41.We heard from our witnesses that uncertainty around building safety is having a significant impact on the wider housing market. One witness called it a “perfect storm”. Some of that impact concerns lenders’ decisions around the need to complete an EWS1 form on selling or re-mortgaging. The EWS1 form was introduced in 2019 for valuation purposes, in order to provide assurance on the safety of external wall systems. The form is not a statutory requirement, however many lenders demanded them, and there was a shortage of qualified professionals to complete the process. On 8 March 2021, the same day that we questioned the Minister, the Royal Institute of Chartered Surveyors (RICS) published new guidance designed to “unlock” the flat market for buyers and sellers by clarifying which properties require EWS1 forms. The Minister told us the Government estimates that 500,000 leaseholders have been taken out of the scope of the EWS1 process, and that the lenders welcomed the new guidance. It remains to be seen how the lenders will interpret the new guidance and what impact that will have on the buying and selling of multi-storey flats.
42.The impact on the wider housing market goes beyond the issues around EWS1 forms. In addition to the negative impact that the Government’s proposed loan scheme—which we do not support—may have on house prices, we were told that the problem was not the EWS1 form itself, but the “underlying uncertainty” around building safety, which affects not just multi-storey flats but the entire property chain, as summarised by Dr Nigel Glen:
We should be very concerned. We have a perfect storm here. It is ghastly what is happening to the market. We have the cladding. Then we believe the non-cladding is going to perhaps dwarf that. You have the stopping of the sales. Rentals could start stopping because, as management agents, we are being approached by the lettings agent saying, “You need to certify before I can rent that this building is safe”. We are going, “We cannot because we do not know”. Sorry to sound like a bit of a doom-monger here, but it could be very significant across the whole property market.
Dr Dean Buckner warned of the impact on banking capital ratios:
Banks have a sliver of capital available to absorb losses. Some of those losses could be caused by borrowers defaulting on their mortgages. If those ratios begin to slip and banks become clearly in trouble, that affects all of us, because we all have money with banks.
The eventual outcome in the private sector, we were warned, was forfeitures and repossessions.
43.When we asked the Minister what assessment had been done on the impact on the wider housing market, he said:
We have made an assessment, in the sense that we have a plan. There are three elements to the plan. One is working with insurers and encouraging lenders to be proportionate to risk and to reduce the demand. We are working with RICS, which carried out this consultation. The Secretary of State and I have had many meetings with the RICS leadership about this, but it is their consultation and their findings. It is absolutely right that it is professionally led.
The second thing is that we step up and fund a scheme to increase supply [of assessors qualified to conduct EWS1 assessments]. The third element is that there have been some issues around professional indemnity insurance being available to some of the people who carry out the EWS1 survey, and stepping in and ensuring that they have access to professional indemnity insurance.
Essentially, the assessment is that, yes, there is a problem, and the approach has been to restrict demand, increase supply and ensure insurance cover, so that these important reports, where needed, can be carried out.
44.The new guidance on EWS1 forms alone is not sufficient to mitigate the short-term and long-term impacts that the underlying uncertainty around building safety is having and will have on the wider housing market. We ask the Government to report back to this Committee with its assessment of the impact of fire safety remediation on the wider housing market. The Government should ask the Prudential Regulation Authority to assess the impact of fire safety remediation on banking capital ratios.
45.Our witnesses told us that because social housing providers cannot access the Building Safety Fund for properties where tenants live, local government funds are being diverted to remediation work that would otherwise be invested in repairing and maintaining existing homes and building more social housing. We were told of one example in south London, where a new development of temporary accommodation to tackle homelessness had to be paused in order to pay for the remediation of an existing building. We heard that the same restrictions to the waking watch relief fund were having the same effect. Lord Porter informed us of 389 social housing blocks with waking watches in Birmingham, London, Manchester and Slough, saying: “As far as we know, no councils have applied to the waking watch relief fund and only two housing associations have. The waking watch relief fund only covers the costs of waking watches passed on to leaseholders.”
46.When we put these concerns to the Minister, he acknowledged the challenges facing providers of social housing. He pointed to £12 billion of government funding made available for building more affordable housing. The Minister explained that the restrictions on the Building Safety Fund are to ensure fairness between tenants and leaseholders, so that remediation costs that are not passed onto tenants are not passed onto leaseholders. However, when pressed on the diversion of funds from repairs and maintenance, he described the situation as “hypothetical”. We were told that the Government had not conducted an impact assessment on the impact of paying for cladding remediation on building new social homes or maintaining existing social homes, “partially because individual social landlords will make their own choices about what they need to remediate”.
47.We are concerned that the exclusion of social landlords from the Building Safety Fund and waking watch relief fund except in specific circumstances is having negative consequences for the wider social housing sector. While the £12 billion Affordable Homes Programme is welcome, any funds diverted from building new social homes to pay for cladding remediation will still result in fewer, much-needed, new social homes being built. In addition to our recommendation that social housing providers should have full and equal access to the Building Safety Fund, preferably our proposed Comprehensive Building Safety Fund, the Government should:
48.We have stressed before that this crisis is about more than statistics, costs, and materials. At its heart are people: people trapped in unsafe, unsellable homes. After a year in which we have spent more time in our homes than ever before, it is appropriate that we conclude by reflecting on the toll taken by residents. We believe the testimony from the UK Cladding Action Group merits lengthy quotation:
Nearly a quarter of people have told us that they feel suicidal or want to self-harm. Nine out of 10 people say that their mental health has deteriorated. Seven out of 10 people say that they cannot sleep at night. We regularly have people contacting us, telling us that they have had enough and cannot continue on. Covid has made things even harder as well. I cannot communicate to anyone who is not a leaseholder in one of these building the fear and complete sense of limbo. You cannot see what your future is going to be like, because all you can see is bills and worry. The impact of living in one of these buildings is horrific.
We also should not forget that mental health affects our physical health. It affects our relationships and our work. It affects the people around us. People tell us that they cannot concentrate at work. One in four, in fact, actually said that they have had to take time off work because of their situations. Others tell us that they feel suicidal at least once every day. People have had to turn down jobs in other cities. People cannot start families. People have been diagnosed with new conditions.
49.In our previous report, we asked the Government to offer NHS support for the physical and mental health needs of residents in affected buildings and to provide signposting to services for residents worried about their safety or financial situation. In response—published six months into the covid-19 pandemic—the Government said that concerned residents should contact their GPs and that it was the responsibility of the “accountable person”, as provided for in the draft Building Safety Bill, to engage with residents. We are disappointed with this response, which puts the responsibility on others, and fails, in our view, to recognise the scale of the public health crisis that we described and which has since shown no signs of improving.
50.We do not think the Government is doing everything it can to support the physical and mental health of residents of affected buildings. The Government should work with local authorities to ensure that affected residents have access to the physical and mental health support they need. The Government should make it an explicit requirement that the information that the “accountable person” is required to share with residents includes signposting to support services for residents worried about their safety, financial situation, and physical and mental health. In the interim, the Government itself should supply this information to residents.
76 , Constituency Casework, House of Commons Library, 15 April 2021
77 “”, Royal Institute of Chartered Surveyors, 8 March 2021
93 HCLG Committee, Second Report of Session 2019–2021, , HC 172, para 95
94 MHCLG, , September 2020, pp 16–17