Jamie Ratcliff, Executive Director of People and Partnerships, explains Network Homes’ response to the building safety crisis
“Whilst it is small comfort to our residents affected by the building safety crisis, we have adopted a principle of transparency by default… We are also keen to work alongside groups of leaseholders and shared owners where possible to push for wider change.”
What do I know?
I have a longish history with the shared ownership tenure (although apparently it started before I was born) including overseeing the last major rewrite of the standard model lease. I now work for Network Homes, a housing association with around 2,000 shared owners.
It is clear that the unprecedented circumstances of the building safety crisis are testing the tenure, which was already facing a number of questions, not least on the pages of this website. Many people already questioned the fairness of shared owners being responsible for 100% of costs before the massive potential scale of building safety remediation bills became clear. I’m not in a position to resolve that but I thought it would be helpful to set out a housing association perspective on what we can do.
What is Network Homes doing?
Firstly, we are proactively pursuing any organisation who may have let us down in terms of the construction of the building. This approach means that many counterparties are directly remediating or having remediation carried out to our buildings, at no cost to us, our leaseholders or shared owners.
Sadly, this is not always possible so as a back-up we are also applying for any potential government funding, most of which is arranged in a way to reduce costs to leaseholders and shared owners. As an aside I would note that these funds do not cover the significant building safety costs relating to our rented homes (across the 12 housing associations in the G15 we have set aside a massive £2.9bn over the next 10 years for building safety).
We are pushing government as hard as we can to make more funding available, which I think is their responsibility given systemic regulatory failure, and to make the funding that is available certain and straightforward to access. We may not always be successful but I believe that without G15 pressure the current Building Safety Funds would not have been available to leaseholders and shared owners of social landlords.
Recharging costs to shared owners
If neither of those things are possible – and I sincerely hope they are – then we are clear as a charitable housing association that we will have to consider recharging costs to leaseholders and shared owners in line with the lease. At Network we will have to pay remediation costs for our rented homes; we have already spent £50m since 2017 and have a further £100m for building safety costs set aside over the next ten years. Any money we spend on building safety issues, takes away from our social objectives of delivering more affordable homes, maintaining our existing ones and seeking to improve our services year on year.
That doesn’t mean there is nothing else we can do to support shared owners.
What else can a housing association do?
Interest free credit
Network Homes has authorisation from the Financial Conduct Authority (FCA) to offer interest free credit to residents to help them with any building safety costs we recharge, that would otherwise be unaffordable. We have a qualified team of advisors who can help residents to manage their finances. Both of these activities are regulated by the FCA and subject to oversight by the Financial Services Ombudsman.
Shared ownership properties are supposed to be the primary residence of the shared owner, and subletting is specifically prohibited by the lease. Homes England and the Greater London Authority have slightly different rules governing this and we also have to consider any impacts on our charitable purpose.
At Network we have loosened our policy on subletting; we will now grant permission to sublet for a year for shared owners who want to move but are unable to do so due to building safety issues. We will then review (and most likely extend) when the year is coming to an end if residents are still in the same situation.
Buyback in truly exceptional circumstances
Instead of subletting permission – which can be challenging not least due to the tax position on rental income – many shared owners instead ask us to buy their home back from them. We do not have the financial capacity to do this at scale. Network Homes’ policy is that we will only do this in truly exceptional circumstances.
Sadly many shared owners are in difficult situations and want to move because of relationship, family, career or health issues – given the scale of the challenge these are not exceptional circumstances. Even where we do agree to this our buyback policy is to subtract the cost of any known repairs from the buyback valuation – this therefore doesn’t solve the problem of a shared owner in effect paying for the cost of building safety remediation.
In similarly limited circumstances we are also able to consider, in line with Homes England or GLA rules ‘reverse’ (downward) staircasing. This involves the housing association buying shares so that residents can reduce their mortgage payments if they are struggling. This may help some residents currently facing financial difficulties, but given the shared owner would remain responsible for 100% of remediation costs, with a smaller share – it is unlikely to be a solution for many. Network Homes only offers this in exceptional circumstances – as above.
Back-to-back staircasing to facilitate cash sale
Where a building hasn’t got a satisfactory EWS1 form it will not be possible to sell to buyers who need a mortgage but it could be possible for a shared owner to ‘back-to-back’ staircase in a sale to a cash buyer. Although where there are potential or confirmed remediation costs again this is likely to affect the purchase price.
Transparency and working with our residents
None of the above solutions are an entirely satisfactory solution to what is an incredibly difficult situation. Whilst it is small comfort to our residents affected by building safety, we have adopted a principle of transparency by default. This means we routinely share our higher risk Fire Risk Assessments and publish our EWS1 forms on our website for all residents to see and we also keep affected residents regularly updated with our progress in investigation, funding applications and remediation.
We are also keen to work alongside groups of leaseholders and shared owners where possible to push for wider change.
The situation in building safety is still full of unknowns but we want to do our utmost to make it better than it otherwise would have been for residents, working with sector organisations, organised groups, the media and all levels of government.