Hidden risks blight tens of thousands of new homes
First time buyers and other people seeking affordable homes built on ‘brownfield’ sites should beware hidden risks which could make these properties uninsurable and unsaleable.
That is the stark warning from Britain’s biggest friendly society which claims that one in 10 homes built on formerly industrial land has already suffered serious problems. John O’Roarke, managing director of LV=home insurance, formerly Liverpool Victoria, said: “About 74,000 new build homes have been adversely affected by the land they were built on in the past 10 years.
“But because of the lack of affordable housing and the need to protect greenbelt land, over the next decade another 500,000 homes will be built on redeveloped ex-industrial sites that could pose risks to homeowners and their properties.”
Government policy requires one in eight new homes to be build on ‘brownfield’ sites or land which was previously occupied by another building, such as a factory or industrial works. The friendly society’s research suggests the most common problem to afflict these homes is flooding, but there are also cases of toxic contamination, poor drainage and sewage overflows.
Flooding is the biggest financial risk for buyers of new homes because these claims are excluded from the National House-Building Council (NHBC) 10-year warranty, that covers most newly-built homes. Richard Tamayo, a director of NHBC explained: “Our technical standards provide detailed guidance on how to safely manage the remediation of contaminated land to ensure it is suitable for new home development and our warranty includes insurance against that risk.
“In practice our claims experience would seem to suggest that building homes on contaminated land does not cause problems in the vast majority of cases.
“In terms of flooding, this is very much a matter for government policy and local planning authorities. Our warranty does not provide cover for flooding, which is typically not caused as a result of construction issues.”
Unwary homebuyers could find themselves caught in the middle of a stand-off between the Government, the NHBC and the Association of British Insurers (ABI). Household insurers are reluctant to cover properties at risk of flooding because of the potentially high cost of claims and recent Government cutbacks in flood defences.
Homes which already have cover should always be able to renew but those seeking insurance for the first time – such as buyers of new builds – may struggle to find affordable policies in some areas. The ABI says it wants to avoid coastal and riverside properties becoming uninsurable but it is calling for the Government and local authorities to maintain adequate defences.
Malcolm Tarling, a spokesman for the ABI, said: “We agreed a statement of principle with the last government that member insurance companies should continue to offer cover against flood risk for existing policyholders but that agreement expires in 2013.
“Since that statement of principle was agreed, the Coalition Government’s spending review announced an 8pc reduction in spending on flood defences. We expressed our disappointment at that and are now waiting to see how the Government will manage to do more with less money.
“The ABI wants to see flood insurance remain widely available, although it is a fact that the statement of principle does not apply to householders who are not already insured seeking new cover.”
But problems may be exacerbated by the last government’s drive to develop some sites which critics claim will always be unsuitable for housing, such as seasonal flood plains. Trevor Kent, a former president of the National Association of Estate Agents, said: “Nothing can be more controversial in the government’s Gadarene rush to build new homes than the release of substandard land.
“There is little doubt that thoughts of profit can sometimes blind developers to the very real risks associated with past pollution, flood risk and other problems such as subsidence. Policing of applications where such problems are known or suspected needs to be more rigorous than is currently is the case.
“Lenders and insurers and the NHBC will be placed under such risk that they may well refuse to co-operate, or worse still withdraw cover when re-sales are contemplated, leaving the first owners unable to move.”
Brownfield hotspots include many urban parts of the North East, North West and West Midlands due to the density of former industrial activity in these areas. Examples in the South include parts of London Docklands and towns where former Armed Forces land could be redeveloped for housing, such as Portsmouth and Gosport.
High house prices and supply falling short of demand tend to compound the problem. Steve McGuckin, managing director of property consultantsTurner & Townsend, commented: “The availability of developable greenfield or previously undeveloped land will continue to be constrained, perhaps more so if the Localism Bill gives greater power to communities to oppose new development. This will inevitably increase the demand for properly serviced and de-contaminated brownfield land.
“It is therefore likely that developers will expect the public sector to take a more proactive role in preparing brownfield sites to the required standards, especially if the ‘product’ being built is new, affordable, homes. Then the Government will be under more pressure to meet the costs of developing brownfield sites, a role previously provided by the Development Agencies.
“In the absence of any such subsidy there will always be a risk that developers may seek to save costs, perhaps by building on sub-optimal land or, in some cases, cutting corners in terms of decontamination.”
As the number of people who wish to live on these overcrowded islands continues to rise – and politicians’ talk about stemming that inflow fails to translate into action – our national housing problems look set to get worse. No wonder some property developers appear to believe that neither they nor their clients are in any position to be choosy about where new homes are built.
According to the Environment Agency, more than 5m people in England and Wales live and work in properties that are at risk of flooding from rivers or the sea. You can see if you are one of them by going to its website here and keying in your postcode.
Daily Telepraph 09.05.2011