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Hot Topic Highlight – Defective Housing

Updated: Oct 28, 2023



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What is today's blog about?


In this week’s blog, we take a look at defective housing and the Housing Act 1985. This is essential reading for all Residential pathway RICS APC and AssocRICS candidates, as well as any Building Surveying candidates reporting on residential property.


What do we mean by defective housing?


Following World War II, there was a national shortage of housing. To meet high demand and increase the limited supply of housing, new construction methods were adopted, primarily by local authorities and public bodies.


These new methods were typically non-traditional (i.e., not traditional brick/block cavity or solid walls) and pre-fabricated to construct new homes quickly and efficiently.


Pre-fabrication was efficient because it:

  • Used minimal imported material

  • Did not require heavy plant for construction

  • Used unskilled labour on site, as labour (skilled or not) had been depleted by the war

  • Created cost efficiencies


These construction methods aimed to provide a short-term, rather than a long-term, solution to the problem.


Unfortunately, by the 1980s many of these non-traditional housing types were found to contain defects, which could lead to structural failure over the long-term. These defects were investigated in detail by BRE research in the early 1980s, following a fire in a non-traditional Airey house.


What is an Airey house?


A photograph of an Airy House.
Credit: Rory Henderson (Head of Net Zero) at Rand Associates

Airey houses, approximately 26,000 of them, were constructed between 1945-1955. They were effectively a ‘kit house’, that was assembled on site in a variety of layouts and sizes.



The construction comprised prefabricated concrete columns on each storey, clad with concrete shiplap panels. The columns were reinforced with steel tubing, recovered from military trucks.



Key issues with construction included:

  • Steel tubing exposed at the end of the concrete columns

  • Narrow columns with thin gauge concrete provided little protection for the steel tubing

  • No cavity insulation

  • Cladding was not overly weatherproof

  • Use of asbestos, e.g., in floor tiles, fire breaks and roof (not an exhaustive list)


This led to the steel tubing being corroded (rusting). In addition, chemical changes occurred in the thin concrete which removed the alkaline protection for the reinforcement, causing it to corrode. Both of these actions caused serious cracking within the concrete structure.


BRE research into Airey houses found that approximately:

  • 25% had no cracked columns

  • 33% had more than 30% columns cracked

  • 42% had some cracked columns but they were not in an advanced state of deterioration


Airey houses in wetter and colder geographic regions (e.g., North West and Wales) had higher incidences and extent of defects.


We will look at other defective housing types in a future blog article.


So what happened next?


In 1984, controversy surrounding defective housing types, exacerbated by the Right to Buy scheme, led to the Government introducing the Housing Defects Act 1984, which was consolidated into Part XVI of the Housing Act 1985.


This designated certain housing types as defective, such as Airey, Cornish Unit, Dorran, Orlit and Woolaway.


Owners of these defective housing types (around 31,000 nationally), which had been purchased from the public sector under Right to Buy schemes, were offered either:

  • 90% of the cost towards repairing the defects (subject to a cap and not permitting any improvements)

  • Repurchase of the house at 95% of the defect free value


The Government scheme reflected the fact that the serious inherent defects could not have been identified by a survey at the time of purchase and substantially reduced the value of the property.


The last claims under the scheme were made around 1994.


How were defective properties repaired?


Most of the defective properties were repaired under the PRC (Pre-Cast Reinforced Concrete) Homes Ltd (a subsidiary of NHBC) repair scheme. However, PRC Homes Ltd ceased trading in 1997.


Defective properties can still be repaired, but without any funding provided by the historic Government scheme. In 2016, the BRE set up the PRC (Repair Scheme) to certificate repairs to certain types of defective PRC homes, whilst other licensed PRC schemes are also available.


Completion certificates are issued by a specialist structural engineer following the repair works. The property is then considered acceptable to most lenders and insurers.


For an Airey house, for example, the repair works include removing the concrete panels and columns and replacing them with brick and blockwork. These works take 6-7 weeks and the occupants do not need to be decanted.


It is important to note that under the PRC certification scheme, a repaired property had to be capable of standing alone, even if it was attached to another property. This would apply in the case of a repaired semi-detached or terraced property, where the adjoining property or properties had not been repaired.


Some mortgage lenders will not lend on a repaired property attached to a non-repaired property.


In addition, there could be an impact on value of differing aesthetics and reduced kerb appeal. You can see this visually in the photographs below of neighbouring repaired and non-repaired properties.



Notes:

  • Photo 1 (Credit: Chris Clark, Riverside Residential Property Services Ltd) - Note the original construction next door to the repaired PRC house.

  • Photo 2 (Credit: Chris Clark, Riverside Residential Property Services Ltd) - Aerial shot of a mixture of repaired and un-repaired PRC houses.

  • Photos 3 and 4 (Google Maps, 2022) - Comparison between unrepaired (2009) and repaired (2022) PRC homes).


Some local authorities undertook only partial repairs, such as over cladding, which means that a PRC certificate will not have been issued. Properties that were only partially repaired are typically not considered mortgageable.


What do surveyors need to be aware of?


Surveyors need to be able to identify both traditional and non-traditional housing types.


Within non-traditional housing types, surveyors need to be able to identify defective housing types and whether these have been satisfactorily repaired or not (under the PRC scheme). This might also include whether neighbouring properties have also been repaired.


It is also important to be aware of the differences between the different types of repair schemes and what these differences mean.


Most importantly, the PRC Homes Ltd repair scheme was the most thorough and required the repaired property to have no structural reliance on the original concrete structure. This did not mean it had to be removed completely. It also allowed for individual properties in a terrace to be repaired in isolation from the rest of the terrace. However, marketability and hence value of such a property may still be adversely affected.


Other individual schemes need to be checked in detail to assess the extent of the repairs.


It is important to note that not all non-traditional (system built) properties are designated as defective. It is only those designated by the Act that are defective.


Surveyors need to be familiar with the types of properties they may encounter within their local area, together with the associated defects they may find within the local housing stock.


Surveyors carrying out mortgage valuations also need to be familiar with their individual lender client’s guidance, as this will confirm whether a specific housing type is considered mortgageable or not, plus any guidance on defective housing types and repair certificates.


Remember, marketability in the area is key to the advice provided to a lender, irrespective of how well a property has been repaired.


For example, Leeds Building Society’s Mortgage Lending Criteria & Guidance confirms the following:

‘Non-Standard Construction: The valuer’s guidance notes include a full list of acceptable construction types. Pre-fabricated reinforced concrete properties are not normally acceptable. However, these may be considered where the valuer states that re-saleability is unaffected and the property has been repaired under a PRC Home Ltd approved scheme…Importantly all adjacent dwellings must have been repaired. For example, all homes in a terrace or both homes in the event of semi-detached’.

Another guidance note, this time from NatWest, confirms that:

‘Designated defective PR houses are unacceptable unless the subject property and all other properties in the structural block have been repaired under the PRC Homes Ltd scheme and a Guarantee was issued by PRC Homes Ltd on completion of the works (even though the Guarantee will have expired). No other repair scheme is acceptable. The valuer must state in the report that the property meets the Core Requirements of being readily saleable and mortgageable. These properties will be considered on an individual basis, subject to the valuer's assessment of saleability and NatWest Core Requirements. Provided the property is considered saleable and mortgageable, then the property would be acceptable to the Bank subject to a satisfactory engineer's report’.

How can we help?

Stay tuned for our next blog post to help build a better you.


N.b. Nothing in this article constitutes legal, professional or financial advice.


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