it certainly was not the case in the early days of shared ownership - that all the major high street lenders support it. There is a good range of mortgages to that.
As a product, it is the only intermediate product that has lasted throughout that entire period. Many have come and gone but shared ownership has been the constant through that period which suggests to me that there is something right about it. Within our property system, leasehold as a way to manage it is effective.
Leasehold has clearly been damaged by some of the sharp practices that we have seen over the past few years, particularly around leasehold houses. We have to continue to drive down service charges. When people are in a position where leases are allowed to run down and they are then getting large charges to extend the lease, all of that does damage to it but all those things, I would define as sharp practice. If it is delivered in a responsible way, I think it is an effective way to deliver this product.
Councillor Danny Beales (Cabinet Member for Investing in Communities, Camden Council): We build a mixed tenure including private sale of leasehold, shared ownership being on that arrangement too, the very small amount that we have delivered. There is clearly scope for a national conversation about leasehold. The general challenges apply across both shared ownership and full ownership. There was lots of discussion pre-election around commonhold as an alternative form. That was something we actively looked at.
From a sales perspective, it is probably a net positive to move to a commonhold arrangement. You are going to be a more sellable product than a leasehold product from a market perspective. There are some practical Page 39 challenges, particularly for public builders if you are seeking to deliver mixed communities, if you are seeking to deliver mixed-tenure blocks. There are some challenges potentially of moving from a leasehold arrangement for intermediate and private sale to a commonhold arrangement when you potentially have social tenants living within that block too. There are some practical challenges: how you, for example, deliver shared services like combined heat and power facilities to blocks of different tenure arrangements. There are some practical issues that do merit a lot of discussion. Clearly, coming back to the point Steve [Moseley] made, there are some fundamental bad practices that need to be stamped out regardless of how the model evolves. That should be the first focus.
Andrew Boff AM (Deputy Chair): May I come in specifically on that? Is there a danger that if we were to move to commonhold, we would have more rich doors and poor doors?
Councillor Danny Beales (Cabinet Member for Investing in Communities, Camden Council): There is a challenge in how the model currently is proposed, yes. For builders such as us, we build tenure-blind. We are very proud about that. It is embedded in our planning policies. It would present a management challenge to develop blocks in that way. There are potentially other ways around that and we are open for a conversation but that would be our reluctance at this point. Certainly from a sales perspective of the private sale units, there is not a challenge. We think it would be net positive. It is more on the management side there is an issue.
Tony Devenish AM: If I can sneak in. The Chair has not mentioned this himself. This is a question that has been suggested to me. How would the Mayor’s proposed rent controls affect the operation and viability of shared ownership in your view?
Reuben Young (Director, PricedOut): That would depend on the wording of the law. Shared ownership rents are capped at RPI plus 5% a year. I do not know if that happens to be over whatever the Mayor’s cap on increases would be.
Tom Copley AM (Chair): It is a different form of tenure so presumably it is a different arrangement.
Councillor Danny Beales (Cabinet Member for Investing in Communities, Camden Council): Just to jump in, in a sense, we have rent capping on social tenants. We have rent capping in this tenure. We do not for private rented tenures, often where there is a significant amount of public subsidies through the Housing Benefit system propping it up. Coming back to the core challenge for Londoners, they want a stable, affordable home that gives them security. Better rent reform in the private rent sector is a must and is what Londoners need. It drives back this obsession for security through ownership, the shared ownership, because in the private rent sector, which is now in Camden the biggest sector, there is not that security and stability there.
Reuben Young (Director, PricedOut): Also on that point, there are specific places and markets already where, because of the subsidised rent that you pay on a shared ownership home and the RPI plus 0.5% increase, there are times when that is more expensive than the market rents for the portion you do not own and if, of course, you are bringing private rents down, that might exacerbate that problem. It might make shared ownership less popular or harder to sell for the people living in it, maybe.
Tom Copley AM (Chair): Thank you. My final question, more generally, does anyone have a comment on what effective alternatives there could be to the shared ownership model that would assist people on low and medium incomes into home ownership that we have not already discussed this morning?
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Reuben Young (Director, PricedOut): Yes. The way to make home ownership affordable is to make home ownership affordable for everyone by building enough homes, by performing our broken property tax system, by making the private rent sector better and by bringing housing costs down for everyone. Shared ownership is great, but it is a symptom of the problem. It is not a solution for everyone. We need policies from governments, regional and national, that will get enough homes built to bring housing costs down and make housing affordable for everyone.
Tony Devenish AM: The Mayor is listening. Peter, do you have any last comments?
Peter Apps (News Editor, Inside Housing): What London needs is many more social rented homes, either managed by housing associations or councils, and the chronic problems in London’s housing market will only be solved when we have that. Shared ownership is not the answer to the people at the very sharpest end of these problems. It is never going to be.
Briefly, to your previous question about leasehold, one point I did want to make on that is the characteristics of a shared ownership buyer are that they are typically younger, probably more naïve about the property market, have less money and maybe a more immediate or a sharp housing need. All of those things make them more vulnerable to the problems with leasehold like high service charges and lease extensions because they might not have known the right questions to ask and they will not have the money to deal with the problems when they come along. It is not a question of, “Is leasehold a worse model for shared ownership than it is for home ownership?” but that the people who get shared ownership are less well prepared to deal with the problems with leasehold.
Dr Alison Wallace (Research Fellow, University of York): I wanted to talk about looking at homes as homes rather than assets. As Reuben [Young] said, shared ownership is the response and the symptom rather than the issue in itself because it is about stopping housing being such a financial asset, making sure land is protected from all these market fluctuations and can offer homes in perpetuity that are affordable.
I was interested in the community-led housing and Community Land Trusts (CLT) and things, but exploring ways of how those things can be delivered at scale to make things permanent. [Councillor] Danny [Beales] said that if people do staircase, then even if they are recycled it might buy less than what has already been sold, if you see what I mean. Looking at out-of-the-box things like that, but at scale, might be of interest, but I do not have evidence of it.
Steve Moseley (Group Director of Governance, Strategy and Communications, London and Quadrant Housing Trust): Shared ownership being the only solution is part of it. We need more housing of all types. My view is that it is absolutely the most effective intermediate housing option. Help to buy does not work in London. There have been many schemes that have come before shared ownership and it continues to deliver for an important part of the market.
The opening remarks were around that we have to be clear who we are trying to help. As long as we are clear about that and provide more housing of all tenures, then I would prefer to focus on reforming shared ownership, improving it and improving the buyer experience but using that as the main intermediate product.
Siân Berry AM: I wonder if Alison could outline a bit more about the models that CLTs use, essentially. Also, somebody brought up shared equity earlier. I think Nicky [Gavron AM] mentioned it. This is a different product again. A lot of regeneration projects are ending up offering shared equity to existing leaseholders as an alternative to shared ownership because they resisted shared ownership. Alison, you are probably the best person to outline what both shared equity is, i.e the lack of obligations there are on somebody who has a Page 41 shared equity deal, and the way that relates to what CLTs tend to offer, which is essentially that the CLT or the co-operative buy only a proportion of the value of the home and you cannot profit from it.
Dr Alison Wallace (Research Fellow, University of York): If it is a CLT. There are different models and they have all been constituted slightly differently. CLTs and shared equity is not my area of expertise. I have not done a lot of work on them. The shared equity make people more secure in their position as a homeowner but people with home-buy options or help to buy has not necessarily been meeting the same target groups that shared ownership has been dealing with, people who are at a higher price point in terms of income but also of purchase. People feel more confident that it is a simpler model where you do not feel like you have the breath of the housing association on you. Some people feel like that, not all.
With CLTs, I know [Dr] Tom Moore from Liverpool University [Lecturer in Geography and Planning; Associate Editor, International Journal of Housing Policy] has done a lot of work in them and showed us some of the potential. That is where the land value is split from the housing value. Some of the houses may be owned individually but some of it is a proportion of your local income, so a multiple of local incomes. They try to keep them affordable in perpetuity and the land is held for public good. It does not get sold on or does not regenerate away from affordable housing, as it were.
It is not my area, but I think they show potential. The problem with them, at the moment, is they are all quite small, niche enterprises. I am interested in the mutual models and how they could be scaled up. That is worth investigating but I have not done the work.
Siân Berry AM: Potentially a can of worms. Can anyone tell us more about the shared equity options that are being offered to existing leaseholders?
Councillor Danny Beales (Cabinet Member for Investing in Communities, Camden Council): We use a shared equity model, as you have mentioned, Siân, on our existing regeneration schemes, particularly leaseholders. It is an option for leaseholders to move into the new estate or decamp into new buildings as a phased development and that is possible. The new value of the properties would be such that, on a traditional outright purchase, they are unlikely to be able to necessarily staircase, if you will, to that full model. As a way of supporting leaseholders to stay on the estate, we offer a shared equity approach. They do not pay rent on the non-owned element and they will just pay a usual service charge that the leaseholder would pay.
Siân Berry AM: Is it freehold?
Councillor Danny Beales (Cabinet Member for Investing in Communities, Camden Council): No. It is a leasehold arrangement still.
Siân Berry AM: Still leasehold?
Councillor Danny Beales (Cabinet Member for Investing in Communities, Camden Council): Yes. Talking about slightly different models, coming back to the previous question of how you make this work, what I have tried to present is that, particularly in inner London and increasingly across London, it is not working. Lowering the amount you can buy to start off with to 10%, maybe being able to increment by 1%, is not going to make the system work. That is dealing with the symptoms of the problem.
The other side of the coin is that we are trying to make sale properties smaller as a way to make them affordable. It is quite clear, as Peter [Apps] mentioned, that we need to build a lot more homes. There need
Page 42 to be a lot more generally affordable homes. That is not necessarily ownership. We need to provide people with stability and security.
One thing the GLA could do is look again at the grants system because it does not incentivise things like Camden Living Rent or the Living Rent product. We need a blended, gradualised, incremental grant system that rewards affordability and also awards larger family units as well.
Siân Berry AM: Yes. Previously we have discussed the grant system with housing associations, and they said much the same thing. Also, they are fixed per unit size. You end up with lots of smaller units.
Councillor Danny Beales (Cabinet Member for Investing in Communities, Camden Council): One of the problems is the Government do specify that Living Rent has to lead to ownership, which is a problem with the conditions that the Government attaches.
Leonie Cooper AM: These are Government restrictions, not GLA restrictions on the way that the whole of the package of funds that comes to the Mayor has to be structured in that way.
Tom Copley AM (Chair): Had you finished, Assembly Member?
Siân Berry AM: I had, yes. I just wanted to get a bit more out about these other owners that do not have the ongoing obligations.
Tom Copley AM (Chair): Sure, yes, that is very helpful. Thank you. OK. In that case, we have reached the end of the session. Can I thank our guests for your contribution today?
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MINUTES
Meeting: Housing Committee Date: Tuesday 11 February 2020 Time: 10.00 am Place: Chamber, City Hall, The Queen's Walk, London, SE1 2AA
Copies of the minutes may be found at: www.london.gov.uk/mayor-assembly/london-assembly/housing
Present:
Unmesh Desai AM (Chair) Andrew Boff AM (Deputy Chair) Siân Berry AM Léonie Cooper AM Tony Devenish AM Nicky Gavron AM
1 Apologies for Absence and Chair's Announcements (Item 1)
1.1 Apologies for absence were received from David Kurten AM.
1.2 The Chair noted that this was his first meeting, following the changes to Committee membership agreed by the London Assembly at its meeting on 6 February 2020. The Chair also thanked and congratulated Tom Copley AM on his new role as Deputy Mayor for Housing.
1.3 During the course of the meeting, the Chair welcomed students from Christchurch Primary School in Redbridge.
City Hall, The Queen’s Walk, London SE1 2AA Enquiries: 020 7983 4100 minicom: 020 7983 4458 www.london.gov.uk Page 45 Greater London Authority Housing Committee Tuesday 11 February 2020
2 Declarations of Interests (Item 2)
2.1 The Committee received the report of the Executive Director of Secretariat.
2.2 During the discussion at Item 5, the Deputy Chair, Andrew Boff AM, declared a non-pecuniary interest as an owner of a leasehold property.
2.3 Resolved:
(a) That the list of offices held by Assembly Members, as set out in the table at Agenda Item 2, be noted as disclosable pecuniary interests; and
(b) That the additional declaration made by Andrew Boff AM as an owner of a leasehold property, be noted as a non-pecuniary interest.
3 Summary List of Actions (Item 3)
3.1 The Committee received the report of the Executive Director of Secretariat.
3.2 Resolved:
That the outstanding and closed actions arising from previous meetings of the Committee, be noted.
4 Lea sehold and Service Charges (Item 4)
4.1 The Committee received the report of the Executive Director of Secretariat as background to putting questions on Leasehold and Service Charges to the following guests: Rebecca Cattermole, Barrister, Tanfield Chambers; Sebastian O’Kelly, Director, Leasehold Knowledge Partnership; and Martin Boyd, Chair of Trustees, Leasehold Knowledge Partnership.
4.2 A transcript of the discussion is attached at Appendix 1.
4.3 During the course of the discussion, Leasehold Knowledge Partnership agreed to invite Members to the next cladding meeting for leaseholders on 12 May 2020.
Page 46 Greater London Authority Housing Committee Tuesday 11 February 2020
4.4 Resolved:
(a) That the report and discussion be noted; and
(b) That authority be delegated to the Chair, in consultation with the party Group Lead Members, to agree any output from the discussion.
5 Response to Housing Committee Report, Living in Limbo: London's Temporary Accommodation Crisis (Item 5)
5.1 The Committee received the report of the Executive Director of Secretariat.
5.2 That the response from the Mayor of London, to the Housing Committee report, Living in Limbo: London’s temporary accommodation crisis, as attached at Appendix 1 of the report, be noted.
6 Housing Committee Work Programme (Item 6)
6.1 The Committee received the report of the Executive Director of Secretariat.
6.2 Resolved:
That the work programme be noted.
7 Date of Next Meeting (Item 7)
7.1 The next meeting of the Committee was scheduled for 3 March 2020, however the Chair advised that this meeting would be in the form of a site visit.
8 Any Other Business the Chair Considers Urgent (Item 8)
8.1 There were no items of business that the Chair considered to be urgent.
9 Close of Meeting
9.1 The meeting ended at 12:05pm.
Page 47 Greater London Authority Housing Committee Tuesday 11 February 2020
Chair Date
Contact Officer: Farah Hussain, Secretariat Intern; Telephone: 020 7983 4573; Email: [email protected]; minicom: 020 7983 4458
Page 48 Appendix 1
London Assembly Housing Committee – Tuesday 11 February 2020
Transcript of Item 4 – Leasehold and Service Charges
Unmesh Desai AM (Chair): That brings us to today’s main item, a discussion with our invited guests on leasehold and service charges. I would like to welcome our guests: Rebecca Cattermole, barrister at Tanfield Chambers; Sebastian O’Kelly, Director, Leasehold Knowledge Partnership; and Martin Boyd, Chair of Trustees, Leasehold Knowledge Partnership.
If I can start off by asking you, Sebastian, a couple of questions just to set the scene, could you give us a background as to how leasehold has developed in England and why it is unique compared to most other countries?
Sebastian O’Kelly (Director, Leasehold Knowledge Partnership): Leasehold in its current form is really something that cohered in the Victorian era, when London hugely expanded and aristocratic landowners did not want to sell the land on which they were building houses to the new Victorian middle classes so they issued long leases. A number of quite prominent Victorians got extremely upset by the fact that they could not actually buy their properties. The point was made by Lloyd George [former British Prime Minister] that of course you do not actually own the building which is built on the land of somebody else; it is simply a rental property. You put all the money into building a mansion and after 100 years or whatever, it returns to the landowner. The novelist Wilkie Collins was very upset about this. Many of the points made in the 1880s Hansard are exactly the same as the points we are making now.
But, sorry, to speed it up, there are a number of aristocratic owners of big London estates. We do not take too much of an issue with that, but the point is that one Duke of Westminster is enough. We are well on our way to creating 100 of them with leasehold in new blocks of flats spread along the Thames estuary, much to the disadvantage of homeowners who buy these properties.
Unmesh Desai AM (Chair): I am just going to move on to ask you to outline the main issues that leaseholders face today. Does that align with the experience of leaseholders at Charter Quay? So, the main issues that leaseholders face today and your experiences at Charter Quay.
Sebastian O’Kelly (Director, Leasehold Knowledge Partnership): I will pass to Martin for Charter Quay, but the main experience of leasehold today is that we are hugely expanding leasehold to the disadvantage of homeowners, and taxpayers are subsidising this with help to buy. People are purchasing these properties and, as we have seen with the doubling ground rent scandal, they are often buying properties which are completely unsellable. There is no other jurisdiction in the world which is dumping people in such disadvantaged properties. I will leave it to Martin to talk about his direct experience of Charter Quay.
Martin Boyd (Chair of Trustees, Leasehold Knowledge Partnership): My route into this was that I own a flat at a development along the river down in Kingston. We, along with a number of other sites that had the same developer and the same managing agent, got together in 2008 and 2009 and realised that we were all having exactly the same problems. We all felt we were being overcharged. We all felt we were being given very poor service. Each of the different sites took a different route to try and address their problems. We spent five years taking our landlord to court. We recovered over £500,000 from them in the various court
Page 49 actions and eventually we were able to force the sale of the site to the leaseholders in 2013. The site has operated as a leaseholder-controlled development since that point in time.
I would not recommend to anyone that they go down the route of going to the Tribunal. It is an appalling process. It is a totally one-sided cost regime. It does not matter how badly the landlord has behaved; the leaseholders have no right to their costs. Under all circumstances the landlord has a right to his costs unless you can persuade the Tribunal to limit them, but you cannot stop them completely from passing onto the leaseholders.
Andrew Boff AM (Deputy Chair): I am just astonished by that.
Martin Boyd (Chair of Trustees, Leasehold Knowledge Partnership): It is standard. We were a lot luckier than other sites. An awful lot of sites just give up. It takes a huge amount of effort. We were very lucky there were enough people who were willing to keep on fighting. We see all the time individuals trying to pick up an issue and they give up because the system overwhelms them.
Andrew Boff AM (Deputy Chair): Mr O’Kelly, you indicated that leasehold has been with us a very, very long time. Why are we hearing so much more about the problems now?
Sebastian O’Kelly (Director, Leasehold Knowledge Partnership): The main reason is that Public Limited Company (PLC) housebuilders overdid it with doubling ground rents. Introducing doubling ground rents every 10 years into leasehold houses and leasehold flats around London and leasehold houses around the country, particularly in the North West, was an astonishing thing to do. It was a very bad idea dreamt up by a previous generation of executives in the PLC housebuilders. They created assets which are now completely unsellable. Mortgage lenders will not lend on these assets so the families who bought these properties are stuck with them. You have about 12,000 doubling ground rent properties and 100,000 with onerous ground rents, where the ground rents are above 0.1% of the sales value of the property. Mortgage lenders also will not lend on leasehold properties where the ground rent is above 0.1% of the value of the property, so you have a whole load of people whose lives are on hold and they are stuck.
Another thing which has come up is the cladding crisis after the Grenfell tragedy. We have numerous flats around the country which have either the aluminium composite material (ACM) cladding which was on Grenfell or other forms of combustible cladding which are now also unsellable. They are facing million-pound repair bills. A case in point is Northpoint in Bromley, in southeast London. This is the site of 57 flats. Its collective ground rent income is only about £7,000 to the freeholders, so the freeholders’ investment interest in this building is minimal, but the cladding remediation is £4 million. This is a staggering amount of money and it is going to wipe those people out. We are facing a considerable number of leaseholders in cladding sites who are going to be rendered homeless if our wretched leasehold sector service charge regime is used to sort this out.
Andrew Boff AM (Deputy Chair): You listed quite a few issues there. Why do you think there have not, to this day, been more fundamental suggestions about reforming the system?
Sebastian O’Kelly (Director, Leasehold Knowledge Partnership): You could say that just about every 10 or 15 years there is a movement to reform leasehold and the message still does not get through to our legislators: stop reforming leasehold, just stop building more of it. Build commonhold, which is the form of tenure in communal properties in every other jurisdiction in the world, including Scotland. It is simply absurd that we are selling long-term tenancies as flats. It does not matter whether this flat is at One Hyde Park and you paid £140 million for it, it is a tenancy and if you do not keep the bills paid, particularly the ground rent, you could lose it through forfeiture to the freeholder. The freeholder’s ownership of a block of flats, the actual
Page 50 value of the freehold, as at Northpoint, which I referenced earlier, could be minimal. It could be 1% of the collective value of the leases and the building. With a minimal investment this freeholder is the landlord and is hugely advantaged in law, as Martin [Boyd] was pointing out, and can forfeit properties for debt.
Andrew Boff AM (Deputy Chair): If those ground rents were capped or even scrapped by some action of the Government, would that be a huge problem for the owners, the freeholders?
Sebastian O’Kelly (Director, Leasehold Knowledge Partnership): No, I do not think it would. We are repeatedly informed that freehold owners of blocks of flats are pension funds. That used to be the case about 20 years ago but since the hyperinflation of United Kingdom (UK) residential properties, freehold ownership investors are broadly private equity, often based offshore. They hide their beneficial ownership behind nominee directors, but they make core decisions. Take the cladding sites. At some cladding sites, there is no Government money available to pay for this cladding. The freeholder has responsibility to maintain this building. The only way he can maintain this building is to get the money out of the leaseholders. If the leaseholders cannot pay, and there will be a considerable number who cannot pay these multimillion-pound bills, he is going to have to take their flats off them. That is the reality of the leasehold system.
Andrew Boff AM (Deputy Chair): We could drill down on that. Perhaps we will later on. Surely, even if they did take the property off them, they would probably have an unsellable property.
Sebastian O’Kelly (Director, Leasehold Knowledge Partnership): Well, that is for sure, yes.
Andrew Boff AM (Deputy Chair): What is the industry’s justification for the ground rents?
Sebastian O’Kelly (Director, Leasehold Knowledge Partnership): You would have to ask them.
Andrew Boff AM (Deputy Chair): You have never asked them?
Sebastian O’Kelly (Director, Leasehold Knowledge Partnership): There is a huge amount of lobbying going on to central Government about owners of freeholds being the responsible long-term custodians of buildings and only professional property managers could possibly manage a site. It is complete nonsense. I have never owned a leasehold property, thank goodness, but I have owned flats in other jurisdictions, and they work perfectly well. In Italy and France, everyone has a collective. You own a bit of the land, you own a bit of the corridor, a bit of the lift shaft, a bit of the roof, and you have to get on with your neighbours to maintain it. In this country it is so confusing and deliberately obfuscated what exactly you own, what is the responsibility of the landlord and what is the responsibility of the leaseholder. That works to the advantage of the commercial entities involved in the sector and to the disadvantage of consumers.
Andrew Boff AM (Deputy Chair): There has been a lot of controversy surrounding leasehold in the last few years. Do you think that leaseholders now are more aware and better informed than they were in the past?
Sebastian O’Kelly (Director, Leasehold Knowledge Partnership): Well, I would hope that they are better informed because it has been the result of working to do this for the past six years. I do hope that my labours have not been in vain. I do think with media exposure and parliamentary debates, yes, leaseholders are getting better informed.
Andrew Boff AM (Deputy Chair): Is there something we can do to prepare leaseholders a bit better than they have been?
Page 51 Sebastian O’Kelly (Director, Leasehold Knowledge Partnership): There is a considerable amount that the London Authority could do on this. It would be very good for London to urge developers or insist that developers build with resident management companies so that the leaseholders actually manage the sites. This cuts a huge amount of the income streams in a building because it will be the leaseholders’ management company which places the insurance control, which will not be padded. It makes sure that the service charges are fair rather than loaded. It is very hit and miss whether a new site has a residents’ management company or not and it is often delayed as well, when control of the residents’ management company is actually turned over to the leaseholders, but it is something that you could insist on. That is empowerment of the residents from the start. It would also be a good idea to get in copies of the leases from the various sites that you are approving.
Andrew Boff AM (Deputy Chair): Yes. Some of these questions I feel I could answer, to be honest. In my experience of buying a leasehold property, I bought one six years ago and because of, perhaps, work by yourself and your organisation, I looked at the ground rent and thought, “Well, that’s ridiculously low. Would I be happy paying quadruple that?” I was, so I went ahead with the deal. It is only since then that my neighbours, who probably were not as cynical as I was about quoted costs at the time of sale, are now getting quite upset about the way in which those ground rents have risen. I am relaxed about it because I am naturally cynical. Do you think housebuilders are entirely open about leasehold sale homes, particularly with first-time buyers and the Help to Buy scheme?
Sebastian O’Kelly (Director, Leasehold Knowledge Partnership): Do I think they are open?
Andrew Boff AM (Deputy Chair): Do you think they are open enough? As I say, I feel I could answer it.
Sebastian O’Kelly (Director, Leasehold Knowledge Partnership): No, I think self-evidently, they have not been open enough, which is why Taylor Wimpey has put aside £130 million to put right its doubling ground rent mis-selling, for example. PLC housebuilders acknowledge that things got completely out of control with loading the ground rents for new buyers and Help to Buy has been used to purchase many of these properties. It was very depressing to discover that Help to Buy did not apply to commonhold properties, which do exist under English law. There are not many commonhold properties in the country - only about 150 units with commonhold in the whole of England and Wales - but it does exist, it is on the statute book, and Help to Buy was not available for commonhold properties until we made a fuss about it. But in answer to your question, PLC housebuilders have played the angles of leasehold to the detriment of their customers and the detriment of us, the wider taxpayers, who have subsidised the purchase of these flawed products.
Andrew Boff AM (Deputy Chair): Thank you.
Martin Boyd (Chair of Trustees, Leasehold Knowledge Partnership): If I could just add to that, if you listen to the Housing, Communities and Local Government (HCLG) Select Committee investigation into leasehold issues, they talked to a number of the PLC housebuilders and one of them made very clear that they understood that verbal agreements that may have been made by their sales representatives did not constitute a contractual agreement.
Andrew Boff AM (Deputy Chair): Yes, I have heard that as well. I would say to my neighbours, “Have you got that written down, that thing you mentioned about the promise?” Of course, they never are written down. That is very true. Thank you, Chair.
Page 52 Léonie Cooper AM: Obviously with the whole issue of purchasing a property, whether leasehold or freehold, you need to go through the conveyancing process and you need to have a solicitor who is going to be able to advise you on things that the salesperson has said to you or whether what is in the documents is too onerous or is appropriate. In a lot of cases, people who are selling a large site will offer the use of solicitors from a panel. Do you think those solicitors are sufficiently neutral or able to stand completely on the side of the purchaser? Do you think there is a risk that sometimes they are not independent enough? Do you think there should be some other arrangement, some other panel? You obviously need someone who has expertise in that kind of conveyancing. I would like maybe to start with Sebastian, but happy for anyone else to comment as well.
Sebastian O’Kelly (Director, Leasehold Knowledge Partnership): I think it has been an appalling story, really. A solicitor recommended by a developer - or an estate agent, for that matter - is in itself a reason to choose a different solicitor. It is quite clear that in the doubling ground rent scandal, the solicitors recommended by the developers were little more than the developers’ stooges. They colluded in the process and landed their clients into these onerous and now unsellable properties and did a frankly disgraceful job in the conveyancing process. There is quite a lot of litigation going on against these conveyancers. I am aware of 17 cases where there have been settlements. I think there will be others that follow that.
I would urge you to take a look at the Conveyancing Association, which has done some good work in looking at the conveyancing of leasehold properties and the bogus charges that are loaded on sales transactions of leasehold properties. Leasehold properties are a good deal more complicated to do the conveyancing on than, say, a five-bedroom house in Guildford. It can be full of complicated and onerous terms that require a good deal of skill to look at, and the Conveyancing Association has done some pretty hard-hitting stuff on this.
But regarding the recommendation of solicitors, we have had this time and again in other property downturns. Generally speaking, if a developer is recommending a particular solicitor, it in itself is a reason to go elsewhere. It is too partial.
Léonie Cooper AM: We have moved from saying that they are not just not independent but that some people are now litigating because they have effectively been acting pretty much for the other party.
Martin Boyd (Chair of Trustees, Leasehold Knowledge Partnership): There is a particular problem with Help to Buy because the timescales in the Help to Buy process are very tight. One of the things that is reported on a very regular basis is that the purchaser does not actually see the document until the very end, so they have 48 hours to review everything. That seems to have encouraged a number of developers to say, “Well, if you do not use our preferred solicitor, who knows the process, you may not be able to complete in the required timescales”, and first-time purchasers believe that they are being told the truth.
Léonie Cooper AM: Is that 48-hour turnaround period legal, given that I thought there was meant to be something like a two-week cooling-off period and a proper ability for people to --
Martin Boyd (Chair of Trustees, Leasehold Knowledge Partnership): As I understand it, the timescales are set by Homes England.
Léonie Cooper AM: Are they? I thought there was an overriding piece of legislation that introduced the capacity for people to examine the small print. I cannot remember what the legislation was called.
Martin Boyd (Chair of Trustees, Leasehold Knowledge Partnership): That may well be, but it does not seem to apply.
Page 53
Léonie Cooper AM: It does not apply to Homes England? OK. To a quasi-autonomous non-governmental organisation such as Homes England, a primary piece of legislation does not apply? That seems a bit odd to me. Forty-eight hours sounds --
Martin Boyd (Chair of Trustees, Leasehold Knowledge Partnership): It might be worth asking Homes England why there are some very tight timescales.
Léonie Cooper AM: That might well be something that comes out of our discussions today. OK. I am quite surprised by that.
Once people have purchased their leasehold they may also not have noticed that in the small print it says something like if you want to change the windows or the doors, you then have to pay another fee to get some sort of permission from the freeholder to make changes that you think are quite essential. That, in many cases, also applies to councils as well as to private freeholders. In your view, would you say that permission fees are necessary?
Also, in some cases where people have asked to put things in, they have then been told they have to pay an amount that goes toward the fact that the property is going to be worth more at that point as well. I have had some examples where people have come and said, “Not only do I have to pay for the door, I also have to pay for the increase in value that the property will exhibit once I’ve improved it”. Do you think this is fair at all in any size, shape or form?
Sebastian O’Kelly (Director, Leasehold Knowledge Partnership): These permission fees have been monetised ruthlessly by the larger freehold-owning organisations. I think it costs £80 to keep a cat, for example. One of the larger freehold companies charges that.
To your broader point of, “Should the freeholder be involved in granting permission?”, well, obviously, yes. If you are going to redo your bathroom in a block of flats then there needs to be some sort of supervision on that, that it does not leak. How much it should cost for that sort of consent is where it becomes controversial. None of these fees are set down in any quantifiable source so it is really made up by the freeholder as they go along, and unless they are challenged in Tribunal that fee stands. Some conservatories might cost £150 to put on the end of your leasehold house, but we have come across others where it might cost £5,000.
Central London is plagued with retrospective consent. I am aware of one woman selling her family flat and the freeholder wanted £120,000 because the bathroom had been changed, I think, 35 years before by the previous owner. He was not going to sign off on the sale until this money had been transferred. This is just extortion. These consent fees are abused on a huge scale in this leasehold sector because of the unbalanced relationship.
Léonie Cooper AM: That is quite astonishing. Perhaps they should have put back the original bath and then not paid the large sum.
Sebastian O’Kelly (Director, Leasehold Knowledge Partnership): Then you have to have consent to put back the original bath.
Léonie Cooper AM: You would have to pay £240 to put the original back.
Do you think the Government can do something in terms of legislation to ensure that freeholders are not allowed to charge these excessive or unreasonable permission fees? I completely take your point. I do think
Page 54 that for someone who has the freehold, it is quite good to have the leaseholders come and say, “This is what we are planning to do. Is that OK?” Then everyone knows what is happening, particularly, obviously, because there have been instances where leaseholders have done things and have, for example, breached fire compartmentalisation, which we do not want at all. Do you think the Government can do something to stop excessive or unreasonable levels of charges?
Martin Boyd (Chair of Trustees, Leasehold Knowledge Partnership): At the moment, one of the many reviews that are underway is looking at the charges that are applied. There is a general acceptance that the fees need to be both genuinely reasonable and also challengeable. The problem you have with many of these consent fees is that it will cost you a huge amount more to challenge them in the courts or the Tribunal than you could ever hope to recover, and lots of landlords have realised that on that basis they can gradually milk the system more and more.
Léonie Cooper AM: Right, so if someone wants to charge you £5,000 to put on the conservatory and then it would cost you £10,000 or £15,000 to challenge the fee that they have said they are going to charge, you could be potentially out of pocket by £20,000 instead of the £5,000. That deters people from legislating. Is that --
Martin Boyd (Chair of Trustees, Leasehold Knowledge Partnership): You could be. Rebecca can explain much better than I can that there is an element of balance. There is some potential to recover your legal costs, depending on which jurisdiction you take the matter forward in.
Léonie Cooper AM: Did you want to come in at that point, Rebecca?
Rebecca Cattermole (Barrister, Tanfield Chambers): Yes. The Commonhold and Leasehold Reform Act [2002], schedule 11, made provision for challenge of these administration charges, which would include some of these changes for consent. There are two ways.
If there is a variable administration charge in the lease - for example, say the landlord is entitled to make a charge for any consent for alterations - and it is not couched in terms that it is in accordance with a formula, then that could be challenged and the challenge would be whether it is reasonable or not, very similar to the challenging mechanism for service charges.
If it is a non-variable service charge, i.e. one which is specified, a fixed amount - say every time you ask for permission to change your bathroom you have to pay £250 - or if it is done in accordance with a formula, which also falls within a definition of non-variable service charge, your remedy or the tenant’s remedy in those circumstances is to apply to the Tribunal and ask for it to be varied on the basis that it is unreasonable. The Tribunal has a discretion about whether to vary the lease or not.
The big difficulty with this is exactly what Martin identified, which is the cost of the leaseholder going to the Tribunal to do that, even though you have a system which is devised to be effectively a no-costs regime, albeit there are some powers for the Tribunal to make costs orders. That is all very well if you are a leaseholder and you are against a landlord who is a litigant in person as well. It does not assist if the landlord employs or instructs solicitors or counsel to attend. We all know that leasehold law is incredibly complex. The other difficulty is even if you walk away and nobody is bearing any costs bar your own costs, the landlord, depending on what the terms of lease say, could actually seek those costs through the service charges later on.
Léonie Cooper AM: Pass it back on through the service charges.
Page 55 Rebecca Cattermole (Barrister, Tanfield Chambers): Yes.
Léonie Cooper AM: Yes. That is quite tricky because even if you are successful you can still end up taking on the costs of the other party, as it were. Quite commonly leases will make that as a point, will they not?
Rebecca Cattermole (Barrister, Tanfield Chambers): Yes. You can have lots of arguments about looking at the lease and arguing whether the landlord is entitled to seek legal costs and the nature of legal costs. It will all depend, on a case-by-case basis, on looking at each of these leases, but there is an ability for the tenant to apply for an order from the Tribunal or the court, depending on where the litigation is taking place, to ask for an order that the landlord cannot recover those legal costs through the service charges against that particular applicant or specified people, the person who has applied for what is called a Section 20(c) order. That in itself does not always work, and you are still dependent on the Tribunal making that decision, and it may not apply to all of the leaseholders.
Léonie Cooper AM: No, because of course that is one of the strange things, is it not? Quite commonly, the costs of the landlord will be split up across all of the leaseholders. You could potentially have one person who has got into the litigation and then the landlord could seek to recover their costs for the litigation with that one individual against 20 leaseholders. You could end up paying the cost of the landlord’s litigation with your neighbour, or share in it anyway.
Rebecca Cattermole (Barrister, Tanfield Chambers): Yes.
Sebastian O’Kelly (Director, Leasehold Knowledge Partnership): It happened at Chelsea Harbour and very upset they were about it too.
Martin Boyd (Chair of Trustees, Leasehold Knowledge Partnership): Each of the non-litigants had an additional £1,000 added to their service charge.
Léonie Cooper AM: Yes, which is slightly galling if you were not involved in the actual litigation in the first place, because of course that is also something that the freeholder is free to do, sometimes, in terms of the lease.
We have mentioned the idea that you could be charged quite a lot for putting in a new bathroom. It applies not just to things like windows, which I mentioned, or doors, but also to some of the fixtures and fittings in the property. Almost anything can --
Rebecca Cattermole (Barrister, Tanfield Chambers): Potentially. It all depends on the lease itself. Your starting point is: what is the contractual arrangement between the landlord and the tenant? You look at the terms of the lease and it will be within that where you will find whether you are liable or not to pay these amounts of money. That is what I am saying. Not all leases are exactly the same. They are all drafted in a different way depending on the kind of development, the type of flat, who has drafted them and what the landlord wanted.
Léonie Cooper AM: We also have the ‘go nuclear’ option which the landlord is able to use, which I think goes back to an even earlier period than the Victorian time, the concept of forfeiture, which I think is a very ancient concept.
Rebecca Cattermole (Barrister, Tanfield Chambers): Yes. If you really want to think about leasehold, you need to go back to William the Conqueror. But yes, forfeiture is a draconian measure. We forget about the
Page 56 problems of the modern day but part of it is to do with that where you are dealing with payment of money there needs to be an easy remedy, some kind of enforcement procedure there or some protection there for the person who is due to be paid that money.
Generally, when you look at any statutory scheme that has come into play over the last 60 or 70 years where it is dealing with payment of rent, despite giving security of tenure to the tenant and making it more difficult for the landlord to recover possession when it comes to rent, non-payment of rent, Parliament has generally allowed the landlord to have a much easier way of being able to recover possession. You can find it in the Agricultural Holdings Act. You can find it in the residential sphere in terms of assured shorthold tenancies. The big problem with forfeiture is that if the landlord is successful in forfeiting the lease, that is it: your leaseholder is not going to be able to get back the money they paid when they bought the flat in the first place. It is a big windfall.
Léonie Cooper AM: No, which is why I said it is a ‘go nuclear’ kind of thing, because if the landlord goes down the route of trying to forfeit the lease then that is it, it is gone, and even if you have been purchasing it on a mortgage and you have spent thousands and thousands of pounds, it is gone, and essentially you will have forfeited everything that you have paid in. You are no longer in ownership of something --
Rebecca Cattermole (Barrister, Tanfield Chambers): Yes, you do not get any balance of payment.
Léonie Cooper AM: -- and you do not get any compensation or anything. It is just literally gone.
In your experience, how frequently do freeholders try to impose forfeiture on their lessees and how often are they successful?
Rebecca Cattermole (Barrister, Tanfield Chambers): There are two different things. One is that landlords definitely go down that forfeiture route, but it is a means of being able to get what they want. Ultimately at the end of the day it is very rare in residential leases for the lease to actually end up being forfeited because the tenant can apply for relief from forfeiture and pay the arrears. Where you have a mortgage, invariably what would happen is that the mortgage company will pay and then add it onto your mortgage.
Sebastian O’Kelly (Director, Leasehold Knowledge Partnership): Could I just come in?
Rebecca Cattermole (Barrister, Tanfield Chambers): Yes, of course.
Sebastian O’Kelly (Director, Leasehold Knowledge Partnership): The threat of forfeiture is absolutely routine. It is the way that landlords get money that is owed. About three times a week I am being contacted by leaseholders caught up in the forfeiture game. They have missed ground rent for one reason or another. They say that the demand has not been sent. A debt collecting solicitor then contacts them on behalf of the landlord. A £250 debt quickly becomes a £1,000 debt with the legal fees, then £2,000, £2,500. Up it goes on a very aggressively escalating scale. The reason is these debt collectors are not actually employed by the freeholder. Their remuneration comes from recovering the debt. They are incentivised, if you like, to pursue these debts aggressively.
I will give you an example of a forfeiture that happened recently. When we last looked at this, we thought there was about 82 forfeitures a year actually granted and about 150 which get into the court system but, as I say, forfeiture is routinely threatened. Now, the case that I was going to reference is a Chinese-Canadian family who owned a flat in Camden. The 24-year-old daughter who was occupying it went back to Canada but was disputing a water leak and her brother, a student, moved in, younger than her. He did not forward any of
Page 57 the correspondence, did not engage with the landlord whatsoever, and there was a knock on the door and the bailiff turned up to say, “You’ve got to get out. This flat has been forfeited”. Now relief from forfeiture has been sought but it is going to cost this family -- I think the debt was something like £2,500 but it is going to cost the family about £30,000 to get relief of forfeiture. It does happen and a relief from forfeiture process does exist, but it comes at a very high price indeed.
Léonie Cooper AM: That takes it to a whole new level, does it not? Of course, as you were saying, quite often the mortgage companies, who effectively would then have a mortgage over nothing if the property is forfeited -- the mortgage would continue but if it has been forfeited then the security of the property is no longer there so they would be quite incentivised themselves, presumably, to step in.
Sebastian O’Kelly (Director, Leasehold Knowledge Partnership): Yes. This is how most forfeitures are avoided, because the mortgage company does step in to protect the loan. Otherwise the loan goes as well. The whole asset is forfeited.
Another example I will give is a maisonette in north London, where a young man who owned a £600,000 maisonette with cash started changing the bathroom and annoyed the neighbour downstairs, who happened to be a freeholder. We are talking about a Victorian maisonette here. There was no serious commercial involvement in this, but the lady downstairs got so cross that she went to court. He did not engage with the process whatsoever. There was a debt of, again, about £3,000, something like that. He paid no attention to the court at all, and she went for forfeiture and she obtained it. Of course, there was no mortgage company to intervene on that so this lady was inconvenienced but she now has a £600,000 asset that is hers.
Léonie Cooper AM: Ouch. That is quite a difficult situation for lessees. It sounds as though it is being used as a weapon. It is being wielded very much as a weapon to direct lessees towards something that the freeholder wants.
Martin Boyd (Chair of Trustees, Leasehold Knowledge Partnership): I would say it is bad enough in the private sector, but the social sector is quite active in using forfeiture powers as well. We have had a number of cases of Right to Buy tenants who have either faced huge costs or, in some instances, have lost their homes.
Léonie Cooper AM: Right to Buy tenants of councils who have also had the threat of forfeiture, or indeed the council has gone through?
Martin Boyd (Chair of Trustees, Leasehold Knowledge Partnership): Yes.
Léonie Cooper AM: It is the threat or indeed the actual. I presume you have not had any examples of this yet, but earlier on you were talking about Grenfell and obviously there are now some examples of leaseholders living in blocks where the council is undertaking what might be extremely expensive works. They might be faced with a very large bill.
Martin Boyd (Chair of Trustees, Leasehold Knowledge Partnership): Yes. The largest we have seen so far is demand for £146,000.
Léonie Cooper AM: Right.
Martin Boyd (Chair of Trustees, Leasehold Knowledge Partnership): Eventually the council decided that it would allow that £146,000 to be repaid over a six-year period rather than their normal five-year period,
Page 58 but that was only something that was available to tenants who lived in their flats. If they were Buy-to-Let investor tenants, they had to pay the £146,000 when it was due.
Léonie Cooper AM: OK. That is a pretty big impact on leaseholders, and although we might say “Buyer beware”, caveat emptor, it would have been quite hard when you purchased something maybe some years ago under the Right to Buy to know that something like this was going to develop. There are potentially there are some very large bills coming down the pipe towards some leaseholders.
Martin Boyd (Chair of Trustees, Leasehold Knowledge Partnership): Yes, and that is what we have with cladding times N, now. As the cladding issue rolls out beyond the ACM problem, it is very clear that a huge number of leaseholders now have homes which are valued at nothing until they are remediated and they have no means to borrow the money, therefore, to pay for the remediation. They are expecting bills which are very often going to be more than £20,000 per flat.
Léonie Cooper AM: I sit on the Fire [Resilience and Emergency Planning (FREP)] Committee as well and we have had some discussions about the issue of sprinklers over the years in the Assembly, particularly post-Lakanal House in 2009. Do you think councils should be seeking to fit sprinklers into leaseholders’ flats? There is one example of one council that was then using its Housing Revenue Account (HRA) to fund an approach to the First-tier Tribunal which has just been rejected at Tribunal. They were funding their solicitors through the HRA.
Martin Boyd (Chair of Trustees, Leasehold Knowledge Partnership): I gave evidence before you on that Committee as well --
Léonie Cooper AM: That is right, you did.
Martin Boyd (Chair of Trustees, Leasehold Knowledge Partnership): -- and I think I made very clear we are not specialists in the technical aspects of buildings. We know bits about leasehold. But yes, it is very clear the issue of sprinklers is one that is going to become more and more relevant. Retrofitting is difficult. We did not have any involvement in that case that you were talking about. It is the first time I have read a decision and thought that everyone got it wrong. I thought the leaseholders got it wrong, I thought the landlord got it wrong and I thought the Tribunal got it wrong.
Léonie Cooper AM: That is pretty comprehensive then. Anyway, thank you very much. Thank you, Chair.
Unmesh Desai AM (Chair): Thank you. Moving on to the next set of questions, which is on the role of the Mayor of London, I will hand it over to you, Andrew.
Andrew Boff AM (Deputy Chair): Thank you. Mr O’Kelly, what do you think of the Mayor’s guide for leaseholders and have you heard anyone in your network that it has been of use to?
Sebastian O’Kelly (Director, Leasehold Knowledge Partnership): Well, I think it was very encouraging that the Mayor was going to intervene on this. The preamble to it was he was setting this up because the Government-funded organisation, the Leasehold Advisory Service, was not fit for purpose.
Now, I think what prompted that criticism of this organisation was the HCLG Select Committee report, which took evidence from a considerable number of leaseholders who expressed strong dissatisfaction with the Leasehold Advisory Service, referencing it as “appalling” or “useless”. It has also been publicly admonished by former Housing Minister Gavin Barwell [MP] and told that it had to be on the side of leaseholders. There has
Page 59 been a perception and indeed evidence that the Leasehold Advisory Service has assisted the freehold-owning who are commercialising in the sector. It organised a lot of commercial conferences and so forth where every freeholder and professional who seeks business from them would turn out. There is a perception among leaseholders that this Government-funded body is not serving them but serving the freeholders who monetise their homes. This explains why other organisations, like us, are addressing leasehold.
In answer to your first point, it is very welcome indeed that the London Mayor is producing advice for leaseholders and I think that it would be extremely well-received by leaseholders generally that there is another source of advice.
Andrew Boff AM (Deputy Chair): Do you know of anybody who has actually used it?
Sebastian O’Kelly (Director, Leasehold Knowledge Partnership): I do not.
Martin Boyd (Chair of Trustees, Leasehold Knowledge Partnership): I have.
Andrew Boff AM (Deputy Chair): You have?
Martin Boyd (Chair of Trustees, Leasehold Knowledge Partnership): I used them for many years. I think the first time I used the Leasehold Advisory Service was in 2003, when we were trying to look at what our options were. Then I also had a commercial solicitor who came in, who set out a different set of options, and we followed that route. Then when we were going through our litigation in court, I am afraid I got to the point of using the Leasehold Advisory Service to help me understand what the landlord’s arguments might be. If the Leasehold Advisory Service did not understand something or were not aware that it was a particular point that we might use, then I used it. If the Leasehold Advisory Service told me that they knew all about it, I knew that our landlord would also know all about it.
Andrew Boff AM (Deputy Chair): Have you heard of anybody using the Mayor’s guide?
Martin Boyd (Chair of Trustees, Leasehold Knowledge Partnership): Oh, the Mayor’s guide. Yes, we have heard some people. To give you a bit of a background, the Housing Committee has been looking at leasehold over a long period of time and you produced an excellent report in 2012 called Highly Charged [Residential leasehold service charges in London], where you had understood many of the issues that are now under review. If you look at the executive report, at the front of that it makes very clear that at the time the Greater London Authority (GLA) understood there was no interest from central Government in reforming leasehold law.
Your only problem was then, as you have now and it reflects on what you have done with this leaseholders’ guide, is that unfortunately the GLA has absolutely no understanding of how big the leasehold sector is. You understand, unfortunately, less now than you did in 2012. We helped the officials who were producing the report in 2012 and the one thing we could not give them then were the numbers. There were no numbers about how big this sector is. In that report, they have talked in 2012 about there being about 500,000 leasehold properties. In the Mayor’s guide in 2018, he says there are over 500,000 leaseholders. That is so wrong it is ridiculous.
We helped the Government produce their first set of official numbers in 2014 and we produced a big report. I put the London numbers in there, and they were not estimates, they were real numbers. We have, including the social sector rented flats, 1.5 million properties in London. That excludes leasehold houses. We did not look at leasehold houses at the time. If you can guess, from 2011 to now we know that almost everything that
Page 60 has been built in the capital is a leasehold property because they are all flats. That 1.5 million properties could very easily now be 1.8 million properties. If the whole of the Housing Strategy is based on the assumption that we have about 500,000 properties and actually it is 1.8 million --
Andrew Boff AM (Deputy Chair): Sorry, that figure you saw was in what document, the 500,000?
Martin Boyd (Chair of Trustees, Leasehold Knowledge Partnership): 2011. It is a report that we produced in 2014.
Andrew Boff AM (Deputy Chair): Yes, but you said the Mayor’s reference --
Martin Boyd (Chair of Trustees, Leasehold Knowledge Partnership): The Mayor’s reference was in the 2018 Housing Strategy document. It is on page 14 and it says there are over half a million leaseholders in London. Obviously, it meant leasehold properties because more than one person is likely to live in a leasehold property, but even so, half a million is a huge, huge underestimate. There are at least 1.2 million or 1.3 million flats in the private sector, plus all of the leasehold houses, plus all of the social housing stock.
Andrew Boff AM (Deputy Chair): I think that warrants some action on our behalf to chase that figure up.
Martin Boyd (Chair of Trustees, Leasehold Knowledge Partnership): We have been suggesting to the GLA they might like to talk to us about numbers for years.
Nicky Gavron AM: Chair, we were just told 1.5 million in the private sector. I thought you were saying earlier the social sector.
Martin Boyd (Chair of Trustees, Leasehold Knowledge Partnership): No, sorry, the figures I have -
Nicky Gavron AM: Is it leaseholders leasing ex-Right to Buy flats in the social sector?
Martin Boyd (Chair of Trustees, Leasehold Knowledge Partnership): Well, they could be anything. In the social sector, the figures were it was 1.1 million private flats in 2011 and there were 536,000 flats in the social sector. Those flats will either be leasehold, or they will have no title at all because it used to be historically in a council block the council would just own the freehold of the block and the only time a lease would be issued would be on a Right to Buy flat. Those flats just did not exist at the land registry, but clearly, they are flats. They were there. They were just never appearing on any records. If it is a registered social landlord (RSL) that owns the property, that is much more likely to have a leasehold title. It is only the historic council stock that might not be leasehold.
Andrew Boff AM (Deputy Chair): That is fascinating, and it is something that probably we will chase up and investigate.
Do you think it confuses people to have a London-specific guide with the Mayor’s guide?
Martin Boyd (Chair of Trustees, Leasehold Knowledge Partnership): No. We were quite optimistic when the guide started. It started from a position in February 2019 where the Mayor had said the existing formal Government advice system is not fit for purpose. It then seems to have decided that leasehold law was a bit complicated and having produced some initial front-end guides which are introductory level, shall we say, it then ends up just pointing back to the Government’s formal system. You end up asking, “What was the point of it?”
Page 61
It could have been much, much stronger, I think, in alerting people to the issues of developer-recommended solicitors, the sorts of problems you get with shorter leases and the problems that you can get into with things like property alterations. People just do not understand what leasehold property can be, particularly leasehold house owners, by the way, because you are as stuck in having to ask permission to change the boiler in a leasehold house as someone who is in a leasehold flat.
Andrew Boff AM (Deputy Chair): Is there anything the Mayor of London or indeed London boroughs can do, prior to any legislative reform, to assist existing leaseholders or perhaps in restricting the sale of new leaseholds? Is there anything they can do?
Martin Boyd (Chair of Trustees, Leasehold Knowledge Partnership): The Mayor could certainly play a much stronger part in trying to control some of the lease terms that exist within the shared ownership part of the market. We see some quite challenging terms in some of those leases. We still see social landlords trying to sell properties brand new on 125-year leases, and that is just disgraceful. It should never be allowed to happen. The Mayor could certainly intervene in that.
He could help encourage a greater level of transparency. Quite often when you are buying a new build property, actually getting to see the lease before you have signed a contract to say you are going to buy is impossible.
Léonie Cooper AM: The 48-hour business.
Martin Boyd (Chair of Trustees, Leasehold Knowledge Partnership): Also, then, within Help to Buy, yes, you have your 48-hour issue as well.
Andrew Boff AM (Deputy Chair): Are you recommending perhaps that the Mayor have a much more granular view of developments he is involved in?
Martin Boyd (Chair of Trustees, Leasehold Knowledge Partnership): Yes. At the moment the Law Commission is looking at the reform of commonhold legislation. Since 2012, the Assembly has been saying it supports a move to commonhold. The Mayor says in his Housing Strategy that he thinks London should be trying to move to ‘a more sustainable form of tenure’, I think were his words. It is going to be a year or two before commonhold moves forward but yes, the Mayor has a key role to play in helping push forward a commonhold system as an alternative for leasehold for new build properties.
Andrew Boff AM (Deputy Chair): You are saying he has to wait. Why does he have to wait, you are saying, a few years before --
Martin Boyd (Chair of Trustees, Leasehold Knowledge Partnership): Because he needs the legislation to be reformed before it is really worth pushing on that, but planning takes a long time so there is no reason why he cannot be putting in there that London will be looking to move towards commonhold as quickly as it can.
Sebastian O’Kelly (Director, Leasehold Knowledge Partnership): I think in the meantime, it would be very advantageous if he pressed for evidence of the leases on these huge sites that are receiving planning permission in London. Why do we not know the legal contracts involved in the sale of these assets to consumers? Also, prior to commonhold, pushing for residents’ management companies as a default position in new developments. It is surely desirable that the people with the greatest financial stake in a block of flats
Page 62 control its management. Why aren’t all sites in London built with residents’ management companies? It is very hit or miss whether they have one or not. It is just at the discretion of the developer.
Andrew Boff AM (Deputy Chair): Do you think it is going to be possible for private market tenure to be a condition of planning permission in the same way that [section] 106 agreements set out affordable tenures?
Sebastian O’Kelly (Director, Leasehold Knowledge Partnership): I would like that very much.
Martin Boyd (Chair of Trustees, Leasehold Knowledge Partnership): There are a number of councils up in the northwest, and one of the London councils, that have begun to pass motions to very much suggest that route as the way forward.
Andrew Boff AM (Deputy Chair): Thank you.
Siân Berry AM: I just wanted to get a bit more clarification on that. The idea that you can put lease conditions into planning permissions is really interesting. Obviously, you have implied that the Mayor can use his funding conditions, particularly where he is funding shared ownership flats, to put those kinds of conditions on. Can I ask Rebecca, as you are the lawyer in the room particularly, do you think that is possible? In which case, other lease conditions could be included. For example, other issues we take up as a Housing Committee are things like short-term lettings.
Rebecca Cattermole (Barrister, Tanfield Chambers): I do not do planning, but the fundamental problem you have to start is there is a private arrangement there between private parties, the developer, the freeholder and the tenant. Parliament has intervened previously between private contractual arrangements. I would say it depends exactly what you are proposing would be incorporated, as a loose term. Commonhold is a brilliant idea but the big issue in London is that you are not just dealing with residential developments. You will be dealing with mixed-use developments. You are having to look at not just residential leaseholders but also commercial lessees as well, and sometimes that commercialising has to be included to make the whole project viable. I think part of the reason why the Law Commission is going to be looking at it this year, and I think coming up with their report later on in the year --
Sebastian O’Kelly (Director, Leasehold Knowledge Partnership): The spring.
Rebecca Cattermole (Barrister, Tanfield Chambers): -- is looking at this issue about mixed use. The legislation at the moment on commonhold is looking at modest blocks and residential blocks, rather than looking at it from a mixed-use perspective.
Siân Berry AM: The Government has discussed recently that -- what are they called, first homes? That those would be secured as Section 106 agreements. It seems to me like those are going to come with lease conditions that say you cannot sell it on for more than the discounted market rate it was first brought for, or some proportion. It seems like that is something Government is confident it could do. The question is: how far can we go?
Martin Boyd (Chair of Trustees, Leasehold Knowledge Partnership): The Welsh Assembly has opened a consultation about what to do with some of the permission fees and in particular the commission fees that arise out of Section 106 agreements where almost all new housing developments are deemed to be private estates and the people, whether they are leaseholders or freeholders, end up having to pay an estate charge to maintain their roads, the grass verges, the lighting, etc, in addition to paying their ordinary rates. What the Welsh Assembly has understood is that that is causing a new set of problems. It is not as big an issue for
Page 63 London because we are not building that many houses anymore in the capital, but it certainly is something that they have decided needs to be addressed.
They have proposed things like the formal adoption of all open areas on any new development after a period of five years. I know because in the capital what we get is we get blocks of flats development and the local authority will make the development pay for the public spaces. On our development, we are responsible for part of the Thames Walkway. When everyone moved in I do not think they had any idea that that was part of their costs, but it is in the [Section] 106 agreement and so the local authority said, “That is tough. You get the privilege of living by the river and so you can pay to maintain it”.
Siân Berry AM: That is really interesting. Did you want to add anything, Sebastian?
Sebastian O’Kelly (Director, Leasehold Knowledge Partnership): There is a discretionary thing here. New sites should be self-governing unless there is an overwhelming reason why they should not be. This is really what would be resisted by the sector.
Can I just point out that Martin Boyd, as well as being Chair of the Leasehold Knowledge Partnership, is Chair of Charter Quay [Residents’ Association]? Charter Quay is an extremely complicated mixed-use site. It is worth over £300 million. It has the Rose Theatre, Carluccio’s, various restaurants and Thames Riverside, as he was pointing out. It has a huge amount of legislative complication in this site, yet it is self-managing.
It is a nonsense to think that a degree of commercial property involved in the site means that leaseholders cannot control it. If they are the overwhelming financial stakeholders in a site, of course they should manage it, certainly not the person who owns 1% of the site and happens to be based in the Cayman Islands. Why on earth should they have all the power over the site and appoint their mates to manage it and their chums to place the insurance contract and so forth? This is the culture which needs to be eroded and which the Mayor could -- if the site does not have a residence management company, why on earth not? If a site comes up with a 125-year lease, which is a very short one, and buyers at the site are not seeing this upfront, why not? These should be the questions that could be just soft power pushing rather than anything too draconian.
Siân Berry AM: Thank you.
Unmesh Desai AM (Chair): Moving on to looking at remedies for existing leaseholders.
Tony Devenish AM: Thank you, Chair. Actually, I am going back to the point that was just raised with but with Martin this time, please. How were the residents of Charter Quay able to resolve the issues they were experiencing? Perhaps you should start by just setting out what they were experiencing.
Martin Boyd (Chair of Trustees, Leasehold Knowledge Partnership): Yes. We all felt we were being overcharged for the services being provided on the site. The site was being very badly maintained. The crunch point came for us in the end of 2007. We received the estimate from the property manager for the next years’ service charge and then the week before Christmas we all got a note saying, “Very sorry. We forgot to mention we have a major works plan for the next 10 years and here it is, and you are going to have to pay this in addition to the previous charges we have told you”.
Everyone looked at it and felt that the costs were very generous to say the least. It was obvious from looking at the plan that whoever had produced it had not taken into consideration the structure of a particular blocks. We have one block that has a 60% commercial unit but this 10-year plan proposed that the commercial
Page 64 element on that part of the development would pay nothing and that the 40% of residential would pay 100% of all the costs, and so their major works bill was going to be very large.
We desperately all got together and the first thing we tried to do was form a residents’ association. That is very hard. There are ridiculously large number of obstacles that get put in the way of letting leaseholders organise themselves. We have been pushing the Government since 2010 to say that it should do more to encourage residents’ groups because you can fairly obviously have a more professional and business-like relationship with an organised residents’ group rather than having to deal with every individual leaseholder on their own. However, for the landlord, the disadvantage of an organised residents’ group is that they are organised and, therefore, they are more likely to challenge you, which is what we ended up doing.
Tony Devenish AM: Thank you. How were you able to resolve the issues, then? Just by working as a team, you are basically saying.
Martin Boyd (Chair of Trustees, Leasehold Knowledge Partnership): Yes. We worked as a team. We were very lucky. We had some people on the site who were very beneficial to the various legal cases that we tried to bring. Our route was to initially have the landlord’s managing agent replaced. Unfortunately, that bit of legislation does not seem to work very well anymore and so we partly shut the door behind us with that one. We then took a number of service charge cases to recover the money that we have been overcharged. That does not work quite as well as it used to. Then we went down a compulsory acquisition route to buy the site and, as I understand, since we did it, there is no large site in the country that has ever been able to do it since.
Tony Devenish AM: Can I just ask how many residents were very active in this approach? Clearly, unless you have a bunch of very well-qualified, very articulate, middle-class residents, it is not going to work, is it?
Martin Boyd (Chair of Trustees, Leasehold Knowledge Partnership): I would dispute the fact that they need to be middle class.
Tony Devenish AM: OK. Everybody is middle class in London, though. Maybe it is the wrong word. I am being told off by my colleagues.
Martin Boyd (Chair of Trustees, Leasehold Knowledge Partnership): If we are going to assert that everyone in London is middle class, you are right that you do need some educated people who can understand things like accounts or understand the way buildings work. That is much more difficult to do in social sector blocks because there a lot fewer leaseholders in social sector blocks, but we do know some of them who have tried. It is hard. We probably had about 10 to 12 people who were actively working on the project.
Tony Devenish AM: Thank you. Very helpful. On to Rebecca, please. For leaseholders who are currently stuck with onerous lease terms or whose freeholders are charging excessive service charges, what remedies are available to them right now?
Rebecca Cattermole (Barrister, Tanfield Chambers): There are various things that can be done. This is part of the problem because there are lots of different routes of which not all leaseholders will be aware. On service charges, if you are being charged excessive charges, then you can challenge those charges through the tribunal system, but we go back to that issue that we raised earlier on, which is the cost issue and the amount of money it takes to get there.
Page 65 In relation to onerous terms on existing leases, it is difficult to define what an onerous term is. There is not any statutory definition. You can look at it within the unfair term’s legislation in the Consumer Act in 2015 which relates to new leases.
For the older leases, prior to 2015, you will be dealing with the Unfair Contract Terms Regulations. The big issue with that is whether it is an unfair term if you consider that you were given legal advice when you entered into the lease or that you had the benefit of legal advice even though you were not possibly being advised specifically on that clause. The question is actually whether there is any significant imbalance between you and the landlord and so whether that would actually constitute an unfair term. There was one Court of Appeal case a couple of years ago that suggested that there would not be that significant balance and so whether you would be able to challenge it on unfair terms -- and there really are not any other cases out there.
One other possibility, particularly when you are coming to onerous ground rents - and again, it is generally the view that if they are 0.1% of the property, then they are going to be onerous, but there is not actually a definition of what an onerous ground rent is - but if they exceed a certain amount, in London over £1,000 a year or outside London over £250 a year - you are not going to have just a long lease. You will have an assured tenancy. The problem with that is that the landlord could seek possession and rent arrears under ground 8, which is a mandatory possession order. You do not even have the opportunity, as you would with forfeiture, of being able to seek relief from forfeiture. It may be that the mortgage company steps in again at that point, but there is a big problem with some of these leases and with these onerous ground rents that once they reach a certain level, they end up falling within an assured tenancy regime.
What happens to those leaseholders in that position is that some are looking to go back to their conveyancing solicitors and thinking, “Actually, can I sue in negligence?” There - and Sebastian mentioned this earlier - are a number of cases where people have tried to sue their solicitors and a lot of them will be settled. There is not one that has actually reached the courts yet. Mostly, the solicitor’s insurance will end up coughing up and so it is unlikely we will see it anytime soon.
There is an additional problem and that is some of these leases are quite old and so you may even have a statute of limitations point and so you are statutorily barred from being able to sue in negligence. There are rather complicated arguments about whether you could say you had constructive notice of that onerous term in the lease, but it is going to be quite difficult for those leaseholders where they have entered into the lease a long time ago.
Tony Devenish AM: Thank you. For the other panel members, what is not in law at the moment? What other remedies could be provided in future for leaseholders currently stuck with onerous lease terms, do you think?
Rebecca Cattermole (Barrister, Tanfield Chambers): They have really started taking steps forward on this. There is not anything in legislation yet, but the Government has already indicated what it is planning on doing with houses and ground rents and leasehold houses subject to certain exceptions.
It could be that you could have within the 2015 Act the indicative clauses which would be considered unfair and so you could make provision in that respect.
Tony Devenish AM: Anything else from the other panellists?
Page 66 Sebastian O’Kelly (Director, Leasehold Knowledge Partnership): The Competition and Markets Authority is looking specifically at the ground rent issue and whether these properties were mis sold and we will get that report in March [2020].
Martin Boyd (Chair of Trustees, Leasehold Knowledge Partnership): Spring.
Sebastian O’Kelly (Director, Leasehold Knowledge Partnership): Spring? OK, it is better to say spring. Hopefully, if it goes the right way, it will be a useful tool in the armoury to seek justice on this misselling.
Martin Boyd (Chair of Trustees, Leasehold Knowledge Partnership): The position has, unfortunately, changed and not changed for the better. When Sajid Javid [MP, former Secretary of State for Housing, Communities and Local Government] initially launched the White Paper Fixing the Broken Housing Market back in 2017, he made a commitment that the Government would look to bring forward early legislation to address existing onerous lease terms. Unfortunately, particularly on leasehold houses, the commitment was at one point before the summer and that was before the summer of 2018. That did not happen.
Unfortunately, the Law Commission was not tasked with looking at it as an issue. The Law Commission had back in 2017 proposed 10 separate projects on leasehold reform that it felt it should look at. It was given three of those projects to undertake and they are beginning to report in the spring: one on common hold, one on right to manage and the other on enfranchisement. There is a fourth project that it was given just before the election to look at the forfeiture issue, but that means there are six further projects that the Law Commission has said to the Government that it would like to review. Until all six of those projects are looked at, we still have some major pieces of leasehold legislation which are in need of fundamental reform.
Tony Devenish AM: Great, thank you. Back to Rebecca, you may have already answered this, but do you think it is a realistic proposition for the Government to legislate for the removal of onerous lease terms for existing leases, i.e. retrospectively?
Rebecca Cattermole (Barrister, Tanfield Chambers): Difficult. Also, one of the big things that has been raised in relation to the ground rents is something called the freehold of landlords under Article 1 of the First Protocol [to the European Convention on Human Rights] rights, which is a right not to be deprived of property. If you are not going to be paying compensation, you have a problem. Without question, you will be facing a challenge. The problem is that the Government legislating to that effect, because of the Human Rights Act, would have to declare whether it considers it is compatible or not and so they have to go through that whole process. It is something that was raised by the Law Commission in the recent paper on valuation in enfranchisement.
Tony Devenish AM: Thank you. We may have touched on the next question as well, but I will ask it anyway. How effective is the right to manage or collective enfranchisement at overcoming some of the issue’s leaseholders face?
Sebastian O’Kelly (Director, Leasehold Knowledge Partnership): It has helped but it has not helped enough, and clever lawyers have run rings around it. The Law Commission is bringing out a report on right to manage to dust it down and reform it and make it more effective, but it has given leaseholders the right to manage their sites in numerous cases. There are about 5,000 right-to-manage companies and there are resident management companies that were in the lease anyway, which are self-managing. There are a considerable number of self-managing sites.
Page 67 Right to manage has done some good things. One of the areas we are involved in his retirement housing. Something has gone very badly wrong in a retirement site when a number of people in their mid-80s to mid-90s decide they want to opt for right to manage with all the rigmarole that that involves, but it has happened. It has been because the right to manage exists on the statute book that they have been able to kick out the management imposed by their often-offshore freeholder and manage their own sites happily. It is a very good thing, but it needs improving.
Tony Devenish AM: Thank you.
Martin Boyd (Chair of Trustees, Leasehold Knowledge Partnership): Can I come in on the enfranchisement point? We have something that is utterly ridiculous at the moment: The Government’s ACM remediation fund, £200 million of taxpayers’ money to be paid into the private sector. The way the system is working is that the leaseholders have to sign a form to obtain the state aid. That aid is not actually paid to them. It is paid to the offshore freeholder. Why on earth is the Government giving £200 million pounds to offshore freeholders rather than seeing that this is an ideal opportunity to enfranchise these sites?
Sebastian O’Kelly (Director, Leasehold Knowledge Partnership): This is what I was mentioning with the Northpoint site in Bromley. There are 57 flats there with a £4 million cladding bill and an annual income of £7,000 in ground rents. The freeholder there has minimal interest in that site. As it happens, this is the Tchenguiz Family Trust, which has a debenture to Rothesay Life, a Goldman Sachs-funded pension investor and so, in fact, that ground rent income goes immediately to Rothesay Life. Vincent Tchenguiz, who is the ultimate beneficiary of the Tchenguiz Family Trust, probably gets two subletting fees from Northpoint every year, which is £130 each. It is absolutely minimal his involvement in that site. How on earth the Government can use the service charge regime to sort out these cladding sites absolutely astonishes us.
Siân Berry AM: That is a really good point and we do need to be following up on whether that money is being well spent as well. That is a very good question.
I actually wanted to ask a question about the number of right-to-manage properties and, Sebastian, you answered that just now. You said there were 5,000 resident management companies --
Sebastian O’Kelly (Director, Leasehold Knowledge Partnership): Sorry, no, right-to-manage companies.
Siân Berry AM: Yes. They have taken up the right to manage and now they are residents’ bodies that manage. Is that right or is that 5,000 properties?
Sebastian O’Kelly (Director, Leasehold Knowledge Partnership): No, it is 5,000 right-to-manage companies and it is very easy to quantify because at Companies House the company name has to have RTM in it.
Siân Berry AM: I can look that up myself, in that case. Do you know how many properties that actually covers, though, or can you guess at that? What is the size of a block, generally?
Sebastian O’Kelly (Director, Leasehold Knowledge Partnership): When we looked at the numbers in 2014, it looked as if it might be about 20 to 30 properties per right-to-manage company. There are one or two very large ones but the vast majority look as if they are quite small.
Siân Berry AM: OK and so we can make some estimates --
Page 68 Sebastian O’Kelly (Director, Leasehold Knowledge Partnership): There would be more resident management companies, which were incorporated in the lease from the start. For example, Neo Bankside, which is just around the corner from here, has a residents’ management company that was in the lease.
Siân Berry AM: Yes. It is like they did not like the law, is it not, that one? Yes, but the ones that have used right-to-manage legislation is what we are asking about.
This is quite hypothetical, but some blocks are not that large and we are aware of some leaseholders being landlords, as it were. They buy the lease and then they rent out the properties and people own multiple properties, often distributed around, but some landlords own more than one property or several properties within a block. Are you aware of any landlords using this legislation to gain the right to manage from a leaseholder or is that not something landlords can do? Does it have to be resident leaseholders?
Martin Boyd (Chair of Trustees, Leasehold Knowledge Partnership): No, it does not have to be residents. You just need to own a lease. There are inevitably some democracy issues when one individual or a small group of individual organisations own a large number of properties within the site. You will get that within the social sector as well. It is very unlikely that the social landlord will become a minority interest.
Sebastian O’Kelly (Director, Leasehold Knowledge Partnership): Is your question really about where these self-managing sites fall down and games are played amongst the leaseholders? Is that where you are going?
Siân Berry AM: Somewhat but also, from a business point of view, if you are a landlord who owns eight out of 10 flats in a block, the incentive to you to then get the right to manage for that block and gain the freehold in terms of your own investment is very high. I am asking whether this is a thing and whether we need to guard against it and whether we need to think about guarding against that in legislation. If we are trying to empower residents, then that is not the same thing.
Martin Boyd (Chair of Trustees, Leasehold Knowledge Partnership): There are certainly protections needed. There are not really any there at the moment and there are not any that are currently sitting within the commonhold environment if we move to that regime. Hopefully one of the benefits of moving to commonhold is we move away from the idea that we have to keep going to the courts over every single issue and there should be some means - and there is in other countries - of helping to encourage a democratic approach and to ensure that the majority does not oppress the minority.
Siân Berry AM: Sebastian, did you want to say? You were about to say something about democracy.
Sebastian O’Kelly (Director, Leasehold Knowledge Partnership): I do want to acknowledge that on the forest floor of leasehold games are played even by the non-typical commercial operators. In the sort of block that you were suggesting, if I was thinking of buying a flat in a block of 10, say, and a landlord owned eight of them, I would know that he was going to call the shots throughout and I would be very wary as a result.
I am aware of a site in north London, which is only eight flats and it was in franchise, but two families had got together and were re-enfranchising the block of flats and wanting to put two penthouses at £3 million each on the roof of this block of flats and compensate the non-participating members with £5,000 each. That is going through the courts at the moment.
Yes, games are played and indeed, knowing Italy and France as I do and places that have commonhold systems, flat owners do squabble amongst themselves, certainly. What is unique about the English system or
Page 69 the system in England and Wales is that you have it industrialised. You have a commercial leasehold sector. The leasehold system is a great way of hitching a ride on the UK residential property boom and to be empowered and so you have this speculation in freeholds that is quite alien to other jurisdictions. You have absurdities in England like over the cladding side, “How do I get in touch with my neighbours? They are all based in Singapore or wherever, investors all over the place”. That strikes me as astonishing because in every block of flats - and I have owned flats in Italy and France - the list of owners is on a board in the foyer. Not only is there a list of the owners and their addresses and how to contact them but whether they have paid up. Everybody knows what is going on in a block of flats. Why on earth the English ones are so secret is really -- I was going to say it is a mystery, but it is not a mystery because keeping leaseholders divided and disunited is absolutely in the commercial interests of the freehold sector.
Siân Berry AM: OK. Thank you. There are problems but they are problems we would rather have. Is that what you are saying?
Sebastian O’Kelly (Director, Leasehold Knowledge Partnership): Yes, exactly. Nicky Gavron AM: Just on that, we do not yet have a register of landlords. That is the point you are making.
Sebastian O’Kelly (Director, Leasehold Knowledge Partnership): No.
Nicky Gavron AM: Scotland does but we do not. England does not.
Sebastian O’Kelly (Director, Leasehold Knowledge Partnership): When they are offshore, who on earth are they? Some of these offshore entities own cladding sites and have to make very difficult decisions, yet we have absolutely no idea who they are.
Nicky Gavron AM: It is absolutely ridiculous and so many of us have argued about that but still we do not have it.
Martin Boyd (Chair of Trustees, Leasehold Knowledge Partnership): The problems that caused are being crystallised by the cladding crisis. The National Fire Chiefs Council Chair has made clear that trying to contact entities that are based in Jersey or the Cayman Islands to find out who or what they are or what they are doing with buildings has been -- and we are aware that all the local authorities are currently being tasked with collecting data on the blocks that they have in their boroughs. We have seen letters from one of the more central London boroughs and they are simply writing to the address with a letter that says, “Dear property manager”, in the hope that somehow whoever is managing that building is going to pick that letter up and then write back to the local authority to tell them what is at that building, whether it has cladding and whether there are building safety issues. It is not a very sophisticated approach. We need to know about all of these buildings.
Nicky Gavron AM: That is very interesting and something we should take up. Just moving on now, it has been a bit touched on. If I just start with you, Martin, and then we might ask the others. Some flats have a share of the freehold. I want to know from you what that means practically and how it differs from commonhold.
Martin Boyd (Chair of Trustees, Leasehold Knowledge Partnership): OK. That is effectively what we have at our development. In many ways, if you have a leasehold block and there is a share of the freehold, it is quite similar to commonhold in a number of aspects, but you are still stuck with the landlord and tenant legislation. I am still stuck if we have a delinquent leaseholder who does not pay their service charge. I do not really have much option but to notify them that they are in breach of the lease. If I do not follow the
Page 70 procedures for someone who is breaching the terms of the lease, then I may lose some of my rights to take action against them. You lose most of the problems with leasehold law but not all of them.
What you do not gain, which you do gain in a commonhold world, is that almost all leases in the private sector prevent the landlord from improving the building. That will include those sites where the leaseholders own a share of the freehold. We are living in this slightly ridiculous world, let us call it, where all the blocks in in London are not meant to be improved in perpetuity. In a commonhold world, what you quite logically do is sit there and say, “We want to put some solar panels on the roof because that is beneficial to the block”, or, “We want to improve the environmental systems that we have here and we want to reduce our energy bills”, and you just do it as a commonhold. You make an agreement and go, “That is what we want to do”, and done.
We have had to, at our site, abandon a plan to put in solar panels for the third time not because anyone on the site objects but because all of the systems out there assume that leasehold is so complicated that you cannot put solar panels on blocks of flats very easily because someone might argue that that is an improvement.
Nicky Gavron AM: That is very shocking. Sebastian and Rebecca, do you want to add anything to that?
Sebastian O’Kelly (Director, Leasehold Knowledge Partnership): No, that detail was compelling, really. That evidence is compelling. If you make an enhancement to a building, you are in breach of the lease.
Nicky Gavron AM: Going back to Martin, do you see in the future that commonhold is a viable alternative - you obviously do - to leasehold?
Martin Boyd (Chair of Trustees, Leasehold Knowledge Partnership): Yes. When we started doing our work back in 2008, 2009 and 2010, the whole of the system was telling us that we were wrong and that the leasehold system was working well and there were not any problems. That is what your predecessors concluded. The Government felt in 2012 that there was not any need to reform the legislation. We have helped manage to convince the system there are fundamental problems.
When we first started looking at commonhold in 2014, we managed to arrange a debate in Parliament. I was completely agnostic about the issue. We had the Government officials telling us that the market simply did not want commonhold. They had tried it and the market did not want it. They said, “There is nothing to do”. Everyone else who came into the meeting said, “No, the problem is the legislation was flawed. There are too many incentives to build leasehold”. Everyone else somehow does manage to build commonhold. We have had various people coming over from Australia and they said this argument about how you cannot build commonhold on very complex and very large sites is rubbish. The largest starter title site in Sydney being developed at the moment is a 14-hectare site. It has a huge number of residential and commercial elements to it and it will take years and years to develop. They have no problems. Over here, if we can get the legislation right, then logically commonhold will be a route that people will go down very quickly.
Nicky Gavron AM: Sebastian and Rebecca, do you agree with that?
Sebastian O’Kelly (Director, Leasehold Knowledge Partnership): Yes, absolutely.
Rebecca Cattermole (Barrister, Tanfield Chambers): It is what I was saying earlier about how the currently existing commonhold legislation probably is not really fit for purpose. The problem that I identified was this issue about huge mixed-use developments. That is why it needs to be looked at again.
Page 71 Sebastian O’Kelly (Director, Leasehold Knowledge Partnership): When commonhold came in, it was envisaged that there would be a sunset clause and that beyond a certain date developers would have to build commonhold. It was dropped and of course, without compulsion, developers are making so much money playing the leasehold game that they are not going to do it. As somebody who has direct experience of commonhold because I have owned flats in France and in Italy, I can tell you that it is a very simple system. It is a huge pain in the neck having to attend condominium meetings, but the only thing worse than managing a block of flats is not managing a block of flats and somebody else doing it, especially when they have all the ample opportunities to turn you over, as they do in England and Wales.
Nicky Gavron AM: All right. We discuss a lot of the issues to do with lease holding. Do you not have some of those issues, too, if you are commonhold? What, for instance, happens if you are in a block with Grenfell-type cladding? What about having to pay those charges when you actually have had no responsibility for putting it in?
Martin Boyd (Chair of Trustees, Leasehold Knowledge Partnership): You would be in a much better position. Your position as a leaseholder is you have no real right to take any action against anyone for the fact that they have put cladding on your building. It is very difficult to force someone to change. There are one or two potential actions happening, but it is so far nothing. If you were living in a commonhold environment, you would simply turn around and say, “We need to raise some money if we think we are able to sue someone for the fact that they put this cladding on our block”. At the moment, what we have over here is everyone accepts no leaseholder is responsible for the fact that they put the cladding on the outside of their building. Many people bought flats that the landlord actually knew had cladding on and did not even tell them. We have had people who have bought flats in 2018 and they were in there for three months and they suddenly discovered that they have actually bought something that is worthless. It does not solve it if you are living in a commonhold world, there is no magic money going to arrive, but at least there has been a more effective means by which fault can be established.
In Australia, they have had many more developers agree to remediate the buildings and the Government has been able to get itself into a much more effective position in deciding what to do on those buildings that will not be remediated by the developer. That has been a mixture. In some instances, the Government has paid to remediate. In some instances, the Government has made loans available. Another problem we have here is the moment you have discovered you live in a cladding block, your properties effectively become worthless and so you cannot borrow the money to fix the cladding on your block, whereas if you were to live in a commonhold world, then you might be able to take a very different approach and the site would be able to perhaps borrow money from the Government or somewhere else to help fix the building.
Sebastian O’Kelly (Director, Leasehold Knowledge Partnership): A closer example is Scotland, which is having exactly the same problems of having to remediate its buildings as well, but there is a direct contractual connection between the real owners of flats in Scotland and the developers who put it up and the regulators who approved it, whereas in this country as a leaseholder you would have to persuade your freeholder to take legal action against the regulators or against the developers because you are only a tenant and it is not your building.
Léonie Cooper AM: You have referred to the fact that the Law Society is doing these six projects not just looking into the idea of whether or not moving over to commonhold might be a good thing, but there does seem to be this lack of take-up really as an alternative. What do you think are the main barriers to that increase in take-up?
Page 72 Sebastian O’Kelly (Director, Leasehold Knowledge Partnership): If you are a developer, you would be absolutely mad to go to offer commonhold given that you could make much more money out of playing the leasehold system. That is the most obvious answer.
Léonie Cooper AM: You are saying the barrier is really with the freeholders being willing to grant the commonholds?
Sebastian O’Kelly (Director, Leasehold Knowledge Partnership): No, it is with the developers when, with the developer, you sell the flats for what you can get for them and then the cherry on the cake is selling the freehold to some speculator and ground rents.
There is that rather successful example of a commonhold site in Pickering in North Yorkshire. It was built commonhold by a New Zealand architect developer, probably because he did not know any different, and he built it as commonhold. He went bust in 2008 like so many developers did, but it is now a very successful commonhold site. It is an anomaly. He could have built that same site and sold the freehold for £250,000.
Léonie Cooper AM: For example, when the Mayor is granting the planning permissions, which comes back to something Assembly Member Berry was talking about earlier on, if it was a requirement that the developers had to sell anything on as a commonhold, that would be something that could be included as part of the planning arrangements as a condition, perhaps. Then that might be one way of --
Martin Boyd (Chair of Trustees, Leasehold Knowledge Partnership): He could not yet because there are problems with the legislation. The Government has accepted that there are two parts to changing our tenure and there is the carrot and the stick. The stick for the developers is that the Government has made very clear that we are moving to a zero ground rent system going forward. If the developer cannot sell on the ground rent rights, that is the only legitimate income stream that the freehold investor has. There are other additional income streams that they may get out of providing insurance for the building or commissions out of property management, but those are not income streams that you can go to a bank and borrow money against.
Léonie Cooper AM: Do you think there is still a requirement to continue with leasehold? There are some developments that are more complicated than others. We have just referred to the complexities of your backyard scheme, if I might call it that, Martin, but, for example, where you have shelter developments or something that includes commercial in there, or could we just flip everybody over to commonhold instead of leasehold?
Martin Boyd (Chair of Trustees, Leasehold Knowledge Partnership): It would take time. What has been very clear from everyone who has spoken about it is that --
Léonie Cooper AM: Let us say for new. We could move everyone on to that for new, do you think?
Martin Boyd (Chair of Trustees, Leasehold Knowledge Partnership): For new, yes. What will happen if we follow other countries is we would gradually transition existing stock. Nobody is going to convert a current leasehold site to a commonhold site unless they think it is going to add value to their properties. No mortgage company is going to allow it to happen unless it thinks it is going to add value to the properties. That will take time. Probably four or five years after the legislation comes forward and we move over to new-build stock, then you will start to see existing stock transition.
Page 73 Sebastian O’Kelly (Director, Leasehold Knowledge Partnership): One area where you might see this is in the retirement sector. You have a retirement trade body called the Association of Retirement Community Operators (ARCO), which runs the more intensively managed retirement sites. They have said --
Léonie Cooper AM: For example, McCarthy & Stone?
Sebastian O’Kelly (Director, Leasehold Knowledge Partnership): No, not McCarthy & Stone. That is a volume housebuilder business model. It would be people like Audley, the ExtraCare Charitable Trust, organisations in retirement villages and that sort of thing. They provide a community and manage it. These operators have said, “We do not need ground rents at all”, as opposed to McCarthy & Stone and Churchill saying that they are essential for the retirement housebuilding business model. They do not need it because they manage these sites permanently for the long term and they are managing quite complicated things. They might be providing some care. They might be providing restaurants and other facilities of the site. The management of that is really crucial.
Then I am considering a licence to occupy rather than leasehold. Leasehold in that sort of circumstance is not essential but it does work because you have a freeholder who actually is the management company. This is the business that you are buying into. This is the asset, really, whereas kicking out some flats, flogging them for what you can get for them and then selling the freehold to whoever wants to have a punt on some freehold is an entirely different business model.
Léonie Cooper AM: If we are going to assume that as many as possible new and then we were going to transition everybody else onto commonhold, how would that work out in something like, for example, where we have shared owners who might be paying rent on a quarter of their domicile and then have a shared ownership on a leasehold basis for the other 75% or some variation of that?
Martin Boyd (Chair of Trustees, Leasehold Knowledge Partnership): Yes. It is one of the specific issues that the Law Commission is looking at. It is very clear in other countries that you do have commonhold working in both the shared ownership part of the market and the commercial part of the market.
The philosophical question that has been asked is whether you transition the system in one or two jumps because it gets a bit more complicated than just in the private sector.
Léonie Cooper AM: What about in the case of community land trusts? Is the Law Commission looking at that as well?
Martin Boyd (Chair of Trustees, Leasehold Knowledge Partnership): Yes, we actively encouraged them to push commonholds particularly at that group. They were cautious in a number of the consultations because, rather oddly, some of them argued that they used the ground rent for community projects. That seemed to be an argument that faced in both directions. They felt that we should have ground rents limited to a very small amount but that they should have the right to keep those ground rents. We said to them that if you want to do community projects in the commonhold world, you just go, “We want to do a community project”, and if everyone agrees or the majority agrees, then that is it. You do the community project.
Léonie Cooper AM: Apart from the planning element that I just referred to and that we have been saying might be a way for the Mayor to ‘encourage’ - in inverted commas - developers to include commonhold rather than other forms, do you think there is anything else that the Mayor or the London boroughs could do to encourage commonhold to become more common rather than leasehold?
Page 74 Martin Boyd (Chair of Trustees, Leasehold Knowledge Partnership): We will not know until the legislative reforms come through, but if they get the shared ownership element right, then there seems absolutely no reason why the Mayor cannot say, “If you are using my money, you will develop a commonhold. Thank you”.
Léonie Cooper AM: Yes. This seems like a very obvious thing. The Mayor asks for other things when he is involved in a development in that way, but the Mayor also has some involvement through the planning process in schemes where there is not necessarily funding from City Hall, if it is taller than a certain height or if there is more than a certain number of units. Would you suggest beyond just, “I am putting some money and so I want this”, but it could be used more widely, could it not?
Martin Boyd (Chair of Trustees, Leasehold Knowledge Partnership): Yes, absolutely.
Léonie Cooper AM: OK. We have referred to the Government looking at this. We talked about the Law Commission having a look at these six different areas. Do you have any idea as to - this is probably going to be how long is a piece of elastic - when we might see any response from all of these investigations into these things and we might see any actual practical change coming through?
Martin Boyd (Chair of Trustees, Leasehold Knowledge Partnership): Yes. There has been some criticism. We have had eight consultations now without --
Léonie Cooper AM: Just eight.
Martin Boyd (Chair of Trustees, Leasehold Knowledge Partnership): Just the eight. Obviously, Brexit issues have caused many delays. We understand that there is a draft Bill to be produced in the near future that will address the first of the sets of issues to be looked at. How long it takes to look at the rest, who knows?
Léonie Cooper AM: A draft Bill coming soon?
Martin Boyd (Chair of Trustees, Leasehold Knowledge Partnership): Spring.
Léonie Cooper AM: Spring. It is spring now, is it not?
Martin Boyd (Chair of Trustees, Leasehold Knowledge Partnership): The Government’s spring lasts a lot longer than other springs.
Léonie Cooper AM: Spring starts in June, I am told.
Siân Berry AM: It continues until June.
Léonie Cooper AM: It continues until June. All right. It could pop at any point between now and June [2020].
Sebastian O’Kelly (Director, Leasehold Knowledge Partnership): I could add, though, that it is a bit disappointing that the Government has announced four times that it is going to set new ground rents at zero and ban leasehold houses. There is no reason to wait for any of these reports from the Law Commission. It just needs to do that. Setting new ground rents to zero in itself would be such a gear shift in the leasehold sector that it opens the question to commonhold that it would be very welcome indeed for them just do what they said they would do back in Easter 2018. Can they please get on with it?
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Léonie Cooper AM: You do not feel that we need another eight consultations about this matter --
Sebastian O’Kelly (Director, Leasehold Knowledge Partnership): I am afraid I do not, no.
Léonie Cooper AM: -- before we actually make a decision? Given how long it has taken us to make a decision on High Speed 2 (HS2) - I am reliably informed by all the media that the decision is going to be made today, which it is funny because I thought we had made it at least eight times previously - I am not going to hold my breath, but it would be good to know that we can proceed without another eight consultations.
Siân Berry AM: We were to have a representative from the Southwark Council here to ask about council works, but the high cost of repairs is not just confined to council leaseholders. I am a local councillor and I experience a lot of issues around major works and I wanted to ask some questions today.
I wondered if, Martin, you might be able to comment on this. We have some small evidence from my local area that potentially allowing residents themselves to commission major works on their own blocks has saved money compared to the big contracts that the council lets out. You can see that if a freeholder in the private sector is commissioning works, they are under no -- a council is trying to save public money and so it should be getting good value, but a freeholder is not compelled to do that, either.
Do you have any evidence from your work that leaseholders who are in control of their major works and repairs get better value or keep a closer eye on costs than potentially their landlords do?
Martin Boyd (Chair of Trustees, Leasehold Knowledge Partnership): Yes. There was a tenant management organisation (TMO) that was speaking at one of the Southwark events who pointed out that they were getting some considerable cost savings. The difficulty for the large authorities is that they are large and they are letting some huge contracts.
There seems to have been a fundamental misunderstanding about how contracts should be let in the social sector. The argument has been that they ought to be using call-off contracts, which go on for many years, and the argument used to be that they had to do this on three grounds. One was as part of the European procurement rules, another was to demonstrate to the Government they were getting best value for money, and the third argument was because they were meant to follow something called the Egan principles, which came out of a report produced for the Government in the late 1990s by Sir John Egan, who was the man credited with saving Jaguar.
When the Government started looking at major works procurements a number of years ago, nobody could ever explain to me why the social sector worked like it is and so we asked various bits of HCLG. Eventually somebody came back to us and said, “There is nothing in the value-for-money statements that require these large contracts”. Then somebody else came back and said, “The European procurement rules we do not think apply to most RSLs other than local authorities”, because there were these shenanigans about moving everything off the public books some years ago. The argument was that if it is no longer on the public books, then the European procurement rules do not apply anymore.
Then I thought, “This John Egan, we ought to ask him”. He is still alive. We got him down to a meeting in Parliament the other year. He was quite rude about the idea that somebody had taken his proposals and turned them into the way that they run procurement in the social sector. He basically said, “I designed a set of principles for new build. It was never, ever intended to use what I was recommending for ongoing maintenance”. His view was that unless you can demonstrate not only value for money at the start of the
Page 76 project but ongoing improvement in value for money throughout the whole length of the project, you should not be doing it.
Siân Berry AM: Interesting. OK. We need to write to Southwark to get the answers to the questions that you might have had.
Unmesh Desai AM (Chair): Before you ask your next set of questions, can I take this opportunity to welcome pupils from the Christchurch Primary School from Redbridge? This is a meeting of the Housing Committee and we are talking about a topic which will be of great importance to Londoners. It is about flats and what are called leasehold flats. It is not exactly the most riveting discussion, I accept, but you are welcome.
Léonie Cooper AM: We should probably ask them. Who lives in a house? Yes, you all live in houses and so it is an important discussion for you, the same as for us.
Unmesh Desai AM (Chair): Sian, can I ask you to continue?
Siân Berry AM: Thank you. Yes, apologies. I was interested in the European contracting process and did not notice the young people. Anyway, I am about to ask some more questions about legislation and how likely it is to come through. Assembly Member Cooper shares my scepticism that we might see anything soon. Certainly the Queen’s Speech was briefed ahead of time that “the Government would be taking forward” and “the Government will” and all of that and then there was no actual Bill announced. There was no mention in what the Queen said of the word ‘leasehold’ at all. Yes, how likely do you think it is going to be that we are going to see anything? It was two years between the last Queen’s Speech and the-
Martin Boyd (Chair of Trustees, Leasehold Knowledge Partnership): It was in the supporting documentation. The Queen did not actually say it but, if you look at the bigger document, then it is in there, yes.
Siân Berry AM: That is what I have been referring to, yes. How likely do you think it is that we are going to see anything, given we might not see another Queen’s Speech for two years like we did last time?
Martin Boyd (Chair of Trustees, Leasehold Knowledge Partnership): We have no influence on that. It would be just speculation. What is very clear is that there is now a much better understanding within the system and there are many more Members of Parliament (MPs) who understand why there are problems that need to be fixed.
That was one of the reasons why the All-Party Parliamentary Group on Leasehold [and Commonhold] reform was set up in 2016 and it has played a very active role in helping to push the Government. It has been very surprising that it seems to be an utterly cross-party issue. There are no particular disagreements between the MPs from any of the parties. We have even had a Scottish Nationalist Party (SNP) MP join recently, which given that they do not have leasehold in Scotland is quite odd, but they were interested because of cladding.
Siân Berry AM: OK. A lot of the MPs have changed. The MPs are different now. Are you aware of any campaigns to ask incoming MPs to commit to making this a priority?
Martin Boyd (Chair of Trustees, Leasehold Knowledge Partnership): At the end of the last Parliament we had 177 MPs in the Group. That dropped to 136 after the election. We are now back up to 157. As the new MPs settle in, I am sure we will get back to 177 quite quickly.
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Siân Berry AM: Yes, that is quite a big increase already given how full postbags must be.
Martin Boyd (Chair of Trustees, Leasehold Knowledge Partnership): Yes. This was the first election where leasehold raised its head above the parapet such that candidates were talking about it. Historically, it is been an issue that has been too complicated and too dull, to be honest, to raise on the doorstep. However, particularly with all the issues that we have had in the northwest and northeast with leasehold houses, it has now become something that a lot of new MPs are very interested in.
Léonie Cooper AM: Perhaps a nice slogan like ‘Get commonhold done’ might work.
Martin Boyd (Chair of Trustees, Leasehold Knowledge Partnership): I cannot comment.
Léonie Cooper AM: It is nice and short, is it not?
Siân Berry AM: Sebastian, you wanted to come in?
Sebastian O’Kelly (Director, Leasehold Knowledge Partnership): Sorry. We are very heartened by the considerable interest in Parliament in this. The [Housing] Communities [and Local Government] Select Committee chaired by Clive Betts [MP] came up with an excellent report last year. The Conservative members of that also signed up to the report, which was excellent, and so there was no minority in that, although they had some doubts and there was very tough questioning about some of the points that leaseholders were making and we were making. It is an extremely good document to have and the interest from that Select Committee on this issue continues.
Of course, it is worth mentioning that tomorrow Hilary Benn [MP] has a Westminster Hall debate on cladding, which will be very well attended. The cladding issue has now brought in a whole other layer of interest, shall we say, to this sector.
Although we are disappointed by the Government’s inaction, if the rumours are true, we are going to have another different Communities Secretary [Secretary of State for Housing, Communities and Local Government] and so we will start all over again there. That probably does not reflect the interest that there is in the Commons.
Siân Berry AM: Rebecca, presumably the Government is slightly waiting for the Law Commission to finish its work.
Rebecca Cattermole (Barrister, Tanfield Chambers): They are not just slightly waiting. They will be waiting.
Siân Berry AM: Yes. Is the cladding issue going to put off any conclusions? Is that creating wrinkles potentially that might in your view --
Rebecca Cattermole (Barrister, Tanfield Chambers): I do not know if they are waiting for the Law Commission on most of that. That is all to do with Government policy. I am not really here to comment on policy as such.
Siân Berry AM: Fair enough. It is just there might be --
Page 78 Rebecca Cattermole (Barrister, Tanfield Chambers): There is something to bear in mind and it is this. Over a number of decades, what we have had is successive Governments tinkering away at leasehold. As and when things have happened, they will apply a sticking plaster. There is a school of thought, which is that actually it would be quite nice - this is partly to do with the commonhold - to scrap the whole lot and start all over again. The difficulty is that you cannot necessarily do that when we have had this system in place for so long. It is not simply a situation of just getting rid of them and then tomorrow everything is going to be commonhold. It is far more complex than that.
Someone was suggesting that, actually, was anything really made of it in the Queen’s Speech and is anything going to happen? There is a programme where they are trying to look at this as a whole because we have seen what problems have been caused historically by tinkering away.
Siân Berry AM: It is better to take slightly longer to do it well?
Rebecca Cattermole (Barrister, Tanfield Chambers): Yes. They are and that is what they are doing. That is why they are taking all these stages while people are waiting for these various Law Commission reports.
Siân Berry AM: Excellent. The final question I have is whether there is anything else you would like to mention, effectively. Is there anything else that we have not raised here or any other aspect of changing practice that you think is essential that we have not asked you about yet?
Martin Boyd (Chair of Trustees, Leasehold Knowledge Partnership): Yes. Cladding. We ran a cladding meeting for leaseholders here last week. We had 144 leaseholders turn up. The Fire Chief Commission also spoke. Unfortunately, there was no GLA official willing to speak. There was no Government official willing to speak. The people living in cladding blocks are in an awful mess. We have been trying to help for two and a half years. Unfortunately, the Mayor wrote to the Secretary of State [for Housing, Communities and Local Government] in December [2019] and effectively said he does not think the GLA should do anything to help cladding leaseholders. That is disgraceful.
Tony Devenish AM: Are there minutes of that meeting last week? Do you know?
Martin Boyd (Chair of Trustees, Leasehold Knowledge Partnership): On the website.
Sebastian O’Kelly (Director, Leasehold Knowledge Partnership): There are reports on the Leasehold Knowledge Partnership website. Formal minutes, no, but reports of what the speakers said. As you heard, it was a very well attended meeting and Roy Wilsher [Chair, National Fire Chiefs Council], the senior fire officer, spoke at it. Hilary Benn [MP] spoke at it. Professor Susan Bright, Professor of Law at Oxford, spoke at it. It was a formidable meeting, really. We have another one scheduled for 12 May [2020] here, which you are welcome to come to.
Tony Devenish AM: Thank you.
Nicky Gavron AM: Can I ask? Did you invite members of the GLA?
Martin Boyd (Chair of Trustees, Leasehold Knowledge Partnership): We did. We invited the Mayor. We invited Tom [Copley AM] just as he was transitioning across and so we understand why Tom might not have been there. GLA officials were invited to come and speak. GLA officials did attend but they did not speak, unfortunately.
Page 79 Siân Berry AM: A Committee Member would have been a good person to go.
Léonie Cooper AM: We were not invited.
Siân Berry AM: If Tom was invited and then he changed jobs, that might explain the issue.
Martin Boyd (Chair of Trustees, Leasehold Knowledge Partnership): We had invited the two Deputy Mayors. Fiona [Twycross AM, Deputy Mayor for Fire and Resilience] was also invited but Fiona had told us very early on that she had another appointment and so she could not attend.
Léonie Cooper AM: Tom was invited with his Deputy Mayor hat on, not as the --
Siân Berry AM: Yes, not as a Committee Member.
Martin Boyd (Chair of Trustees, Leasehold Knowledge Partnership): As I say, it was just on the transition and so we knew that there was --
Léonie Cooper AM: No one from the Housing Committee was invited. That is what we are saying.
Martin Boyd (Chair of Trustees, Leasehold Knowledge Partnership): We will make sure we will invite you.
Page 80 Agenda Item 7
Subject: Summary List of Actions
Report to: Housing Committee
Report of: Executive Director of Secretariat Date: 5 August 2020
This report will be considered in public
1. Summary
1.1 This report sets out actions arising from previous meetings of the Housing Committee.
2. Recommendation
2.1 That the Committee notes the completed, outstanding and closed actions arising from its previous meetings and additional correspondence sent and received, as listed in the report.
3. Background
Actions Arising from the meeting of 11 February 2020
Minute Topic Status For action by Number 4. Leasehold and Service Charges
During the course of the discussion, Leasehold Completed. Chair of Trustees, Knowledge Partnership agreed to invite Members to See Leasehold the next cladding meeting for leaseholders on 12 May Appendix 1. Knowledge 2020. Partnership
Senior Policy That authority be delegated to the Chair, in Completed. See Agenda Advisor consultation with the party Group Lead Members, to Item 8. agree any output from the discussion.
City Hall, The Queen’s Walk, London SE1 2AA Enquiries: 020 7983 4100 minicom: 020 7983 4458 www.london.gov.uk Page 81
Actions Arising from the meeting of 21 January 2020
Minute Topic Status For action by Number 5. Affordable Home Ownership
During the course of the discussion, Steve Moseley, Completed. Steve Moseley, London and Quadrant Housing Trust, agreed to See London & provide the following information: Appendix 2. Quadrant Housing Trust • Whether London and Quadrant shared owners had the same Right to Manage, Right to Transfer rights that already exist for council tenants; • The administration fees to process changes in homes at London and Quadrant; • Whether London and Quadrant are signed up to Battersea’s Dogs and Cats Home campaign on Pet-Friendly Properties and responsible pet ownership; and • The percentage of people who have bought a Shared Ownership homes from London and Quadrant who used a solicitor from the recommended panel.
Councillor Danny Beales, Camden Council, agreed to Completed. Councillor Danny share whether tenants in Camden have tried to do See Beales, Camden Appendix 3. Council Right to Manage.
That authority be delegated to the Chair, in Completed. Senior Policy consultation with party Group Lead Members, to agree See Agenda Advisor Item 8. any output from the discussion.
Actions arising from the meeting of 3 September 2019
Minute Topic Status For action by Number 7. Decent Homes Standard and Private Rentals
That authority be delegated to the Chair, in Closed. Senior Policy consultation with party Group Lead Members, to agree Superseded Adviser by current any output from the discussion. work.
Page 82
Action arising from the meeting of 2 April 2019
Minute Topic Status For action by Number 4. Housing First
During the course of the discussion, Members Ongoing. Rough Sleeping requested a summary of the breakdown of funding Followed-up Lead, GLA provided to homeless services across London. on 25 June 2020.
Actions arising from the meeting of 26 March 2019
Minute Topic Status For action by Number 7. Update on the Use of Transport for London Land to Build homes
During the course of the discussion, Members Ongoing. Commercial requested an update in March 2020 on how TfL are Followed up Development on 9 July Director and Head progressing towards their March 2021 housing target. 2020. of Property Development, TfL
That authority be delegated to the Chair, in Ongoing. Senior Policy consultation with party Group Lead Members, to agree Adviser any output from the discussion.
Actions Arising from the Meeting of 22 January 2019
Minute Topic Status For action by Number 6 Temporary Accommodation in the Era of Welfare Reform During the course of the discussion Members, requested the following information; • Further information on the number of out-of- Completed. Director of borough placements from other London Attached in Gateway Services, Boroughs that are placed within the London Appendix 4. London Borough of Boroughs of Croydon; and Croydon • Further information as to the experience and process, from the perspective of a London Borough, of inputting landlords onto the rogue landlord database.
Page 83
Actions Arising from the Meeting of 4 October 2018
Minute Topic Status For action by Number 5. Question and Answer Session with Housing Associations During the course of the discussion, Members Ongoing. Vice Chair, g15 requested the proportion of Network Homes forward Followed-up programme that is affordable rent. on 19 June 2020.
At the end of the discussion, the guests from the g15 Ongoing. Vice Chair, g15 committed to support publishing on an annual basis a Followed-up London report from housing associations including, on 19 June what they are spending on maintenance in London 2020. and how many homes they have in London. That authority be delegated to the Chair, in Closed. consultation with party Group Lead Members, to agree an output from the discussion.
4. Additional Correspondence
4.1 The Chair wrote to the Deputy Mayor for Housing and Residential Development on 8 June 2020 to ask questions in regards to Housing in London: Planning for Recovery from the COVID-19 Crisis. A copy of the letter is attached at Appendix 5. A copy of the response from the Deputy Mayor for Housing and Residential Development is attached at Appendix 6.
4.2 A further follow up letter from the Chair to the Deputy Mayor for Housing and Residential Development was sent on 16 July 2020, attached at Appendix 7.
4.3 Following consultation with party Group Lead Members, the Chair wrote to the Berkeley Group to offer their condolences with regards to the death of Tony Pidgley, attached at Appendix 8.
5. Legal Implications
5.1 The Committee has the power to do what is recommended in this report
6. Financial Implications
6.1 There are no financial implications to the GLA arising from this report.
Page 84
List of appendices to this report: Appendix 1 – Response to Committee from Martin Boyd, Leaseholder Knowledge Partnership Appendix 2 – Response to Committee from Steve Moseley, London & Quadrant Housing Trust Appendix 3 – Response to Committee from Councillor Beales, LB Camden Appendix 4 – Response to Committee from Julia Pitt, Director of Gateway Services, LB Croydon Appendix 5 – Letter from Chair to Deputy Mayor for Housing and Residential Development dated 8 June 2020 Appendix 6 – Letter from Deputy Mayor for Housing and Residential Development dated 22 June 2020 Appendix 7 – Letter from Chair to Deputy Mayor for Housing and Residential Development dated 16 July 2020 Appendix 8 – Letter from Chair to the Berkeley Group dated 23 July 2020
Local Government (Access to Information) Act 1985 List of Background Papers: None.
Contact Officer: Diane Richards, Committee Officer Telephone: 020 7084 2956 Email: [email protected]
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Page 86 Appendix 1
Response to follow up request for information from the February 2020 meeting of the Housing Committee – Martin Boyd, Leasehold Knowledge Partnership
Request for information:
During the course of the discussion, Members requested that Martin Boyd, Leaseholder Knowledge Partnership, provide an invitation to the Leaseholder Knowledge Partnership’s next public cladding meeting for leaseholders.
Response:
(Due to COVID_19) we have abandoned the idea of meetings at the moment but have gone down two different routes.
1) I had started holding virtual meetings with individual MPs and their constituents. I helped Apsana in Limehouse and Poplar last Saturday with 71 delegates attending and have others being scheduled in the coming weeks
2) I have also urged some of the MPs to organise a meeting with Tom Copley to understand what more London can do to be seen to help encourage the government to move more quickly. As you may know, Ministers have criticised the London Major for the slow pace of change compared to Manchester. As I am sure you know that pace is more to do with the newness of the Manchester building stock compared to London. However, Manchester has done things like organise a high rise task force to give the appearance of a more coordinated approach.
I also have a survey out at the moment on the problem of valuation in high rise blocks. https://www.leaseholdknowledge.com/cladding-leaseholders-please-complete-survey-on- ews-for-mps/
I launched last Friday and already have over 400 replies. The picture painted is very bleak. The survey will run for another couple of weeks. It would be useful if the GLA might do something to promote it.
I will probably organise an APPG cladding meeting for MPs in the near future. It will mostly be for members as we'll run via zoom but might the Committee members also want to attend?
Sent by email on 24 June 2020 and Committee Members invited to the APPG for 21 July 2020
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Page 88 Appendix 2 West Ham Lane Office 29-35 West Ham Lane London E15 4PH
Tel: 0300 456 9998
Email: [email protected] Website: www.lqgroup.org.uk
Tom Copley AM Chair of Housing Committee The Queen’s Walk More London London SE1 2AA
By email only: [email protected]
14 February 2020
Dear Mr Copley
Thank you for your letter of 4 February 2020 following the Housing Committee meeting concerning affordable home ownership. I appreciated the opportunity to attend and provide a Housing Association perspective on the delivery and management of shared ownership.
L&Q is committed to the provision of affordable homes across a range of tenures in London and see shared ownership very much as part of that approach. It is the most popular and established form of affordable home ownership having been delivered since the early 1980’s, and the only product currently available which makes home ownership a realistic proposition for middle income Londoners without access to large deposits.
We believe it is vital that homeowners, funders and stakeholders continue to have confidence in shared ownership as a product and therefore welcome the Housing Committee’s interest in this area and support the continued evolution of the shared ownership model for the benefit of all involved.
I committed to provide further information to the Committee on four areas. My responses are set out below:
• Whether shared owners have the same Right to Manage, Right to Transfer, which already exist for council tenants:
• The Commonhold and Leasehold Reform Act 2002 does not currently give shared owners the statutory Right to Manage. However, this position has been tested by subsequent case law. The Law Commission is reviewing whether to extend this right on equal terms to other qualifying leaseholders as part of its consultation paper “Leasehold home ownership: exercising the right to manage”. The final report is due to be published in Spring 2020. The Right to Transfer does not apply to shared owners.
Page 89 Registered Office 29-35 West Ham Lane Stratford London E15 4PH Social Housing Regulator (L4517) Registered Society (30441R) L&Q is an exempt charity • Administration fees to process changes in homes at L&Q:
• We publish our full schedule of all administration fees for homeowners on our website: HERE. With regards to fees for home improvements we publish a list of alterations which don’t require any prior permission and for which fee’s are not payable. These include general re-decoration, fitted wardrobes/cabinets, replacement carpet flooring, replacement of interior light fittings or general accessories e.g. curtain poles. This list is not exhaustive. For more significant improvements we make a charge to cover our administration costs including where necessary checking the lease and relevant documentation, liaising with internal departments, consulting with external surveyors and instructing solicitors. For a basic improvement request (up to five different minor alterations) we charge £85. For more complex improvement requests (structural) we charge £225. If we do not approve the improvement request, then we will refund any administration fee. • Whether L&Q are signed up to Battersea’s Dogs and Cats Home campaign on pet- friendly properties and responsible pet ownership:
• We are not formally signed up to this campaign. However, L&Q fully recognises the benefits of pet ownership to our residents and leaseholders and wherever possible we support our residents who wish to do so. We have recently updated our pets policy to create our first standalone document which makes it clearer and easier for all our residents and leaseholders to know their rights and responsibilities. We are committed to continue to review our policy to take account of approaches such as those advocated by Battersea.
• The percentage of people purchasing a home from L&Q who have used a solicitor from a recommended panel
• Based on completions in 2019, 88% of our purchasers used a solicitor from our recommended panel. We keep the solicitors appointed to our framework panel under regular review.
I trust this information is helpful. if either myself or my colleagues can be of any further assistance please do contact me.
Page 90 Yours sincerely,
Steve Moseley Group Director Governance, Strategy & Communications E: [email protected] T: 0300 456 9998 cc. [email protected]
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Page 92 Appendix 3
Response to follow up request for information from the 21 January 2020 meeting of the Housing Committee – Councillor Danny Beales, London Borough of Camden
Request for information: During the course of the discussion Members requested that Councillor Beales confirm whether tenants in Camden have enacted Right to Manage.
Response:
The short answer is no.
Right to Manage is the right for the leaseholders of a building containing flats to take over management of the building from the freeholder, via an RTM company. It does not apply where the immediate landlord of any qualifying tenant is a local housing authority. In any case Camden Living tenants (our wholly owned company that delivers our living rent housing) would not have long enough leases (21 years+) to qualify. Leases area 3 year and renewable.
Local authority tenants and leaseholders do have a right to form a tenant management organisation (TMO), which is not available in the private sector.
The law society is currently reviewing RTM, albeit we don’t think it will impact on local authorities.
Sent by email on 08 February 2020
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Page 94 Appendix 4
Response to follow up request for information from the 22 January 2019 meeting of the Housing Committee – Director of Gateway Services, LB of Croydon
Request for information:
During the course of the discussion Members, requested that the Director of Gateway Services, London Borough of Croydon, provide the following information:
Further information on the number of out-of-borough placements from other London Boroughs that are placed within the London Boroughs of Croydon: and Further information as to the experience and process, from the perspective of a London Borough, of inputting landlords onto the rogue landlord database:
Response:
Further information on the number of out-of-borough placements from other London Boroughs that are placed within the London Boroughs of Croydon:
We do not hold accurate records for the number of out-of-borough placements from other London Boroughs that were placed within Croydon for the period 2018/19 as a critical issue for us is that we are aware that a number of other London Boroughs and local authorities outside of London are placing clients in Croydon but we are not always informed. These placements put considerable strain on Croydon’s ability to procure accommodation and also on Croydon’s wider public system including health, social care and education to name a few. We are currently reviewing our recording processes and data collection linked to this to enable us to report more accurately going forward and to enable us to have dialogue with our colleagues in other areas.
It should also be noted that we have information that leads us to believe that some boroughs are also paying large incentives to landlords and agents which range from £4,000 to £6,000 which totally undermines our ability to procure in the local market we would welcome any support from Members of the Housing Committee in addressing this issue as we had hoped that Pan London Agreements would have addressed this problem.
Further information as to the experience and process, from the perspective of a London Borough, of inputting landlords onto the rogue landlord database:
We do input to this and although it’s ‘one more thing’ to do it’s actually straightforward and relatively quick to do it, so we don’t have any problems.
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Page 96 Appendix 5 Housing Committee
Murad Qureshi Londonwide Assembly Member Chair of the Housing Committee
Tom Copley City Hall Deputy Mayor for Housing and Residential Development The Queen’s Walk (via email) London SE1 2AA
08 June 2020
Dear Tom, Housing in London: Planning for recovery from the COVID-19 crisis
The London Assembly Housing Committee is following with interest the actions that you and the Mayor have taken in response to the impacts of COVID-19 on housing in London. I am writing with a number of requests for information in relation to the present status of the Mayor’s housing programmes. Your answers will enable us to better assess the COVID-19 response as it develops. We would greatly appreciate if you could please provide the following: 1. Details on funds allocated from the current Affordable Homes Programme, broken down for each provider. Please could you provide table or tables that show how much funding was allocated for how many homes; how many of these homes have been started to date (for each category of tenure); how many of these homes have been completed to date (for each category of tenure); how much of the grant has to date been given to the provider by the GLA. As part of this, please also specify funds allocated and remaining in the budget for the Innovation Fund. 2. Analysis indicating how you expect delivery of the Affordable Homes Programme to be impacted by the COVID-19 crisis. In particular, we would like you to quantify the predicted impact on delivery targets and timeframes. 3. Details on land owned by the GLA and functional bodies that would be suitable for development. Please include details on small sites suitable for development, but exclude sites currently scheduled for development.
Page 97 Appendix 5 Housing Committee
I would be grateful to receive a response by 22 June 2020. Please also send your response by email to Sarah-Jane Gay, Senior Policy Adviser ([email protected]).
Yours sincerely,
Murad Qureshi AM Chair of the Housing Committee
Page 98 Appendix 6
Murad Qureshi London wide Assembly Member Chair of the Housing Committee Date: 22 June 2020 (by email)
Dear Murad,
Housing in London: Planning for recovery from the COVID-19 crisis
Thank you for your letter of 8 June concerning our housing programmes and COVID- 19. I have responded to your specific questions in detail below.
In general terms, while it is too early to say what the precise impact of COVID-19 will be, it is clear that it presents real challenges, including for our partners in delivering the genuinely affordable homes that London needs.
Nevertheless, I’m proud that we went into this crisis with a strong track record of affordable housing delivery. As you and the Committee will be aware, last year we supported starts of over 17,000 affordable homes in London - more than in any year since GLA records began in 2002/3. This included over 7,000 homes at social rent levels - more than the total number of homes for social rent delivered during the entirety of the previous Mayor’s second term – and over 3,300 homes started by councils, the most in any year since 1984/85.
The Housing Delivery Taskforce which I chair is focusing on developing a post-COVID- 19, cross-sector recovery plan. We know that there are concerns about the resilience of the construction sector, demand for housing, development viability challenges and maintaining a pipeline of developable land, amongst other things. The Taskforce is looking into all these issues and how we can best work together with all partners to address them, and is on track to publish its recovery plan in July.
I look forward to discussing these issues with you and the Housing Committee in future.
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1. Details of funds allocated from the current Affordable Homes Programme, broken down for each provider:
(a) How much funding was allocated for how many homes
Remaining allocations for the current Affordable Homes Programme by provider and tenure are listed in appendix 1.
(b) how many of these homes have been started to date
The information is available in the GLA published statistics and summarised below.
Starts on Site Other Social Rent Other London Affordable Total Affordable (and LAR to Intermediate1 Living Rent / Tenure TBC Affordable Rent benchmarks 1 Shared 12 Starts [9] )10 Ow nership
2019-20 Total 1,330 7,156 450 8,120 200 17,256 2018-19 Total 1,717 3,991 2,020 6,524 292 14,544 2017-18 Total 2,792 2,814 180 6,658 111 12,555
Starts on Site Affordable Social Rent Intermediate Affordable Total Rent Rent Home Affordable Ow nership Starts [9]
2016-17 Total 3,749 3 270 3,394 7,416 2015-16 Total 3,846 331 - 3,012 7,189
(c) how many of these homes have been completed to date (for each category of tenure)
Details of starts on site completed from 2017 onwards are shown in the table below.
Please note that the GLA introduced a new project management system in 2018 (GLA Open Project System) and details of historic projects for legacy programmes completed prior to 2017 were closed in the historic system. For legacy programmes these records are held offline and therefore not included in the response below.
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Start on No. of Social Rent Affordable Shared Other Other site year starts (and LAR at Rent Ownership Inter- Affordable completed benchmark) / LLR mediate 2017-18 5,738 1,209 1,708 2,696 14 111 2018-19 3,425 988 647 1,090 493 207 2019-20 715 168 179 349 19 0 Total 9,878 2,365 2,534 4,135 526 318
(d) how much of the grant has to date been given to the provider by the GLA.
A response to this query will take some time to compile and will be provided as soon as possible.
(e) please also specify funds allocated and remaining in the budget for the Innovation Fund.
The Innovation Fund is part of the main Affordable Homes Programme. A total of £88.5 million has been contracted via the Innovation Fund. These contracts are with: • Pocket Living, see MD2122 • Real Lettings, see DD2175 • Rural Urban Synthesis Society (RUSS), see DD2269 • Apex, see DD2326 • Cornerstone, see DD2280 • Place, see MD2284
2. Analysis indicating how you expect delivery of the Affordable Homes Programme to be impacted by the COVID-19 crisis. In particular, we would like you to quantify the predicted impact on delivery targets and timeframes.
The GLA’s target for the current Affordable Homes Programme is to start 116,000 affordable homes by 31 March 2022. To the end of March 2020, the Mayor has supported starts of 58,960 genuinely affordable homes, with 57,040 starts on site still required to reach the target. The GLA has commitments in place with housing providers to deliver a further 58,550 starts, totalling 117,510 starts (1,510 homes above the 116,000 target). Of these, 116,188 starts are contractually committed with housing providers.
While it is too early to say what the precise impact of COVID-19 will be, we are already clear that COVID-19 will delay the delivery of housing on many schemes, due to the critical need to follow social distancing measures on site, which reduces the pace at which construction sites can be built-out. I have convened a Housing Delivery Taskforce which is focusing on developing a post-
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COVID-19 cross-sector recovery plan, developed in partnership with the housing sector and development industry, which will report in July.
However, at this stage it is expected that, without any action from the Government on key areas, affordable housing delivery in London will reduce significantly compared to the record levels of affordable housing starts achieved last year. My team is continuing to raise the urgency of clear decision making from the Government, and is seeking urgent clarity on a number of issues including an extension of the current Affordable Homes Programme, and confirmation of the next one.
3. Details on land owned by the GLA and functional bodies that would be suitable for development.
The GLA and its functional bodies do not, as a rule have property holdings beyond those which are for operational use and/or already earmarked for development, therefore the amount of land that is not already in use or subject to a disposal process is very limited.
The GLA’s functional bodies have reported the following:
• MOPAC- As a result of the national officer uplift programme MOPAC/Metropolitan Police Service (MPS) are reviewing their estate. The vast majority of sales have been paused pending the outcome of that review. Other than Paddington Green Police Station and surplus Hendon sites which will not be required to accommodate the uplift MPS is also working on completing the sale of Wembley Feeding Centre which is a site no longer required and was approved for disposal. • LFB is in the process of disposing of two significant sites suitable for development. As at June 2020, the former LFB HQ complex at 8 Albert Embankment anticipates a final determination on planning within the next 12 months. The former Clerkenwell fire station is subject to current negotiation between GLA, LB Islington and LFC respectively on the timing of the sale. The remaining estate is currently being reviewed to consider what might be surplus and suitable for development and this work will be informed by timing of the new LFB London Safety Plan. • TfL has identified additional development opportunities on its estate and is currently undertaking detailed due diligence on a range of sites across the capital to assess their suitability for redevelopment. This process is ongoing. • LLDC – The purpose of all LLDC owned land is addressed through the Legacy Communities Scheme masterplan which covers the legacy areas and therefore there is no land that remains without a disposal route. • OPDC does not have any land holdings.
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GLA Land and Property (GLAP), is the property-holding company of the GLA, and as such, acquires and disposes of a range of sites across London. The sites in the portfolio, for the most part, are subject to a disposal process or existing development plan. A small number of sites which might be suitable for redevelopment are currently awaiting the agreement of a fixed strategy, although all are currently being prepared for marketing.
I hope that this information is helpful.
Yours sincerely,
Tom Copley Deputy Mayor for Housing and Residential Development
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Appendix 1: remaining allocations from 1 April 2019 onwards. £2,602,842,574 66,429 35,138 29,842 1,449 Organisation Org Remaining GLA No. Code Funding homes Homes Homes Homes - for Rent for other (all rent) SO/LLR tenures. L&Q 10122 £80,848,750 7,635 3,162 4,473 0 Metropolitan 10151 £13,814,000 294 233 61 0 Newlon 10159 £2,324,000 83 81 2 0 One 10169 £4,008,000 269 115 154 0 Southern 10210 £18,598,000 464 146 318 0 Swan 10221 £3,890,000 80 48 32 0 A2 Dominion 10002 £51,239,500 1,670 942 728 0 Catalyst 10037 £4,083,000 1,383 575 808 0 Connected Partnership 10166 £11,050,000 257 59 198 0 Home Group 10085 £5,474,000 197 80 117 0 Network 10156 £28,762,011 1,284 507 777 0 Notting Hill Genesis 10419 £70,338,162 5,947 2,121 3,826 0 Clarion 10010 £180,963,906 4,384 1,321 3,063 0 Hyde 10094 £86,203,922 2,657 1,834 823 0 Optivo 10412 £67,696,391 1,722 841 881 0 Peabody 10179 £156,315,384 3,782 1,141 2,641 0 L&Q 10122 £114,000,000 2,000 1,200 800 0 LB Redbridge 10140 £6,678,000 126 75 51 0 MetTV (Met) 10151 £9,944,108 952 591 361 0 MetTV (TVHA) 10229 £30,000 9 0 9 0 Newlon 10159 £21,592,000 478 175 284 19 One 10169 £25,336,000 975 515 460 0 Southern 10210 £24,082,000 562 193 369 0 Swan 10221 £8,983,333 1,375 573 802 0 A2 Dominion 10002 £0 241 156 85 0 Catalyst 10037 £19,510,000 345 200 145 0 Connected Partnership 10166 £25,998,000 525 189 336 0 Guinness 10233 £0 1,519 641 878 0 Home Group 10085 £15,790,000 675 279 396 0 Notting Hill Genesis 10419 £1,120,000 11 11 0 0 Clarion 10010 £29,200,000 600 200 400 0 Hyde 10094 £34,440,000 600 420 180 0 Optivo 10412 £57,200,000 1,000 600 400 0 Peabody 10179 £39,864,000 660 462 198 0 LB Newham 10114 £84,470,000 961 791 170 0 LB Redbridge 10140 £20,000,000 474 474 0 0 A2Dominion Homes 10002 £242,577 0 0 0 0 Agudas Israel Housing 10012 £882,000 15 0 15 0
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Association Anchor Hanover Group 10614 £300,000 14 2 12 0 BL Canada Water Holdings Ltd 10592 £21,600,000 480 336 144 0 Brick by Brick (Croydon Council) 10275 £23,082,000 539 0 539 0 Catalyst Housing Limited 10037 £32,000 0 0 0 0 Circle Anglia Limited 10043 £1,326,158 0 0 0 0 City of London 10255 £29,190,000 391 381 10 0 City of Westminster Council 10460 £15,810,000 433 388 45 0 City YMCA, London 10047 £2,190,000 0 0 0 0 Clarion Housing Group 10010 £1,036,089 0 0 0 0 Croydon Council 10528 £45,290,000 467 467 0 0 Eastend homes 10395 £4,634,000 99 41 58 0 Estuary Housing Association 10063 £1,890,000 53 18 35 0 Evolve Housing + Support 10283 £3,780,000 61 61 0 0 Family Mosaic Housing 10065 £48,000 0 0 0 0 George Peabody Donation Fund 10396 £3,117,198 0 0 0 0 Golding Homes 10399 £0 30 23 7 0 Greystar 10595 £0 219 0 0 219 Hexagon Housing Association 10084 £5,080,623 200 53 147 0 Hyde Housing Association 10094 £80,000 0 0 0 0 Limited Islington and Shoreditch HA 10099 £5,030,421 109 62 47 0 Jewish Community HA 10102 £710,000 10 10 0 0 Keniston Housing Association 10276 £70,000 2 2 0 0 L&G Affordable Homes 10572 £5,076,000 262 9 253 0 Lambeth & Southwark HA 10109 £3,000,000 30 30 0 0 Leicester HA 10118 £481,960 0 0 0 0 London & Quadrant Housing 10122 £59,000 0 0 0 0 London Borough of Barking and 10123 £37,782,000 957 605 352 0 Dagenham London Borough of Barnet 10436 £8,700,000 87 87 0 0 London Borough of Brent 10124 £85,180,000 975 705 117 153 London Borough of Camden 10400 £23,350,000 208 208 0 0 London Borough of Ealing 10126 £96,115,000 1,102 901 201 0 London Borough of Enfield 10127 £36,220,500 791 720 71 0 London Borough of Hackney 10129 £42,754,000 750 411 339 0 London Borough of 10524 £15,308,000 251 238 13 0 Hammersmith and Fulham London Borough of Haringey 10081 £61,758,000 851 650 201 0 London Borough of Harrow 10131 £32,144,000 639 580 59 0 London Borough of Havering 10133 £51,842,000 867 603 264 0 London Borough of Hillingdon 10134 £11,412,000 297 90 207 0 London Borough of Hounslow 10135 £75,446,000 835 686 128 21 London Borough of Islington 10136 £22,500,000 327 327 0 0
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London Borough of Lambeth 10137 £9,996,000 281 233 48 0 London Borough of Lewisham 10430 £36,600,000 373 373 0 0 London Borough of Southwark 10165 £95,350,000 1,019 984 35 0 London Borough of Sutton 10429 £6,500,000 81 81 0 0 London Borough of Tower 10142 £9,750,000 390 390 0 0 Hamlets London Borough of Waltham 10143 £25,357,000 279 226 53 0 Forest London Borough of 10144 £12,074,000 139 70 65 4 Wandsworth Metropolitan Housing Trust 10151 £64,000 0 0 0 0 Moat Homes Limited 10153 £6,007,000 79 64 15 0 Network Homes Limited 10156 £2,254,548 0 0 0 0 Newlon Housing Trust 10159 £762,292 0 0 0 0 Notting Hill Genesis 10419 £2,397,097 0 0 0 0 Octavia Housing 10166 £716,191 0 0 0 0 One Housing Group Limited 10169 £32,000 0 0 0 0 Optivo 10412 £1,580,504 0 0 0 0 Orbit Group Limited 10170 £23,772,000 346 138 208 0 Paradigm Housing Group 10176 £2,672,000 53 0 53 0 Limited Paragon Community 10177 £30,491,748 458 277 177 4 Paragon Community 10428 £0 17 3 14 0 Peabody Trust 10179 £16,000 0 0 0 0 Phoenix Community HA 10182 £12,444,000 184 152 32 0 Places for People Group Limited 10183 £1,694,000 0 0 0 0 Pocket Living Ltd 10593 £0 902 0 0 902 Poplar HARCA Limited 10187 £13,357,823 259 195 64 0 ReSI Housing Limited 10474 £5,968,000 132 0 132 0 Richmond Housing Partnership 10194 £24,898,800 540 228 263 49 Riverside Housing Association 10196 £27,930,000 399 399 0 0 Royal Borough of Greenwich 10128 £32,600,000 588 588 0 0 Royal Borough of Kensington 10197 £33,680,000 338 338 0 0 and Chelsea Royal Borough of Kingston upon 10273 £67,844,000 713 665 48 0 Thames Rural Urban Synthesis Society 10411 £661,960 33 5 14 14 Sanctuary Housing Association 10202 £945,000 0 0 0 0 Soho Housing Association 10205 £2,837,958 9 9 0 0 Limited Southern Housing Group 10210 £11,000 0 0 0 0 Limited St Mungo Community HA 10217 £0 64 0 0 64 Sutton Housing Society Limited 10189 £70,000 1 1 0 0 Swan Housing Association 10221 £2,609,161 0 0 0 0
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Limited TBG Open Door Homes Limited 10507 £2,632,000 49 30 19 0 Thames Valley HA 10229 £16,000 0 0 0 0 The Guinness Partnership 10233 £2,922,499 0 0 0 0 Limited Walterton & Elgin Community 10401 £1,290,000 0 0 0 0 Homes (WECH) Wandle HA 10246 £832,000 117 5 112 0 YMCA Thames Gateway 10268 £2,810,000 39 39 0 0
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Page 108 Appendix 7 Housing Committee
Murad Qureshi Londonwide Assembly Member Chair of the Housing Committee
Tom Copley City Hall Deputy Mayor for Housing and Residential Development The Queen’s Walk (via email) London SE1 2AA
16 July 2020
Dear Tom, Housing in London: Planning for recovery from the COVID-19 crisis
The London Assembly Housing Committee is following with interest the actions that you and the Mayor have taken in response to the impacts of COVID-19 on housing in London. The Committee would like to thank you and your team for your letter dated 22 June 2020, which we have found very useful. I am writing to follow up on that letter, and with a small number of other requests for information.
We would greatly appreciate if you could please provide the following:
1. To update Appendix 1 Remaining Allocations, of your letter dated 22 June 2020, to include all 5 types of tenure rather than the 3 originally provided. 2. To provide further information in regards to why, in Appendix 1 Remaining Allocations, of your letter dated 22 June 2020, some providers have been allocated £0, yet they still have homes in the pipeline according to the following columns (e.g. A2 Dominion 10002). 3. Also in regard to Appendix 1 Remaining Allocations, of your letter dated 22 June 2020, to provide further information on the meaning of ‘remaining allocations’, and, given that the Appendix outlines roughly half of the total current Affordable Homes Programme (£2,602,842,574), the status of the rest of the £4.82 bn fund. 4. Currently, data is published on the GLA website on the number of bedrooms of starts made in the last quarter, however data from the previous quarter is removed as each new release is published. We would greatly appreciate if the full historic data set could be made public on the website, and for Housing Committee Members to be notified when a new release is published. 5. To provide an update on the data on ballots and exemptions on the GLA website and for the Committee to be alerted when this is published.
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6. To provide details of the grant level envisaged per unit for the tenure conversion programme as part of the £5 bn affordable homes investment that the Mayor has requested from Government. 7. To provide details on the current accommodation status of rough sleepers who have been accommodated in hotels in London during the pandemic. Specifically, how many rough sleepers in total have been assisted by the GLA and local authorities into hotel accommodation since the programme was announced in March; how many are still living in hotels; how many have been helped into move on accommodation; how many have returned to living on the street; and how many have fallen out of contact with the service providers. If there are people who do not fall into one of the outlined categories, please also include information on their current accommodation status. 8. To provide further information in regards to the amount of money allocated to the GLA from the additional government funding announced on 24 May 2020 for homes for rough sleepers and how the money will be allocated; and, when the data is available, to provide information on the allocations i.e. amount, to whom, for how many units, capital/revenue split.
I would be grateful to receive a response by 31 July 2020. Please note your response will be included in the agenda pack for the next Housing Committee formal meeting. Please also send your response by email to Sarah-Jane Gay, Senior Policy Adviser (Sarah- [email protected]).
Yours sincerely,
Murad Qureshi AM Chair of the Housing Committee
Page 110 Appendix 8
Housing Committee
Murad Qureshi Londonwide Assembly Member Chair of the Housing Committee
Berkeley Group City Hall (via email) The Queen’s Walk London SE1 2AA
23 July 2020 To all at the Berkeley Group,
Condolences for Tony Pidgley
The London Assembly Housing Committee would like to express their deepest condolences with regards to the death of Tony Pidgley. His life’s story – from a humble start to becoming the driving force behind housebuilding giant Berkeley Group – is an inspiration to us all. The Committee was sad to hear of Tony’s passing, and our thoughts are with all of those who knew and worked with Tony.
Yours faithfully,
Murad Qureshi AM Chair of the Housing Committee
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Page 112 Agenda Item 8
Subject: Action Taken Under Delegated Authority
Report to: Housing Committee
Report of: Executive Director of Secretariat Date: 5 August 2020
This report will be considered in public
1. Summary
1.1 This report sets out recent actions taken by the Chair of the Housing Committee under delegated authority.
2. Recommendation
2.1 That the Committee notes the actions taken by the Chair of the Housing Committee, under delegated authority, following consultation with the party Group Lead Members, namely:
(a) To agree the Committee’s output from the discussion on Affordable Home Ownership at the Committee meeting held on 21 January 2020; and
(b) To agree the Committee’s output from the discussion on Leasehold and Service Charges at the Committee meeting held on 11 February 2020.
3. Background
3.1 Under Standing Orders and the Assembly’s Scheme of Delegation, certain decisions by Members can be taken under delegated authority. This report details those actions.
4. Issues for Consideration
4.1 The Committee, at its meeting on 21 January 2020, delegated authority to the Chair, in consultation with the party Group Lead Members to agree any output from the discussion with experts on Affordable Home Ownership.
4.2 Following the meeting, a letter was drafted to the Mayor of London, in consultation with party Group Lead Members, containing recommendations regarding Affordable Home Ownership in London. The letter sent to the Mayor can be found in Appendix 1.
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4.3 The Committee, at its meeting on 11 February 2020, delegated authority to the Chair, in consultation with the party Group Lead Members to agree any output from the discussion with experts on Leasehold and Service Charges.
4.4 Following the meeting, a letter was drafted to the Mayor of London, in consultation with party Group Lead Members containing recommendations regarding leasehold in London. The letter sent to the Mayor can be found in Appendix 2.
5. Legal Implications
5.1 The Committee has the power to do what is recommended in the report.
6. Financial Implications
6.1 There are no direct financial implications to the Greater London Authority arising from this report.
List of appendices to this report: Appendix 1 – Letter to the Mayor regarding Affordable Home Ownership – 25 March 2020 Appendix 2 – Letter to the Mayor regarding Leasehold and Service Charges – 12 March 2020
Local Government (Access to Information) Act 1985 List of Background Papers: Member Delegated Authority Form 1147 (Delegated Authority for output from 21 January 2020 Housing Committee meeting); and Member Delegated Authority Form 1160 (Delegated Authority for output from 11 February 2020 Housing Committee meeting).
Contact Officer: Diane Richards, Committee Officer Telephone: 020 7084 2956 E-mail: [email protected]
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Housing Committee
Unmesh Desai AM London Assembly Member for City and East Chair of the Housing Committee
City Hall The Queen’s Walk London SE1 2AA Switchboard: 020 7983 4000 Minicom: 020 7983 4458 Web: www.london.gov.uk Sadiq Khan Mayor of London (Sent by email) 25 March 2020 Dear Sadiq, London Assembly Housing Committee review of affordable home ownership in London I am writing to you on behalf of the London Assembly Housing Committee to share findings from our recent investigation into affordable home ownership in London. As part of your commitment to deliver 116,000 affordable housing starts by 2022, at least 58,500 will be affordable home ownership tenures, either shared ownership or London Living Rent (LLR). This represents a large part of the affordable housing investment in London. The Committee’s investigation has concentrated on whether Londoners feel these housing options are working for them, and we have identified several recommendations. During October and November 2019, the Committee ran a survey and held an open forum to hear about the experiences of Londoners living in these homes. In January 2020, the Committee spoke to a panel of experts comprised of representatives from academia, advocacy, journalism, and an organisation that is delivering shared ownership. We heard that shared ownership helps many people fulfil an ambition to experience some of the benefits of home ownership. It offers improved security of tenure compared to the private rented market. Some people ‘staircase’ their share to 100 per cent and become full home owners. However, some shared owners also encounter issues with escalating fees, poor quality maintenance, costly lease extension processes, and they might struggle to staircase or sell their share of the property when moving. Our panel also raised concerns about whether shared ownership could or should realistically be treated as an ‘affordable’ product that was helping people in housing need.
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Leasehold Shared ownership properties are exclusively ‘leasehold’, which is an ownership model that provides the leaseholder with time-limited permission to occupy the property while the freeholder, or landlord, retains an interest in the property. Two of the main grievances expressed to us by shared owners relate to service charges, and the requirement to periodically extend the lease. These issues are also experienced by leaseholders more broadly. Commonhold is an alternative to leasehold which allows for the freehold ownership of flats in larger developments. Purchasers of commonhold units become a member of a company which owns and manages the common parts of the building. Commonhold currently has low levels of uptake, and legislation prevents shared ownership on a commonhold basis. The Government is considering substantial reform to leasehold and commonhold. The Government has tasked the Law Commission with considering ways of reforming the commonhold tenure so that it may take the place of leasehold, including how this option could be made available for shared ownership properties. The Committee recently wrote to you with a range of recommendations for supporting London’s leaseholders, including that you should work with Government to ensure that reforms are implemented to enable the use of commonhold for shared ownership homes. The Law Commission has provisionally proposed that shared owners would continue to be leaseholders within a commonhold development, but they could become a commonhold owner when and if they staircased to 100 per cent ownership, and that even while the shared owner remains a leaseholder they could be entitled to the voting rights which give owners collective control over the management of the block.1 Transitioning to commonhold is a long-term undertaking, and housing associations might be cautious in adopting any alternative to leasehold for shared ownership. While the Committee hopes that commonhold will prove viable for shared ownership homes in future, there are other ways to mitigate the issues relating to leasehold for shared owners in the shorter term. Service charges Shared owners, as leaseholders, pay a service charge for the services provided by the housing association, including maintenance of common areas and provision of building insurance. Despite owning a portion of the property, shared owners are liable for the entire service charge, and can be required to contribute additionally to major works on the property. Service charges and maintenance fees were the main cause of dissatisfaction among the shared owners we spoke to and who participated in our survey. They expressed concern with high costs and the quality of service they received in return.
1 Reinvigorating commonhold: the alternative to leasehold ownership, Consultation Paper, Law Commission, December 2018 https://www.lawcom.gov.uk/project/commonhold/
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In 2017, you established the Shared Ownership Charter for Service Charges. As a result, new buyers should receive explanatory information, and housing providers should set service charges at a realistic level and review them on a regular basis to ensure that ongoing costs to the leaseholder are minimised and where appropriate are reduced. The Committee acknowledges your efforts to manage service charges through this charter, but in order to ensure its effectiveness there needs to be active monitoring of its implementation. A service charge monitoring programme would also enable housing associations to acquire accurate data on historic fees, which could be provided to prospective shared ownership buyers, enabling them to better understand and plan for future costs. Lease extensions A marriage value payment is a compensation payment for when the value of a property is increased by extension of a lease and is generally divided equally between the leaseholder and the landlord. A leaseholder becomes liable for a marriage value payment if they seek to extend a lease that has dropped to below 80 years. Lenders are extremely reluctant to provide mortgages for leases of less than 80 years, so these homes are extremely difficult to sell without extending the lease. As such leaseholders should extend their lease before it drops below 80 years. However, extending the lease can itself be costly, not only in terms of buying the lease but also meeting the legal fees involved in facilitating the process. Shared ownership leases are generally 99 or 125 years so lease extension becomes an issue for many shared owners during their period of ownership. We heard reports of shared owners taken entirely by surprise at the fees required to extend their lease, and with insufficient time to enact a plan to save for the expense. Others told us they were never made aware until they approached their bank to re-mortgage, at which time the lease had dropped below 80 years. Shared owners need greater information and support to manage the lease extension process. They would also benefit from longer leases from the outset, thereby reducing the frequency with which shared owners are required to extend their leases. For example, if offered a lease of 250 years a shared owner should not need to extend the lease during their period of ownership. During our investigation, a representative from one of the large housing associations indicated they would be willing to work you to implement a process for shared owners to be offered longer leases.
Recommendations: 1. The Mayor should require housing associations to report on service charges and maintenance costs for each block of shared ownership homes under its management, and the Mayor should make this information publicly available. Housing associations should provide historic information on service charges to prospective buyers in advance of purchase.
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2. The Mayor should require that housing associations actively manage the lease extension process, including providing shared owners with support to ensure they are planning for lease extension at regular intervals, for example 95, 90 and 85 years remaining on the lease. They should also provide clear information on the implications of not extending the lease. 3. The Mayor should require housing associations to report on an annual basis how many of their shared owners have 85 years or less remaining on their lease. These owners would be very near to reaching the point where their home becomes a less valuable asset, and appropriate management of the lease extension process should see no, or limited numbers, of owners in this position. 4. The Mayor should work with housing associations to explore the possibility of providing longer leases for shared owners.
Understanding the motivations of shared owners Shared ownership is primarily marketed as a ‘foot on the ladder’ towards full ownership. This can be achieved through the characteristic ‘staircasing’ feature, which allows the shared owner to buy additional shares over time, or through building equity and savings in the shared ownership home before moving on to full ownership outside the scheme, perhaps in a cheaper area. However, there is not enough information to determine whether the initiative is successfully moving people into full home ownership, nor whether a desire for full home ownership is an aspiration for shared owners. We heard from Dr Alison Wallace, University of York, who has done research on the topic of shared ownership that data on staircasing is lacking but all the evidence that has been gathered so far points to quite a low rate. You have stated that, while MHCLG provides borough-level data on the number of annual sales in which shared owners staircased to 100% ownership, it does not provide data on staircasing sales to less than 100% ownership, on the length of time taken to staircase, or the proportion of properties staircased to 100% by year of original sale.2 This information, alongside an understanding of what tenure types shared owners are moving into once they leave the scheme, is essential to determine whether shared ownership is effective as a vehicle to full home ownership. Further, data collection on housing pathways and motivations of shared owners would facilitate improved programme design. It is likely that low staircasing rates are mainly a result of affordability issues.3 This in itself could be an issue with this product. However, we heard that some shared owners make an active choice not to staircase, potentially because they are concerned about the impact on future resales, or because full home ownership is
2 Questions to the Mayor 2020/0208, January 2020, https://www.london.gov.uk/questions/2020/0208 3 In response to a 2018 YouGov survey, nearly 90 per cent of the respondents across the UK had not staircased at all in their current property, despite most (73 per cent) saying they fully understood what staircasing was. More than 60 per cent said they could not afford to save the money needed to staircase. Another Way: Part 2, Aster Group, 2018 https://www.aster.co.uk/SO-report
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Housing Committee not an aspiration for them. It may be that security of tenure is the main appeal of shared ownership for some.
Recommendations: 5. The Mayor should require housing associations to report annually on: a. the tenure types type that shared owners who sell their property are moving into b. staircasing sales (including those to less than 100% ownership). Data should be broken down by year of original sale. 6. The Mayor should require housing associations to survey shared owners on a three-yearly basis to identify barriers and motivations for shared owners who are not staircasing. The Mayor should make this information publicly available.
Transparency This Committee has raised concerns with previous Mayoral administrations about the quality of the information received by prospective shared ownership buyers.4 Our recent investigation indicates that this continues to be an area for improvement. Primarily, we heard that some shared owners were surprised by the true costs of the tenure. This includes costs relating to service charges and lease extensions as outlined above, but also the administrative costs of staircasing, maintenance costs, and rent increases. We heard that the marketing of shared ownership as ‘ownership’ can be an area of friction when shared owners purchase without understanding the complex legal structure of the tenure. It is more akin to a combination of assured tenancy, long lease, and contract.5 When shared owners experience issues, for example excessive service charges or poor-quality maintenance, the ownership model creates further confusion as shared owners struggle to identify the routes of redress. Building on recommendations in our recent letter regarding leasehold, to avoid shared owners feeling they have been ‘mis-sold’ the product, the realities of the ownership model need to be made clear prior to purchase, and there should be clear information available on the rights and obligations for people living in these homes. Buying a home is a huge financial and administrative undertaking. Shared owners are primarily first-time buyers. Having no experience of the home-buying process, and purchasing a more complex product, puts shared owners in a position of vulnerability.
4 First Steps on the Ladder?, London Assembly Housing Committee, June 2015 https://www.london.gov.uk/about-us/london-assembly/london-assembly-publications/first-steps-ladder 5 Exploring experiences of shared ownership housing, Cowan, Wallace and Carr, July 2015 https://www.york.ac.uk/media/chp/documents/2015/sharedOwnershipCHPL.pdf
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Recommendations: 7. The Mayor should, as a condition of funding, require housing associations to provide prospective shared owners with a key features document which should, at a minimum, outline: a clear description of the ownership model; the length of the lease (including the fact that it may need to be extended should it approach 80 years and the associated fees); rent increase terms; the ground rent; historic information on and a 5 year estimate of service charges and maintenance fees; staircasing fees; permission fees; and any key restrictions on the lease such as owning pets or subletting. These key features should be made clear as part of any shared ownership properties listed on the Mayor’s Homes for Londoners portal. 8. The Mayor should publish guidance material outlining routes for redress for shared owners who are not receiving adequate service in return for their service charges and contribution to major works. Housing associations should direct shared owners to this information as part of the information package at the time of purchase.
Affordability Increasingly, as house prices have risen in London, shared ownership is helping people on higher incomes than might be expected from an ‘affordable’ product. In 2016/17 the average household income of purchasers of shared ownership properties across London was £46,185.6 This is certainly lower than the average household income of a first-time buyer in London at £64,276, however when contrasted with the median London salary (£38,298 in 20197), questions arise about how affordable shared ownership really is for Londoners on middle-incomes. Similarly, the median deposit paid by shared owners rose by 75% from 2013/14 to 2017/18, suggesting that some shared owners may have access to reasonably significant levels of capital.8 A guest at our Committee meeting in January 2020 told us that shared ownership is assisting “a bracket of earners who are not in housing need so much as housing desire”. For example, Camden Council has decided that it is no longer possible to deliver shared ownership at a price that is affordable to the group that the Council targets for intermediate housing (earning £30,000 to £40,000 per year). Councillor Danny Beales told the Committee that the incomes of those able to access shared ownership in Camden were not the priority for the Council in terms of public subsidy and support. Camden Council now discourages the use of shared ownership, preferring instead the delivery of subsidised rental housing. Camden Council had initially planned to directly deliver 300 units of shared ownership
6 Questions to the Mayor, 2018/5279, January 2019 https://www.london.gov.uk/questions/2018/5279 7 Employee earnings in the UK: 2019, Office for National Statistics https://www.ons.gov.uk/employmentandlabourmarket/peopleinwork/earningsandworkinghours/bulletins/an nualsurveyofhoursandearnings/2019 8 Questions to the Mayor 2019/20854, December 2019, https://www.london.gov.uk/questions/2019/20854
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Housing Committee through its Community Investment Programme. These homes will now be Camden Living Rent – a three-year, renewable, discounted tenancy.9 We understand that, in order to provide flexibility, grant funding can be used for either shared ownership or LLR homes, with tenure only determined at the point of first occupancy. However, LLR is only available to households with incomes up to £60,000, compared with £90,000 for shared ownership, and it does not require any equity deposit to be paid upfront. As it is a fairly new tenure, it may be too early to draw many conclusions, particularly regarding the impact of LLR tenants being encouraged to purchase their home on a shared ownership basis. Nevertheless, we hope that the evidence from boroughs like Camden, indicating the growing unaffordability of shared ownership in some parts of London, is taken into account when future allocation policies are determined. Currently shared ownership comprises a large proportion of London’s affordable housing delivery yet it is not assisting those who are furthest removed from home ownership. We recognise that Government places restrictions on the use of funds, however as Mayor it is essential that you continue advocating for flexible use of funding that caters to the needs of Londoners, with the ability to explore alternative initiatives that may offer greater affordability for the target cohorts for affordable home ownership.
Recommendation: 9. The Mayor should advocate to Government for devolution of the affordable homes programme, to ensure greater flexibility on the allocation of different housing options. 10. The Mayor should work with affordable housing providers to increase the delivery of London Living Rent where appropriate, and consider additional incentives for London Living Rent such as higher rates of grant. This should of course be coupled with rigorous outcomes evaluation of London Living Rent, and consideration of tenant satisfaction.
I would be grateful to receive a response to our findings and recommendations by 7 August 2020. Please also send your response by email to the Committee Services Manager, Fiona Bywaters ([email protected]). Yours sincerely,
Unmesh Desai AM Chair of the Housing Committee
9 Transcript of Housing Committee meeting, January 2020, https://www.london.gov.uk/moderngov/ieListDocuments.aspx?CId=302&MId=6620&Ver=4
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Page 122 Appendix 2
Unmesh Desai AM London Assembly Member for City and East Chair of the Housing Committee
City Hall Sadiq Khan The Queen’s Walk Mayor of London London (via email) SE1 2AA
12 March 2020
Dear Sadiq, London Assembly Housing Committee review of leasehold in London
Over the past months, the Housing Committee has examined the issues facing leaseholders and the potential for reform in the sector. We heard from a panel of experts on the topic, including a barrister with experience of leasehold disputes and representatives from the Leasehold Knowledge Partnership. Through our investigation, we have identified a number of interventions which could improve support for London’s leaseholders.
Leasehold, in contrast to freehold, provides time-limited permission to occupy the property and control is shared with the freeholder (also referred to as the landlord). The leasehold tenure has been subject to considerable criticism over many years. This is largely a result of onerous terms imposed in the lease document which governs the relationship between the leaseholder and the landlord. This includes high fees for ground rent, excessive permission fees for the leaseholder to make changes in the property, and arbitrary restrictions such as the prohibition of pets. Other controversies have included the imposition of excessive service charges (which the leaseholder pays for the costs of the day-to-day management and maintenance of leasehold blocks), costs for major repairs, and the burden imposed by the existence of forfeiture which, where the leaseholder has breached terms of the lease, enables the landlord to bring the lease to an end and take back the property without recompense for the financial investment of the leaseholder. Some leaseholders are also initially unaware that lenders are unwilling to provide mortgages for leases of less than 80 years, and costly lease extension processes are often required.
Page 123 The issues facing leaseholders disproportionately affect Londoners. In 2018, around 24 per cent of residential property transactions in England and Wales were leasehold. Because almost all flats sell as leasehold, leasehold transactions tend to be more common in London, where 57 per cent of transactions were leasehold in 2018.1
National Government reform programme
Owing to the issues outlined above, the need for reform of leasehold is widely accepted. Legislative reform is the main solution, so responsibility largely rests with Government. The Government and other bodies, including the Law Commission, Select Committees, and the Competition and Markets Authority (CMA), are undertaking work on reviewing and reforming the tenure.
The Government has outlined plans to improve practices for future leases, for example, by banning leasehold for new-build houses and restricting future ground rents to a peppercorn rent of £0, and has published an industry pledge, which voluntarily commits developers to help existing leaseholders with onerous ground rent terms in their lease agreements.2 However, the Committee believes that existing leaseholders need the Government to implement more concrete solutions to onerous terms. This could take the form of, for example, retrospective legislation to amend onerous terms in existing leases (coupled with compensation for freeholders).3
Commonhold is an alternative to leasehold and allows for the freehold ownership of flats in larger developments. During our Committee meeting in February, we heard that a move to using commonhold is the best way to ensure flat owners are protected from the issues associated with leasehold. However, commonhold is presently only used in a small number of developments. The Law Commission is currently reviewing how to improve the law relating to commonhold with a goal of increasing its uptake.4 The panel in February told us that one of the main barriers to commonhold uptake is the difficulty of using it in mixed-use developments.
You note in your new London Plan that “Planning for mixed-use developments in all parts of London will spread the success of London’s economy and create stronger communities where everyone feels welcome.”5 Given the importance of mixed-use planning in London, it is essential that any successful reform of commonhold ensures it is viable for mixed-use developments.
1 House of Commons Research Briefing – Leasehold and commonhold reform, 31 December 2019, https://researchbriefings.parliament.uk/ResearchBriefing/Summary/CBP-8047 2 Ibid. 3 As recommended by the Housing, Communities and Local Government Committee: Leasehold Reform, House of Commons, March 2019 https://publications.parliament.uk/pa/cm201719/cmselect/cmcomloc/1468/1468.pdf 4 Commonhold project, Law Commission, https://www.lawcom.gov.uk/project/commonhold/ 5 The London Plan, Intend to Publish, December 2019 https://www.london.gov.uk/sites/default/files/intend_to_publish_-_clean.pdf
Page 124 The Law Commission’s work will also consider how to make commonhold effective for shared ownership homes, which are currently delivered exclusively as leasehold. Your commitment to affordable housing delivery is comprised of delivering 116,000 affordable housing starts by 2022. 50 per cent of these homes will be shared ownership or London Living Rent.6 As shared ownership forms a significant part of London’s affordable housing delivery, it is your responsibility as Mayor to ensure shared owners do not continue to be subject to the issues associated with leasehold.
The Committee appreciates your efforts in lobbying Government for reform of the leasehold sector and urges you to continue to drive forward the interests of London’s leaseholders.
Recommendations 1. The Mayor should continue to lobby national Government to take concrete action, over and above voluntary deals with developers, to ensure that existing leaseholders benefit from remedies as a result of any reform in the leasehold sector. 2. Once the Law Commission’s recommendations for reform of commonhold are published, the Mayor should advocate that the Government implement any recommendations which will enable the use of commonhold for mixed-use developments and shared ownership homes. The Mayor should report to the Assembly on the progress of his lobbying in relation to leasehold by December 2020.
Engagement with the housebuilding industry
A 2016 online survey of over 1,200 leaseholders conducted by the Leasehold Advisory Service (LEASE) found that 57 per cent of leaseholders who responded said they regretted buying a leasehold property.7 However, the figure could be even higher - NAEA Propertymark (formerly National Association of Estate Agents) published a report in September 2018 which claimed that 94 per cent of leasehold homeowners who took part in their survey regretted buying a leasehold.8
A transition away from leasehold to commonhold (subsequent to legislative improvements to commonhold) could ultimately be the answer to resolving leasehold dissatisfaction. However, until commonhold legislation is reformed, leasehold will still be the ownership model for flats in London.
6 London Housing Strategy, May 2018, GLA https://www.london.gov.uk/sites/default/files/2018_lhs_london_housing_strategy.pdf 7 National Leasehold Survey 2016, Leasehold Advisory Service https://www.lease-advice.org/news- item/national-leasehold-survey-2016-report/ 8 Leasehold: A Life Sentence, NAEA Propertymark, September 2018 https://www.naea.co.uk/media/1047279/propertymark-leasehold-report.pdf
Page 125 It is welcome that you are producing your Guide for Leaseholders, which assists leaseholders to know what they are signing up for and to be wary of lease terms that could be potentially onerous. The Committee believes that even more could be done to improve transparency in the industry. For example, a recent Select Committee review of leasehold recommended that ”The Government should require the use of a standardised key features document, to be provided at the start of the sales process by a developer or estate agent, and which should very clearly outline the tenure of a property, the length of any lease, the ground rent and any permission fees.”9 In advance of national Government action, we recommend the use of such a document in London.
Residential management companies give leaseholders a stake in the company that manages their block. Our panel expressed the view that establishing residential management companies in new developments from the start would improve fairness in fees for leaseholders, such as service charges.
Recommendation 3. The Mayor should work with London’s housebuilding industry and local borough councils to: a. Encourage developers and councils to provide potential buyers with a copy of the lease early in the purchase process and before the potential buyer has made any commitment to the purchase. A key features document should also outline those elements of the lease which are most likely to cause later dissatisfaction among leaseholders: the length of the lease (including the fact that it would have to be extended should it approach 80 years), the ground rent, permission fees, and any key restrictions on the lease such as owning pets or subletting; and b. Explore the possibility of developers building with residential management companies in place. 4. The Mayor should ensure that any private sale, or affordable home ownership home, that is listed on the Homes for Londoners portal includes a key features document and/or explains the key features of the lease mentioned above. The Mayor should report to the Assembly on his progress by December 2020.
Understanding London’s leasehold sector
The Committee feels strongly that comprehensive, contemporaneous data on London’s housing mix is essential to ensuring effective policy and planning for the future. Currently, the Ministry of Housing, Communities and Local Government (MHCLG) produces experimental statistics on the number of leasehold residential properties in England, however, this is not provided at a sub-national level. Previously, you stated you will work
9 Housing, Communities and Local Government Committee: Leasehold Reform, House of Commons, March 2019 https://publications.parliament.uk/pa/cm201719/cmselect/cmcomloc/1468/1468.pdf
Page 126 with MHCLG to seek this data at a regional level.10 This matter needs to be pursued as a matter of priority. Given the upcoming reforms to leasehold, it is essential that London’s government has a clear picture of the extent and distribution of leasehold across the city so that any reforms can be effectively responded to and implemented.
Recommendation 5. The Mayor should, as a matter of priority, work with MHCLG to ensure data is available on the number and distribution of leasehold across London. If MHCLG is unable to provide this information, the Mayor should ensure that the GLA begins producing and publishing this data by December 2020.
I would be grateful to receive a response to our findings and recommendations by 7 August 2020. Please also send your response by email to the Committee Services Manager, Fiona Bywaters ([email protected]). Yours sincerely,
Unmesh Desai AM Chair of the Housing Committee
10 Questions to the Mayor 2019/9190, May 2019, https://www.london.gov.uk/questions/2019/9190
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Page 128 Agenda Item 9
Subject: Impact of the COVID-19 Crisis on Housing in London Report to: Housing Committee
Report of: Executive Director of Secretariat Date: 5 August 2020
This report will be considered in public
1. Summary
1.1 This report sets out the background information for a discussion with invited guests on the impact of the COVID-19 crisis on housing in London.
2. Recommendations
2.1 That the Committee notes the report as background to putting questions to the invited guests and the subsequent discussion; and
2.2 That the Committee delegates authority to the Chair, in consultation with the party Group Lead Members, to agree any output from the discussion.
3. Background
3.1 Before the COVID-19 crisis, London was already in the midst of a housing unaffordability crisis. Now, there is the prospect of a deep economic recession and rising joblessness which will impact house prices, private rents, and will put further pressure on the need for affordable and social housing. There was a reduction in housebuilding during the lockdown which comes with the risk that the shortfall in supply of new homes in London may worsen. The public health response to the virus also meant that many Londoners were spending most of their time confined to their homes. As a result, there is speculation about whether there will be an exodus from the capital with people looking for different attributes in their homes based on their experiences of the crisis.
3.2 The Government has put in place measures to assist households to retain their homes during the crisis, including extending the notice periods that certain tenants are entitled to receive when a landlord is seeking to recover possession of their homes, and increasing Housing Benefit and Universal Credit. Lenders have been offering payment holidays for owner-occupiers and buy-to-let landlords. The Government has also taken steps to stimulate the housing market with the recent announcement of an increase to the stamp duty land tax threshold.
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3.3 Sector bodies have put forward recommendations for tackling a rising demand for social and affordable housing, continuing to build new homes, and stimulating an economic recovery more broadly. Organisations, including the Affordable Housing Commission and the Local Government Association, have proposed increased investment in social and affordable housing as an economic stimulus.1 The Mayor of London and the ‘Covid-19 Housing Delivery Taskforce’, convened by the Deputy Mayor for Housing and Residential Development, Tom Copley, have issued calls to Government for a £5 billion affordable homes investment package, which would allow councils and housing associations to buy unsold private homes at cost price and turn them into social housing if a buyer cannot be found in the open market, and a tenure conversions programme to convert housing currently planned for low-cost ownership and sale into homes for social and low-cost rent.2
4. Issues for Consideration
4.1 The Committee may wish to consider: The potential short- and long-term impacts of the COVID-19 crisis on home ownership, private-rented sector, social and affordable housing, and supply of housing in London; The measures adopted by the Government and the Mayor of London in response to the crisis; Whether counter-cyclical investment in the social and affordable housing sector could be effective in boosting economic recovery, and other strategies that could be employed; and Whether London residents are likely to leave the capital in the wake of the crisis, and their motivations.
4.2 The following guests have been invited to attend the meeting and participate in the discussion: Tom Copley, Deputy Mayor for Housing and Residential Development; Lawrence Bowles, Director, Residential Research, Savills; Henry Pryor, Buying agent, professional negotiator and housing market commentator; Christine Whitehead, Professor Emeritus in Housing Economics, London School of Economics; and Rob Wall, Head of Policy, National Housing Federation.
5. Legal Implications
5.1 The Committee has the power to do what is recommended in this report.
6. Financial Implications
6.1 There are no direct financial implications to the GLA arising from this report.
1 Making Housing Affordable After Covid-19m, Affordable Housing Commission, July 2020, and Delivery of council housing: Developing a stimulus package post-pandemic, LGA, June 2020 2 Press release, 7 July 2020 Page 130
List of appendices to this report: None Local Government (Access to Information) Act 1985 List of Background Papers: None. Contact Officer: Sarah-Jane Gay, Senior Policy Advisor Telephone: 07783 805 827 Email: [email protected]
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Page 132 Agenda Item 10
Subject: Housing Committee Work Programme
Report to: Housing Committee
Report of: Executive Director of Secretariat Date: 5 August 2020
This report will be considered in public
1. Summary
1.1 This report sets out proposals for the Housing Committee work programme.
2. Recommendation
2.1 That the Committee notes its work programme as agreed under delegated authority by the Chair of the GLA Oversight Committee on 13 May and 20 July 2020.
3. Background
3.1 The Committee receives a report monitoring the progress of its work programme at each meeting.
4. Issues for Consideration
4.1 The table below sets out the remainder of allocated dates for the Housing Committee that are currently scheduled for the 2020/21 Assembly year.
Date Topic 5 August 2020 The housing market in London during COVID-19 10 November 2020 TBC
4.2 The Committee’s initial work programme was formally approved under delegated authority by the Chair of the GLA Oversight Committee on 13 May 2020 and has been designed to proactively examine issues of interest arising from the COVID-19 crisis. The work programme for September to December 2020 was agreed under delegated authority by the Chair of the GLA Oversight Committee on 20 July 2020
4.3 In August 2020, the Committee will hold a question and answer session with the Deputy Mayor for Housing and Residential Development and other invited guests to review the housing market in London during COVID-19 and how housing can contribute to economic recovery.
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5. Legal Implications
5.1 The Committee has the power to do what is recommended in the report.
6. Financial Implications
6.1 There are no financial implications to the Greater London Authority arising from this report.
List of appendices to this report: None.
Local Government (Access to Information) Act 1985 List of Background Papers: Member Delegated Authority Form 1176 Approval of Work Programme Member Delegated Authority Form 1194 Proposed London Assembly Timetable for Autumn
Contact Officer: Sarah-Jane Gay, Senior Policy Advisor Telephone: 07783 805 527 E-mail: [email protected]
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