Westminster Hall
Wednesday 1 November 2006
[Mr. Martyn Jones in the Chair]
Council Leaseholders (Works Charges)
Motion made, and Question proposed, That the sitting be now adjourned.—[Mr. Shaw.]
9.30 am
Ms Karen Buck (Regent's Park and Kensington, North) (Lab): I am extremely grateful to have this opportunity to raise a series of issues that are of grave concern to tens of thousands of Londoners, including thousands of my constituents, many of whom have very low incomes. Those people bought ex-council properties either through the right to buy or on their subsequent resale, and now face major works bills and service charges that are well in excess of what they can pay. I will describe the experiences of some of my constituents and explain why the argument that the increased value of their homes outweighs the pain of their bills is fundamentally flawed.
I welcome the recent improved deal offered by CityWest Homes to leaseholders in my borough of Westminster, which has come about as a consequence of pressure put on that organisation by my colleagues and me, but more needs to be done. I would like more assistance from the Government to support initiatives that will help my constituents and those in other areas who suffer equivalent problems.
Although I shall discuss these issues with particular reference to my constituents, I asked for this debate because I know that leaseholders in other boroughs also face problems. I commend in particular the hard work of and initiative shown by my hon. Friend the Member for Islington, South and Finsbury (Emily Thornberry), who has achieved more than anyone else, in the face of disinterest from the previous council administration in Islington, to raise the profile of local authority leaseholders in the past two years. She will speak for herself—I am delighted to see her in her place—but I know that some of the stories of personal hardship that she has heard are extremely distressing.
The Minister of State, Department for Constitutional Affairs, has also been very energetic in this campaign. She has been quoted as saying that Southwark council treats its leaseholders like “cash points” with its high charges and overheads, and she revealed that well over £1 million worth of mistakes were found in the leasehold management unit’s accounts in one year only. That is another theme of today’s debate: not only is there a problem with the size of the bills, but transparency regarding charges is often lacking and information is not provided to leaseholders in a way that makes it easy for them to understand their liabilities and responsibilities.
Clearly, although Westminster leaseholders are not alone in their predicament, their problems are particularly acute. That is partly because of the high cost of delivering services in central London and partly because we have
an unusually high concentration of ex-council properties in high-rise blocks and on estates, but part of the problem is rooted in local history. Westminster leaseholders include people who were first enticed and encouraged to buy their homes in the 1980s and 1990s, in the years when Shirley Porter ran Westminster council. It is neither accident nor coincidence that one of the estates on which I shall focus today was central to the notorious and illegal designated sales programme. During that period, three tower blocks on the Warwick estate, which probably faces the largest major works bills in the country, were designated for sale with the explicit aim of replacing tenants who were assumed to be Labour voters with Conservative-voting home owners. The aim was also to create a smokescreen around the general sales programme which was, of course, concentrated on politically marginal wards.
In order to make home ownership an attractive option in estates and tower blocks, new leaseholders were offered immunity from major works bills through schemes such as the abatement and indemnity schemes, which were subsequently found to be illegal. Even more germane to today’s debate is the fact that major works were repeatedly postponed because the council lived in fear of alienating leaseholders by revealing the true cost of maintaining their homes. Roof replacements in the Little Venice estate village, for example, were originally planned for the early 1990s, but did not take place until last year. They were deferred for almost15 years because of fears about the consequences for the home ownership programme that the council was promoting.
Twenty years after the homes for votes scandal, today’s leaseholders, including many who did not originally purchase their properties through the right-to-buy scheme, are still paying the price. Why? Two of the reasons for that are of particular concern. First, many blocks and estates were neglected for decades, until the Labour Government brought in the decent homes initiative and gave £200 million to CityWest Homes alone to bring thousands of homes into the 21st century. Secondly, the dozens of different leases issued to purchasers in Westminster, which reflect the variety of different home-ownership schemes that there have been since the 1980s, have made it much more difficult for leaseholders to work together to influence major works programmes and to talk to their landlords.
Mr. Mark Field (Cities of London and Westminster) (Con): Does the hon. Lady have any comparative statistics for other parts of London or the country? She makes a powerful political case, which I understand given her background as a former Westminster city councillor, but she has made statements about the complex lease arrangements. Is that an uncommon situation in London as a whole, given the variety of ownership schemes and the importance that has been attached to council and social housing in central London for longer than might be the case in other parts of the country?
Ms Buck:
The hon. Gentleman might like to address his question to the Minister. I ask her to take all that on board, because that is the kind of research that might usefully by undertaken to help establish what is happening with leaseholders in London. Clearly, the variety of
home-ownership programmes in Westminster puts the residents there into a separate category to those in other boroughs. Most other boroughs had some experience of the right-to-buy scheme, but, as far as I am aware, none of them have gone through the process of designated sales or had the plethora of schemes that were unique to Westminster, where leaseholders are now dealing with the consequences of that variety of sales programmes.
On the positive side, the estates in my constituency are a forest of scaffolding, as much needed replacement roofing, lifts and windows are installed. Internal works are also being done, with new kitchens and bathrooms being fitted. Less happily, low-income leaseholders are faced with bills for tens of thousands of pounds. On the Warwick and Brindley estates, bills are topping £58,000. Many of the works being carried out are accompanying, but not part of, the decent homes initiatives. For example, the fitting of lifts is not part of decent homes standard. The Conservatives neglected estates, which are being brought up to standard through the decent homes initiative, and now the Government are being blamed and challenged on the cost of works. I would like councils to be required to have a sinking fund for work that is not part of the decent homes initiative, so that leaseholders pay as they go, effectively saving towards future major works which are bound to recur in 10 or 20 years.
It has been argued that the purchase price of the properties reflected their original disrepair and lack of refurbishment, but many people bought their homes at the limits of their financial capacity. Indeed, they were encouraged to do so, particularly in Westminster, openly in some cases and more subliminally in others. It does not make it any easier for them to pay today’s bills to be told that their property was cheaper to buy then than it would otherwise have been. Some of the works being carried out are likely to enhance value, but many are repairs rather than improvements. Replacing the roof on a tower block is unlikely to affect the resale price of the properties in it. That is one reason why good asset management would require an annual contribution to a sinking fund.
Who are the people who I am discussing? The ones who I am most concerned about own their properties and live in them as family homes. The families of the people in the examples that I will use have lived in those homes for many years as tenants. In some respects, they are the fortunate ones, because right-to-buy purchasers have a better deal than those with assigned leases. However, they also have their roots in the local community, and the neighbourhood, as well as the property, is their home. They do not want to move away because they cannot afford to maintain the property.
Let us consider Mr. S, who lives in a two bedroomed 16th-storey flat with his wife and two children. It was bought for £42,000 in 2003. Even with the proposed five-year extended period in which to repay the major works bill of £58,000, the family would need to make a monthly £1,000 repayment, on top of a monthly £140 service charge and £420 loan repayment, in lieu of the mortgage for their original purchase price. Even with additional equity now in the property, they would have no prospect of being able to sell and to recoup sufficient
money to buy another property in the area. If they were to sell, as they are tempted to do, the property would almost certainly go back into the private rental market, reducing the capacity to provide permanent homes in the area.
Mr. K is a bus driver who also has a wife and two children. He and his wife paid £57,000 for their fourth-floor flat in 2002. They are now paying monthly a mortgage of £680, plus a £140 service charge and all other bills, from a monthly income of £1,800. They, too, received an estimate of £58,000 for their major works, again with an estimated requirement of £1,000 a month to repay. The economics simply do not stack up. They are impossible, even with a five-year repayment period, for people in this category. We are talking about those who work in local supermarkets or the health service, and bus drivers; people in the Warwick and Brindley estates whose average yearly household income is £14,000, £15,000, £16,000 or £17,000.
Pensioners have the option of having a charge put on the property so that the major works bills can be recouped at the time of sale or when they leave for other reasons. None the less, it is hard to imagine the shock and anxiety experienced by people who have worked hard to avoid debt and who now have to deal with what they perceive as a debt of tens of thousands of pounds hanging over their heads.
One lady wrote to me saying that she had recently been billed for £16,000. She is an 83-year-old stroke victim who was beside herself with anxiety. All of the systems put in place to tell her that she would not have to find that sum herself and that the bill would be a charge on the property had passed her by.
In some ways, the situation of pensioners is better than that of lower-income households of working age, but to avoid the stress and anxiety experienced by my constituent they need intensive personalised advice and support, preferably from someone one step removed from the landlord. That would enable there to be trust about the disinterested nature of the advice given. Such advice provision does not come cheap, but it should not be paid for from the housing revenue account—effectively at the expense of tenants—either.
Lessees are often seen as the key to mixed communities, which is a concept we all support, on the assumption that they will argue for better standards of management and regeneration. In fact, financial anxiety of the type I have described often pulls in a different direction. For entirely understandable reasons, low-income leaseholders can act as a brake on the improvement and regeneration that we want on our estates, because they worry about the bills that they will have to pay.
A proportion of leaseholders are not only quite capable of paying their bills, but are speculating on the property market. Figures that I have obtained show that a quarter of Westminster leaseholders are in the purchase-to-let market. We should not use public money to support people in that category, particularly as thousands of ex-council properties are let back to people on low incomes in housing need—homeless families—so the taxpayer picks up a weekly housing benefit bill of £300 to £450 to cover someone else’s mortgage.
Even having said that, I am conscious that the only way out some tenants could see was to buy and then re-let, and that the pressure will be intensified by unpayable major works bills. People who are stable members of a local community feel that the only way that they can transfer and get themselves out of housing need is to buy and then move on. The properties then go either to homeless families or into short-let, high-turnover markets, involving students and others who, through no fault of their own, erode the stability of the communities in which they live.
My case for greater assistance to low-income leaseholders is based not only on sympathy for their personal situation, but on a firm belief that we should sustain viable communities, which have been undermined by council house sales, and not encourage more of them into unstable, short-term rentals.
What needs to be done? First, CityWest Homes and Westminster council need to go further and faster in responding to my local leaseholders’ calls for greater transparency and accountability. Too many letters, bills and statements are impenetrable, computer-generated nonsense, and advice has come too late for too many people and it is often not trusted. Administrative overheads are high and need to be justified.
Secondly, right-to-buy and assigned leaseholders should be treated equally. There should be no hardship schemes that could mean that an original leaseholder who moves away and lets their flat gets a chance to defer payment, while someone who bought in good faith from another lessee gets hit by a huge bill, regardless of their personal circumstances.
Thirdly, there needs to be a simpler method of challenge to major works bills, especially given the plethora of different leases in places such as Westminster.
Mr. Field: I hope to catch your eye later on in order to make my own contribution to this important debate, Mr. Jones.
On some of the specifics that the hon. Lady raises, will she not accept that Westminster council and CityWest Homes have gone to some trouble to try to engage local residents in the estates? I appreciate that there are a plethora of problems, as she mentioned. On occasion, particularly in relation to the large bills for major works, they have asked residents to come forward with their own quotations. All too often, residents have not come forward with a lower quotation or a different proposal for works to be undertaken. It is fair to say that there have been attempts to try to engage. Does she have any suggestions about how to ensure that residents associations and lessees associations on many of our estates put forward concrete proposals? Obviously, we will do our best as local Members of Parliament to oil the wheels of bureaucracy to ensure that people listen to any such proposals.
Ms Buck:
I accept that improvements have been made in recent months in responding to the needs of lessees. The chief executive of CityWest Homes, Brian Johnson, is committed to trying to resolve the difficulties. I do not believe that a landlord, be it CityWest Homes, a local authority in another area or an arm’s length management organisation, should require individuals, often members of working families or people with high levels of personal commitments, to take on all the
responsibilities involved in challenging the bureaucracy. The complaint is frequently put forward that members of the community do not come forward saying, “This is how we are going to do it. These are our detailed business plans for the alternative running or management of our estate. These are our quotes for major works”. As such people are handicapped in terms of the skills and resources needed to make the challenge, it is assumed that they are not interested, incompetent or unable to be involved in the decisions that affect their lives.
I return to the example of the Warwick and Brindley estates, which is the one that has triggered my greatest anxiety because of the size of the bills. I organised my own meeting, and 100 angry lessees came to me with a list of concerns and complaints, which I was then able to feed on to CityWest Homes. It should not have to fall to the Member of Parliament to go out to reach those lessees. I am prepared to work alongside landlords and say, “I will play my part. You play your part in being proactive and in finding ways to reach people.” Local politicians can be very involved in that too.
Some leaseholders do not have English as a first language, and greater efforts need to be made in that regard. There is great deal of mistrust of the landlords, and people want independent advice because they are not necessarily convinced that the landlords will act in their interest; indeed, the landlords are not acting in their interests, because they have a fiduciary duty to act in their own interests. It is not unreasonable for lessees to believe that their interests are not best served by landlords. Lessees in the sort of financial predicament that I outlined and who face £58,000 bills may not be able to afford independent legal advice. If they have a bill of £58,000 hanging over them, they may feel that they cannot take on £5,000 of independent legal advice. The landlord must respond to that.
Some leaseholders want a general cap on their bills, as there is on some estates where there have been major regeneration projects. The danger is that public money would subsidise companies and big landlords in the buy-to-let market as well as vulnerable individual lessees and that would be an unacceptable use of public money. However, the Government should support efforts to get round the problem so that we target help on those who need it most. I have no great wish to help what I understand to be 770 limited companies and 173 multiple-property owners among the 9,000 Westminster leaseholders, although I wonder whether a policy that results in one in four of the properties sold through the right-to-buy scheme being sublet, including 1,000 being rented back to homeless families, represents good value for money. As things stand, caps can be funded only through the housing revenue account, so tenants would subsidise home owners. Any locally funded subsidies to leaseholders should come from general fund capital or revenue.
Fifthly, landlords must be facilitated and supported in providing more flexible repayment options in cases of hardship, including longer loan periods, buy-back options to protect households at risk of repossession by converting leases to tenancies, and reverse staircasing. The housing revenue account could help here and lessees could have the right to staircase down by selling part of their equity back to the council to help to fund major work, and to become shared owners. They could then staircase
back up if and when their financial position improved. The council would receive equity instead of payment. That would all come with a cost. CityWest homes has £2 million of capital tied up in deferred payment schemes and that is likely to rise. That cost pressure must be recognised and I look to the Government for support.
Sixthly, the Government should support work with the Council of Mortgage Lenders to improve cost-effective equity release schemes for younger purchasers.
Seventhly, housing providers must be given the authority to establish sinking funds to prepare for future contingencies and to support tax-free savings accounts as another voluntary option to help to pay for future work.
Eighthly, recognition must be given to the financial cost of offering advice and Ministers could liaise with colleagues in the Department for Constitutional Affairs to ensure that housing advice services are strengthened and not compromised by the proposals in the Carter review.
Frankly, if I am finding all the problems that I have described in properties managed by CityWest Homes, which has just received three stars from the Audit Commission, I dread to think what is happening elsewhere in London. The truth is that thousands of individuals, pensioners and young families are in despair, and facing bills that they cannot pay and the prospect of leaving or even losing their homes. Many are confused by their liabilities and angry about charges that they did not anticipate and were not warned of. Many struggle to understand the documents that are sent out to them and do not know where to turn for help. All are paying the price for a legacy of neglect of council housing during the 1980s and 1990s. It is time for the Government to respond to those problems, to work with landlords on the front line of delivering service to lessees and to help to underpin some of the financial and practical pressures that are put upon them.
9.54 am
Mr. Mark Field (Cities of London and Westminster) (Con): I congratulate my constituency neighbour, the hon. Member for Regent's Park and Kensington, North (Ms Buck), on initiating this debate. I stand here as another Westminster Member of Parliament, but not to praise or to bury Westminster city council. More importantly, the debate reflects the breadth of life in central London. It is often assumed that in my constituency I have an enormous number of wealthy people and would not have to deal with any of the social problems that are an integral part of the hon. Lady’s day-to-day case book. The reality, of course, is that there are some wealthy areas in my constituency, as in hers, but that the community is diverse. We all want to protect that diversity.
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