Leaseholders feel ‘more trapped’ in blocks with cladding because of Help to Buy loans
Leaseholders living in blocks with fire safety issues have said that they feel more trapped in their homes because of rules around the selling of homes bought with Help to Buy loans.
Inside Housing has spoken to several leaseholders who have attempted to move but have been blocked by Homes England, the administrators of the Help to Buy programme, because of restrictions around sales of apartments in blocks with dangerous cladding. The government’s housing delivery agency is now preventing the redemption of loans on these homes, too.
Read: How the cladding scandal is affecting people on the government’s Help to Buy scheme
Homes England currently has a condition in place in which those who have bought their homes with support of a Help to Buy loan are only allowed to sell their home at an ‘unaffected market value’. This means that homes cannot be sold at a price that takes into account the dangerous materials on the building.
The cladding scandal has meant the value of homes across the country have reduced, while prospective buyers have been unable to buy homes because lenders are not willing to provide mortgages on flats in blocks that may potentially need expensive remedial works.
READ MORE
This has led to some leaseholders turning to companies and investors willing to purchase homes as cash buyers, usually at a reduced rate, as the only means of leaving their homes.
Nevertheless, with Homes England’s rules around sales, this cannot be done if a person owns a home because of a Help to Buy loan, leaving some who need to move stuck.
Clair Havard, who lives alone in Miliners Wharf in Manchester, found out her building had dangerous cladding in 2019. This year, Ms Havard, who is originally from South Wales, lost her job as a result of the coronavirus pandemic.
Wanting to move back closer to family, she found a cash buyer who offered £120,000 for the home she bought for £160,000. However, when she approached her mortgage broker to understand the next steps, she was left disappointed when she was informed that she could not get a valuation because of Homes England rules around the unaffected market value.
Ms Havard said that she is now living alone, with no support bubble and feels “more trapped” due to the Help to Buy loan.
Inside Housing has spoken to another leaseholder in Manchester who found a buyer for his property and had an offer accepted on a new property, before he was informed of the fire safety issues on his block. Keen to move, he found a cash buyer but was then informed of Homes England’s position and forced to give up the new home and remains in his Manchester flat.
Help to Buy leaseholders are also unable to sub-let in most cases or buy a second home under the Help to Buy conditions.
Many Help to Buy customers have been particularly critical of the communication they have had from Homes England and Target, the company the former uses to manage those in the Help to Buy programme.
Inside Housing has seen a number of cases where Help to Buy customers have had correspondence with both companies lasting many months, with both companies often unable to provide clear answers on the options available to customer regarding selling their homes or redeeming their loans.
It comes as Inside Housing can reveal that Homes England is also stipulating that Help to Buy customers are only able to redeem their loans at unaffected market value.
Under the Help to Buy programme, those looking to redeem their loan but not move home can pay off their loan based on a new valuation given by an Royal Institution of Chartered Surveyors-approved surveyor.
While this can work in Homes England’s favour if the value of the property rises and the percentage of equity denotes a larger sum, it also means that if the value drops, the body would lose money as the customer redeems at a lower level than the original loan.
In 2018, Homes England agreed to virtually wipe out Help to Buy loans on a flat in the New Capital Quay development in Greenwich, London, after the presence of Grenfell-style cladding caused the value of the flats to drop from £500,000 to £50,000.
This saw a leaseholder have to pay only £10,000 of the £85,000 loan she had taken out, due to her being able to redeem Help to Buy loans on the value of the property rather than value of original loan. Inside Housing understands that several other leaseholders in the block were able to redeem at lower values.
However, that route has now been cut off to leaseholders. Inside Housing has seen correspondence in which Homes England said a redemption must happen at an unaffected market value, meaning customers can only effectively redeem at a price that does not take into account the fire safety defects on their building.
A Homes England spokesperson said: “Homes England is unable to comment on individual cases.
"There are many factors that influence the value of a property and we are not able to confirm whether a reduced value is impacted by cladding or not. The redemption value of all Help to Buy: Equity Loans is the market value of the property at the time.
"A RICS surveyor confirms the market value based on comparable property sales in the area. We will only accept equity loan redemptions against the market value of Help to Buy homes. This is in accordance with the equity loan agreement."
Sign up for our fire safety newsletter
Already have an account? Click here to manage your newsletters
