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Taxpayer ‘faces multimillion-pound Help to Buy losses’ on cladded towers
The government could be forced to write off millions of pounds of taxpayers’ money invested in Help to Buy loans on a south-east London block amid a row over cladding removal, an MP has warned.
Leaseholders at Galliard Homes’ New Capital Quay development in Greenwich have seen the value of their homes slashed by up to 90% after the buildings failed category 3 tests following last June’s Grenfell Tower fire.
However, it is believed that some leaseholders who bought their homes with Help to Buy loans have repaid them at a fraction of their original value, leaving the government out of pocket.
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According to Homes England figures obtained under a Freedom of Information Act (FOIA) request from a resident, New Capital Quay includes an estimated 29 flats in which Help to Buy holds a share of equity, with nearly £3m invested in total.
Homes England’s response to the FOIA request admitted that its “analysis is not complete”, suggesting the true figure could be even higher.
Local MP Matthew Pennycook has written to housing secretary James Brokenshire, after constituents alerted him to leaseholders who are redeeming their Help to Buy loans through the government’s agent, Target Services.
In the letter, seen by Inside Housing, Mr Pennycook wrote: “In recent days, I have received worrying reports from New Capital Quay residents that Target Services Ltd are redeeming a number of Help to Buy loans on properties on the site on the basis of market valuations that are distorted as a result of the presence of cladding and insulation that has failed category 3 tests arranged through the department.”
Residents have contacted Mr Pennycook claiming that valuers had knocked up to 90% off the value of homes in the development, meaning that Help to Buy loans would be redeemable at just 10% of their original value.
A spokesperson for Homes England confirmed to Inside Housing that one loan had been redeemed at below its market value.
In April, The Guardian reported on a New Capital Quay homeowner who saw more than £400,000 wiped off the value of her flat after it was assessed by a surveyor approved by the Royal Institution of Chartered Surveyors.
The development, which features 980 homes across 12 blocks, features aluminium composite material cladding, similar to that used on Grenfell Tower, and Kingspan K15 insulation.
However the cladding has not been removed, amid an ongoing dispute between developer Galliard Homes (a subsidiary of which is freeholder on the development) and the National House Building Council (NHBC) over who is responsible.
The NHBC approved the buildings when they were completed in 2013/14, but is establishing whether they were compliant with building regulations at that time.
But Mr Pennycook warned of the consequences of “a lengthy litigation between the freeholder and the NHBC”.
He told Inside Housing: “If this goes on through years and years of litigation, it could be years before it [the cladding] comes down. We need government to set a deadline for when it has to be removed.
“Leaseholders and tenants are being caught in the middle of this dispute.”
A Homes England spokesperson said: “Help to Buy equity mortgages are redeemed at market value to be determined by an independent valuer and in accordance with the terms of the loan.
“The basis of the loan is that government shares in both the upside and downside of market valuations. This is a matter of public record and is made very clear in the Help to Buy Buyers’ Guide. Only one loan has been redeemed at a lower value than the original sales price.”
