Monday, 30 May 2016

The Taxpayer as Insurer

This story has popped up on my social media recently.

There’s relatively scant details in the Daily Record article, or indeed in the online petition that’s been set up by the daughter of one of the homeowners affected.

Here’s my attempt to summarise what’s happened (please feel free to get in touch and correct me if I’ve gotten any of the details wrong – all of my information here is from second and third-hand sources, so who knows what details may have gotten distorted in transit):

The council (local government) in West Dunbartonshire built a bunch of houses several decades ago.  These are what is known in the UK as ‘council houses’, i.e. low-cost housing created for people who, for whatever reasons, find it difficult to find affordable private housing to rent or buy.  Tenants of these properties rent them from the local government, typically at below-market rates.

The central UK government passed ‘right to buy’ legislation as part of the Housing Act 1980.  This entitles tenants of council houses “the legal right to buy, at a large discount, the home they are living in”.  This discount was originally very substantial, at between 33% and 50% of the valuation of the property.  The size of the discount was reduced in 1997, and some of the rules surrounding ‘right to buy’ were changed in 2005.  For example, five years tenancy is now required to qualify for ‘right to buy’ and properties purchased under the scheme since 2005 cannot be immediately placed on the open market for sale, among other restrictions.

The houses in question started out as council houses, but were subsequently bought by their tenants at well below market rates under the ‘right to buy’ scheme.

A few years ago, in 2013, “a serious roof defect was discovered” in a number of these houses.  “Some of these properties have had roofs collapse, with several so defective that they have been deemed uninhabitable, others requiring new roofs to be built and many still to be surveyed.”

I don’t know the precise nature of the building defects, but they sound pretty serious if people’s roofs are falling in and homes are being rendered uninhabitable or deemed unsafe to live in.  A few of them have even been earmarked for demolition.

The specific example given in the article is that of one Mrs Mary Goldie, a 69 year old retired headteacher, who purchased her house in 2008 for £105,000 (~$206,000).  This purchase was not made under ‘right to buy’; the property was already under private ownership prior to Mrs Goldie’s purchase of it.

Mrs Goldie’s house has been rendered uninhabitable by the defects and she’s been forced to move out.  With the help of her family, she’s taken out a mortgage on another nearby property to live in.

The council have subsequently offered to buy Mrs Goldie's house from her for just £12,000 (~$17,500).

The response of Mrs Goldie’s daughter has been to raise a petition “to request financial support from the Scottish Government for the private homeowners of flat-roofed properties in West Dunbartonshire”.

I feel bad for this woman, I really do.  Her house has been rendered almost worthless by the extent of the defects and she’s spent most of her savings on securing somewhere else to live.  It is a nightmare situation for anyone to have to go through.

But, what I don’t understand is why are taxpayers being asked to foot the bill for this?  Surely this is a matter to be dealt with between the property owners and their insurance companies?  The petition states that the “insurance companies will not pay out anything”.  I don’t understand why this would be the case.  Surely this is exactly the sort of thing people take out insurance for?! 

The responsibility for maintaining and repairing a property lies with the owner of that property.  Property owners take out insurance to protect against catastrophe, that is, to cover substantial necessary work that they wouldn’t be able to afford on their own.

If the home(s) in question are still owned by the local government, then the responsibility for repairing them lies with the local government and/or their insurer(s).

If the home(s) in question are privately owned, then the responsibility for repairing them lies with the private owner(s) and/or their insurer(s).

I would happily sign a petition that asked for the government to assist the homeowners in dealing with their insurers and to put pressure on the insurance companies to pay out.  I refuse to sign a petition that basically amounts to the taxpayer acting as a private insurer.  I never agreed to insure these properties with my taxes.  And I don't expect Mrs Goldie or her daughter to pay for any repairs I might require on my house.

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