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Feature: Can new-build horror stories find a happy ending?

A skills crisis is at the heart of the problem but what is being done to turn things around?

Construction

For years, governments have pledged to solve Britain’s housing crisis – but the truth is none of them have really come close. Building more homes is one of the major issues the UK is currently grappling with. But the tone of the debate revolves mainly around hard figures; namely the gap between the homes built and the homes required.

For example, Theresa May’s government has promised an ambitious drive to build 300,000 new homes a year.

This focus on numbers is certainly important to ensure targets are set and adhered to. But does it mask existing problems with the construction of new homes?

Last year proved housebuilders are struggling to build safe, well-built homes at the moment when completing barely half of that 300,000 figure.

At the start of 2017, the pages of the national press were awash with horror stories of poorly built, unsafe properties.

Housebuilder Bovis Homes was at the centre of the storm but the industry as a whole felt the brunt of the media backlash. There were nightmare stories of buyers being forced to live without electricity or flooring and with sagging walls. Some reports even claimed owners had been injured because of the poor quality of some of the builds.

The Home Builders Federation’s latest consumer satisfaction survey of 52,290 buyers shows 98 per cent of them reported some snags to their builder.

Tellingly, 17 per cent were either “fairly” or “very” dissatisfied with the standard of the finish on their home, while 38 per cent said the property had more problems than they expected.

In July 2016, the All Party Parliamentary Group for Excellence in the Built Environment looked into the quality and workmanship of new-build housing in England. It found the “lack of market competition, [builder] skills shortages and an imbalance in bargaining power is selling buyers of new homes short”.

This was before the build-quality debacle hit the press last year. The group of MPs called for an increase in skills training, allowing buyers to inspect properties and a drive to “instigate a quality culture”, among other recommendations.

It said: “Housebuilders may talk of 85-90 per cent of homes being fault-free, that still leaves thousands more that are not – in fact, 15,500 each year, based on completion figures for private sector homes in 2015. This is simply not acceptable. Housebuilders should be upping their game and improving quality and the buying process and Government should be urging them to do so.”

A skills crisis is at the heart of the problem – one that will be magnified by Brexit. There are roughly 174,000 workers in Britain’s housebuilding sector – nearly 165,000 short of what is needed, according to a recent report by the committee. And that shortage will only get worse after Brexit, the committee says. It estimates that 194,000 construction workers from the EU could be denied the right to work in the UK following Brexit, unless a deal is struck. That would have disastrous consequences for the industry.

Despite this, housebuilders are adamant they are turning things around. Home Builders Federation spokesman Steve Turner says: “The overwhelming majority of new-home buyers are happy with their purchase, with over 90 per cent saying they would buy new again. In the small percentage of instances where there are issues builders will look to address them in a timely manner to the satisfaction of the customer. The standards, inspections and warranty processes in place ensure there are very few serious structural issues with today’s new-build homes.”

That may be the case, but critics say the redress system for buyers who are unhappy with their home is wholly inadequate. At the moment, these buyers can seek redress through the Consumer Code for Home Builders, which also sets minimum standards for the industry. They must pay a fee and then an independent body will adjudicate and rule either in favour of the buyer or the builder.

But critics point to the fact few complaints side with the buyer. They say that because the code was developed by and led by the industry, it results in unfair outcomes for buyers. Last year, 102 buyers complained to the code’s Independent Dispute Resolution Scheme, run by the Centre for Effective Dispute Resolution – up from 66 the year before. Of these 102 complaints, just seven were fully upheld in the customer’s favour, while a further 59 were partially upheld.

While seven may seem a strangely low number of times to find in the buyer’s favour, it is a marked improvement on recent years. Between 2010 and 2015, the Code fully upheld just six out of 166 complaints. But while the code is gradually finding in buyers’ favour more, the level of compensation it recommends in each case is falling dramatically. In 2016, the average redress per successful complaint was £986 – less than half of the £2,031 awarded on average the year before.

Critics have hit out at the low number of payouts. HomeOwners Alliance, which lobbies on behalf of buyers and owners, says this is evident even by looking at the code’s case study section on its website.

Paula Higgins, its chief executive, says: “It is no surprise that the Consumer Code for Home Builders has tried to bury its own annual report. The number of complaints has doubled, but the average amount of redress paid has more than halved. Given homebuyers have to pay £120 to make a complaint, they don’t complain lightly, and yet shockingly only one in 14 of their complaints are fully upheld.

“Even when they win, often they get no compensation at all, and even when they do payouts can be so insultingly small that often the homebuyer refuses to accept them.

“This is an industry body which clearly sees its job as defending the industry rather than helping homebuyers with legitimate complaints. This scheme fuels cynicism amongst homebuyers while doing nothing to change industry behaviour.”

A spokeswoman for the Code says: “The Code’s Independent Dispute Resolution Scheme is provided by an international accredited organisation, the Centre for Effective Dispute Resolution and is equivalent to an ombudsman service. No award decisions are made by the Consumer Code or its partners.

“In addition, the Code has recently set up an independent disciplinary and sanctions panel which is chaired by a board member who represents Citizens Advice. This is designed to assess whether any further action should be taken by the Code in cases where the independent adjudicator has found that a Code breach has occurred.”

HomeOwners Alliance, along with others, have long called for the creation of a new, powerful Ombudsman, like the Financial Ombudsman Service, to deal impartially with complaints for new-build homes.

At the moment, complainants must rely on the Con­sumer Code as an adjudicator as the Property Ombudsman only looks at complaints between buyers and property agents and the Housing Ombudsman will only adjudicate on cases between landlords and tenants.

Critics have hit out at the low number of payouts

However, a separate, independent Ombudsman for the new-build sector is one step closer after a group of MPs launched an inquiry into setting one up.

The All Party Parliamentary Group for excellence in the Built Environment is looking at where the current complaints procedure works and where it does not. However, it will also investigate how a new Ombudsman would be funded and what can be learned from other bodies, such as the FOS.

Another major issue with new-builds that has hit the headlines in the past year has been that of leaseholds. Described as a “feudal” practice by critics, leaseholds allow buyers to occupy a property legally for up to 999 years as long as they pay an annual ground rent to the freeholder, which owns the land on which the home is built.

But it became clear in the past 12 months that many owners of leasehold homes in the UK were unaware that their ground rents would rise sharply over time.

Other homeowners were promised they could buy the freehold on their property after a few years for a few thousand pounds. However, when they approached their housebuilder they were told the freehold had been sold to an investment firm, many of which were quoting figures of more than £40,000. However, days before Christmas the Government bowed to intense pressure and announced a ban on leaseholds on most new-build homes.

The only time developers will be able to sell leasehold houses is where it is necessary, such as shared ownership properties.

It is right that the Government and industry are actively trying to overcome the housing shortage. And there are flickers of hope for buyers. But many issues still need to be addressed — and it’s not all about the numbers.

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