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A deal between some of the leading high street banks and the UK government to resolve the cladding crisis has hit a roadblock just a week after being unveiled, sowing uncertainty among mortgage lenders and hundreds of thousands of leaseholders trapped in flats they cannot sell.
The agreement, personally backed by prime minister Boris Johnson, was meant to clear the way for some of the big lenders to resume offering mortgages on flats in buildings less than 18m tall. Many of them became unsellable because of safety fears that emerged after the 2017 fire at Grenfell Tower in which 72 people died.
Housing secretary Robert Jenrick said it would mean any block below that height should be presumed safe by fire risk assessors and mortgage lenders. This meant those flats would no longer need the EWS1 fire safety certificate that so many owners had failed to obtain from surveyors who were following guidance put out in the aftermath of the Grenfell disaster, he added.
At the time Jenrick hailed the deal as “a significant step forward for leaseholders in medium and lower-rise buildings who have faced difficulty in selling”.
But hopes that the intervention would quickly unclog the housing market and liberate lenders have run into problems.
The Royal Institution of Chartered Surveyors, which advises property valuers, has said it is unable to alter its guidance on the issue until the government changes its fire safety advice, which is “still in place”. This means many low-rise buildings still require an EWS1 form, according to several people with knowledge of the matter.
The RICS outlined its stance during a call with lenders and trade bodies on Monday, saying that “urgent clarification” was needed before it would change its position.
According to one person on the call, Jenrick’s intervention last week “changed nothing” and “looked like the government trying to pass the buck”.
Without assurance that properties are safe, or ministers committing funds to make them safe, valuation firms cannot accurately put a price on a property. In turn, banks would be unlikely to shoulder the risk of lending against those flats, an issue that has created a huge pool of “mortgage prisoners”.
Ministers have been struggling to contain the crisis, which has ballooned in the four years since the Grenfell fire as worries about building safety have mounted. Johnson intervened personally at a recent meeting in Downing Street with the UK’s biggest lenders that led to last week’s agreement.
Safety concerns originally centred on high-rise tower blocks clad in similar materials to Grenfell Tower. But the government changed its guidance in January 2020 stating that multistorey, multi-occupancy residential buildings of any height should be assessed for fire risk, affecting about 840,000 flats across the UK.
The advice “opened Pandora’s box”, according to one executive at a property company.
As part of the announcement last week, Jenrick said the government would withdraw the advice, but insisted the crisis was being prolonged by “excessive industry caution”.
The RICS said lenders could technically still issue mortgages under the terms of its existing guidance.
David O’Leary, policy director at the Home Builders Federation, said he doubted that a change in fire safety guidance would necessarily solve the crisis.
“There’s a wider consumer point: if you have been told something for the last four years about safety, it’s hard to just say ‘don’t worry about this now’,” he added.
The government denied it was passing the buck and said it was “committed to correcting the present market failure and supporting leaseholders in selling their properties should they wish to do so.”
A spokesperson added: “The view from the independent experts is that there is no evidence of a systemic risk of fire in blocks of flats, but excessive industry caution is leaving many leaseholders in lower-risk buildings unable to sell, or facing bills for work which is often not necessary.”
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