Non-Traditional Housing – Securing a mortgage is not easy!

There is no reason why older houses of non-traditional construction cannot be repaired and refurbished to provide comfortable homes that can last for many years.  The issues however will come when an owner decides that they want to sell.  Lenders are very reluctant to borrow on such properties, which in itself is likely to make prospective purchasers nervous

Source: http://www.externalinsulation.co.uk/

Non-traditional housing generally relates to any property that is not built using traditional methods and materials. A traditionally built property would be of solid wall or cavity wall construction built with masonry (bricks/stone/blocks) and mortar. Non-traditional properties include those ‘designated defective’ under the Housing Act 1985 and those other types that have not been ‘designated’ but which are still not of a ‘traditional’ type (certain timber frame types for example). Certain non-traditional types are not mortgageable without significant amounts of work being undertaken to recognised standards.

Understandably, lenders often get very nervous about borrowing money to those who are planning to purchase a non-traditional house and although we may wonder why such a cautious approach is taken it is worth considering the risk to the lender.  In actual fact, the lender ‘owns’ a property until a loan has been paid back in full and have the right to re-possess in the event of a default in payments or a significant loss in value.  The lender needs to be satisfied that in the event of such a default that they can recoup the value of the loan at any point in time. Basically, lenders want to make sure that a property is readily saleable and isn't likely to have any serious defects in the construction.  In assessing whether to provide a mortgage a lender will consider the borrower’s ability to maintain mortgage repayments as well as establishing whether a property is considered to be an acceptable security in which to secure the mortgage loan.  It is the latter of these two criteria which comes under the spotlight when the property is classified as non-traditional.

Trying to secure a mortgage on a non-traditional property can prove to be problematic, with a limited number of lenders offering such a product.  Many lenders are not prepared to take the risk and avoid this market completely, however there are a number of lenders who are willing to provide mortgages on non-traditional properties, although this usually comes with a number of requirements that will need to met before a mortgage loan is offered.  A particular requirement may be for the property to have an Assessment in Accordance with Non Traditional Homes Appraisal Scheme (NTHAS). 

'The scheme takes a pragmatic and common sense approach to the structural assessment of these property types and does not automatically assume that at all forms of non traditional construction are defective. Very often it is sufficient to protect the underlying structure from further deterioration and exposure to the elements by the adoption of either a lightweight insulated render over cladding or brick cladding coupled with repairs and strengthening measures’ Source:http://www.mdyson.co.uk/ 

It is these types of measures that may provide the security necessary and give a lender sufficient confidence to provide a mortgage loan.

Source: http://www.greendealsolutions.net/

A number of years ago I was acting as Consultant for a medium sized Registered Social Landlord (RSL).  Five years earlier the RSL had taken ownership of approximately 1500 former Local Authority tenanted houses through stock transfer. Over the five year period the RSL had worked very hard to meet their ‘promises’ commitment, which required them to complete a comprehensive programme of refurbishment/upgrades and demolition and a new build programme.  For those who are not aware of the intricacies of stock transfer, part of the process requires consultation with tenants with a view to gaining their support and commitment so that they will vote in favour of the transfer.  During the consultation the proposed new RSL will detail improvements they will make and make a number of commitments or promises together with likely timescales should the tenants vote for the transfer.  The RSL I was acting for was now reaching the end of this initial programme and were now considering how to strategically proceed with a number of non-traditional houses they have inherited through the stock transfer.

As part of the appraisal we considered a number of options to maximise the assets, one of which was to consider selling properties on the open market.  In order for this to happen we had to ensure that the properties were mortgageable and not only that but also to establish which lenders would be able to offer mortgages on these properties, so that prospective purchasers could be directed to a selection of lenders.  After a number of months of consulting with lenders we established a list of just three who were willing to offer a mortgage. All three lenders stipulated that each of the properties must have a structural assessment and that a comprehensive programme of repairs/upgrade must be undertaken.  This included concrete repairs, where appropriate as well as the installation of an externally insulated render system and window replacements to the external envelope to improve the very poor thermal efficiency of most non-traditional housing.  As you would expect, these improvements and repairs were not cheap, so it was necessary to factor in these costs together with the cost of professional fees, warranties and the like and then weigh them up against the likely return based upon the open market value.  Even if these works were to be carried out, the properties would always be classified as non-traditional construction and the client felt that this would significantly impact on the number of prospective purchasers and in particular their restricted ability to obtain a competitive mortgage due to the limited number of lenders willing to provide one.  In the end the client felt that the most viable option we provided was to demolish their non-traditional over the next few years and replace them with new build.


In summary, there is no reason why older houses of non-traditional construction cannot be repaired and refurbished to provide comfortable homes that can last for many years.  The issues however will come when an owner decides that they want to sell.  As discussed above, lenders are very reluctant to borrow on such properties, which in itself is likely to make prospective purchasers nervous. With the amount of non-traditionally constructed houses in existence in the UK this is an issue that many are likely to encounter for a number of years to come.  Consequently, cash paying property investors may see non-traditionally constructed houses as an opportunity as some may be in a position where they do not need a mortgage loan. They are likely to be able to achieve good rental yields over many years, based on the fact that they may be able to pick up these types of properties relatively cheaply.

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Information/opinions posted on this site are the personal views of the author and should not be relied upon by any person or any third party without first seeking further professional advice. Also, please scroll down and read the copyright notice at the end of the blog.

Non-Traditional Housing - External Wall Insulation

Guest article from Joe Malone BSc(Hons) ICIOB Head of Asset Management ALMO Business Centre Leeds

It should be recognised that the majority of External Wall Insulation (EWI) systems are non-structural and therefore are fixed to load bearing fabric. There are times when a non-structural system is inappropriate for use such as in Crosswall construction.

The Triple Problem

Figure 1. Typical EWI System - Source: http://www.everwarmgroup.com

Non-traditional stock normally presents 3 major problems for registered providers, they are thermally inefficient, they may have structural defects and they are unattractive and often blight housing estates. Whilst each problem presents unique challenges, none are insurmountable and life cycles can be cost effectively extended for a further 30-40 years so long as investment decisions are evidence based and address the three problem areas under discussion.

Poor SAP Ratings

Since all non-traditionally constructed properties require an improvement in their SAP rating it makes sense to discuss external wall insulation. There are a number of EWI systems in use but unless you are looking or a structural system then there is little variation apart from the choice of insulation material.  Phenolic boards (PF), PUR (Rigid polyurethane foam), PIR (Polyisocyanurate) EPS (Enhanced polystyrene board) or mineral wool are all frequently used as part of these EWI systems.  Rigid phenolic insulation products offer best thermal performance when, compared with rigid polyurethane or extruded polystyrene. Its low thermal conductivity allows specified thermal performance targets to be achieved with minimal thickness of insulation. This is particularly significant where space saving is important. For this reason it is one of the most widely used products in the external wall insulation business. That being said Phenolic board comes with a few known and a few less well publicised issues:

1.   Demand for phenolic board has exceeded supply which has caused manufacturers to cut the 12 week curing period to 6 weeks in an attempt to keep the market supplied. There are some concerns with regard to the effect this decision will have on the quality of the product and there is some early anecdotal evidence regarding increased board shrinkage after system application. Phenolic boards were known to shrink which can occasionally cause gaps to open up in the building envelope. Will we now see an increase in the severity of this problem? Many commentators (myself included) believe that we will.

2.   Phenolic board has known acidic properties and should not be placed in direct contact with metal roof decks, wall cladding or stanchions. There are cases pending against the manufacturer where phenolic boards have caused corrosion of steel roof decks.

3.   Phenolic foam insulation has a significant environmental impact, exceeding that of other insulation materials. Significant amounts of petroleum and natural gas must be burnt during the manufacturing and refining processes, though the insulation industry has ceased to use chlorofluorocarbons (CFCs) in the manufacture of foam insulation products. In simple terms, it's nasty stuff, its manufacture was discontinued in the US in 1992 and you should consider whether continued use of phenolic board is a responsible business decision for you or your client.

4.     Phenolic foam insulation will deteriorate if it is exposed to moisture or sunlight for extended periods of time. While it will be safe from sunlight exposure inside your walls or between your floorboards, it is important to store phenolic boards correctly and apply render to walls within 48hr of fixing external wall boards.I have personally managed millions of pounds worth of EWI work and site management of this issue has been a consistent and ongoing problem.

Figure 2. A Wallsall scheme. No design work and bland results

PUR board comes with similar known environmental problems but is also known to suffer a loss of U value (thermal performance) with time. This is due to a combination of air infiltration and fluorocarbon gases diffusing out of the product (outgassing) over time. This rate of outgassing is unclear and varies from product to product but in all likelihood a property that has a PUR insulation system installed will have a significantly reduced U Value 10 years on from the date of installation.

The most cost effective and pragmatic choice of material from the 3 materials listed is EPS, in particular Graphite enhanced polystyrene (GEPS), which will give a significantly improved U-value over standard EPS. Long term performance gives significantly less concern than phenolic or PUR and whilst it could never be considered a ‘green’ product, it is in my opinion the more environmentally friendly and acceptable choice from the main types of rigid insulation board in main use. Mineral wool also provides a viable alternative choice to GEPS yet it one of the more underused options. Of course there are pro's and con's with every material choice and whilst I would recommend GEPS for low rise stock, consideration needs giving to fire performance when used in high rise stock.

Fire Safety Performance

A chemical called HBCD is often added to EPS or GEPS to improve fire performance and whilst you may not yet have heard about health concerns relating to the use of HBCD, it is on the verge of being banned or having its use restricted in Europe. In general terms EPS or GEPS has poor fire performance but can achieve a class E rating when enclosed with a laminated facing layer of the type seen in EWI systems. That being said, Class E isn't really acceptable for high rise applications and you would be looking to build in external fire breaks if such a system was used externally on high rise blocks. Whilst being the least environmentally friendly, PIR or PF insulation boards offer the best fire resistance having achieved a class O rating; this does raise their profile for use in high rise applications.

EWI System Failures

There are a number of EWI high rise system failures in Scotland and Birmingham and the North West; I'm sure there are many more that to date I am unaware of but the point is made. One spectacular failure in the North West was captured by a passerby on their mobile phone:

In Scotland court cases are pending but in Birmingham the issue has been turned into a dispute over whether the products or the standard of installation were the cause of these failures What is clear is that insulation boards have moved or become partially detached from the external building façade and the I have some concerns that systems have not been adequately wind tested for installation at height. Another known problem is that mechanical fixings into no fines concrete have been very poor or completely inappropriate for the circumstances. There have been a significant number of hammer fixing failures into concrete and particularly no fines concrete.

In general terms, the majority of EWI system installers are satisfied with mechanical hammer fixings alone whilst a minority of installers believes this is a problem and adopt a belt and braces approach to installation by both gluing and mechanically fixing boards to the external façade. I agree with this approach for low rise stock but would still issue a note of caution with regard to specifying a standard non-structural system for medium to high rise stock.  If the thermal solution is not given adequate consideration and fails then I have experienced first hand how extremely difficult it is to get contractors to resolve these failures when high rise access alone (mast climbers or scaffolding) can cost them somewhere in the region of £100k to £250k per block.

EWI Structural Systems v Non-Structural Systems

It should be recognised that the majority EWI systems are non-structural and therefore are fixed to load bearing fabric. There are times when a non-structural system is inappropriate for use such as in Crosswall construction. Crosswall construction takes all the building loads from floors, roof etc. on the gable walls. The front and rear facades of these properties are non-load bearing and therefore unsuitable for fixing a standard EWI system. In these cases you would choose a structural EWI system such as Structherm. Moreover, a structural EWI system has several other potential applications when considered for use on non-traditional stock.

·       Full cladding of defective buildings (reduces need for difficult remedial work)

·       Fully designed structural cladding for non-traditional medium to high rise structures. Designed to account for wind loadings etc.

·       Full over-cladding of defective or inefficient system built structures (improving structural safety and thermal continuity)

·       Enclosing balconies and walkways (converting external space into usable internal floor area)

·       Forming new or extending existing parapets (improving safety at roof level)

You should also note the failures of mechanical fixings into concrete (particularly no fines) and ensure a system is designed to bypass this issue. This is a note of warning that should apply to all system design but you should note that bad site management during any installation process will negate any effective design process. I have visited site on many occasions and seen the wrong size hammer fixings used or more commonly, operatives not using depth stops attached to their drills and often even punching straight through walls when drilling for hammer fixings. The length of hammer fixing is critical to the design process yet I am convinced that they often don't account for the depth of existing render applied to some non-traditional properties and therefore hammer fixings can be fixed to insufficient depth in the structural panel. It is all too easy to make assumptions about the depth of existing render and I often insist on having patches chiselled out to expose the substrate. This allows us to make a more informed decision about the required length for hammer fixings.

Pre-Existing Concrete Defects

In part one I discussed the defects relating to carbonation and chloride attack of concrete non-trads. The problem is of particular concern when dealing with high rise stock because the repair of cracks and spalling can significantly add to your refurbishment cost. Each small localised repair can cost circa £30-40 per repair. There can be hundreds of such repairs on each high rise and this doesn't account for access costs or the cost of an anti carbonation coating. Rusting is of course an expansive reaction and treating rusted rebar is a key part of the concrete repair process to prevent future spalling of the concrete. There is an argument that says overcladding with an EWI system cuts off oxygen required for the rusting process and therefore prevents any further deterioration of the rebar. This could to a degree mitigate the requirement for concrete repairs but where structural engineers are involved in the design process then they are less likely to accept this argument.

Is EWI Appropriate for All Properties?

In short, No! There are concerns about the potential for EWI systems to cause damp and this stems from two issues:

1.     Traditional properties built on the ‘overcoat’ principle and using traditional stone or lime mortars are meant to breathe. Adding EWI would affect the walls breathability and is completely inappropriate for use on these properties. An ex-colleague of mine has been trying to find a solution for improving SAP on single skin stone properties in Cumbria, they went with an internal wall insulation system and whilst pragmatically this raises less concern it will still affect the walls breathability.

2.     I’ve seen a number of EWI systems badly installed and bridging the dpc. The installers may well claim that their materials will not wick moisture but you’d be wise to discount their claims. 

Design

Figure 3. A well designed Nottingham City Homes scheme in Bulwell, Nottingham.

Well designed EWI systems have the ability to completely transform our estates but if design is not given adequate consideration then completed estates will remain as bland or even be damaged, particularly by the choice of gaudy colour schemes. Housing providers who give residents too much choice in the design of their estates are often those that end up with a series of ill matched pink, green and violet housing.

Whilst colour choice of external render systems is one consideration, all EWI systems offer a choice of features that will add architectural detailing, particularly effective can be the use of bricks slips. On the last scheme I was involved with we gave a great deal of consideration to all aspects of design, even to the extent of having artists illustrations done so we could make informed choices on design. To many organisations, EWI is nothing more than a technical solution to deal with thermal efficiency but they are failing to protect the future of their estates and communities by not giving adequate consideration to the design process.

Please feel free to share this article and other articles on this site with friends, family and colleagues who you think would be interested

Information/opinions posted on this site are the personal views of the author and should not be relied upon by any person or any third party without first seeking further professional advice. Also, please scroll down and read the copyright notice at the end of the blog.

Non-Traditional Housing Stock - Strategic Planning

Guest article from Joe Malone BSc(Hons) ICIOB Head of Asset Management ALMO Business Centre Leeds

The average SAP rating for non-traditional stock is around 45 yet social housing providers should be aiming for a target SAP rating of 80

Figure 1: A Typical Pair of Airey Non-Traditional  PRC Houses

To date I have written two survey strategies to give housing providers guidance on dealing with their non-traditional housing stock. The scope of recommended survey and the information gleaned is critical to planning any investment or indeed, disinvestment, into non-traditional stock. Contrary to popular belief specialist structural survey work is not always required and even where a structural engineer is required it is important to define the scope of inspection to ensure the information is focussed and relevant.  The survey strategy should  be balanced against the view that the aim of the asset management strategy is to secure a 30-40 year lifespan.  When we talk about this lifespan we are not simply talking about these buildings being structurally sound for another 30-40 years; we have to recognise that these buildings in ‘as built’ condition are technically obsolete, particularly with regard to thermal efficiency. The average SAP rating for non-traditional stock is around 45 yet social housing providers should be aiming for a target SAP rating of 80, admittedly a challenging target when you consider that the average energy efficiency SAP rating of new homes was 79.4 in England for the quarter January – March 2012.

What is a Non-Traditional House?

In essence it is any property that is not built using traditional methods and materials. A traditionally built property would be of solid wall or cavity wall construction built with masonry (bricks/stone/blocks) and mortar (OPC or lime). Arguably even todays MMC (Modern methods of construction) will in future be defined as non-traditional stock because it uses non-traditional fast track on site or off site construction techniques. We can only wonder as to whether in future these methods become so commonplace that they become the norm and therefore traditional, but I digress…

The scope of this article is to discuss the non-traditional stock that sprang up after the war in response to the national housing shortage and the shortage of traditional build materials and shortage of a skilled workforce to build at the required demand. The answer was found in system build housing, particularly Pre-reinforced concrete (PRC) and In-situ (poured on site) concrete systems. Additional there were a number of steel/timber frame and hybrid systems clad with a variety of materials. It is this huge variation in non-traditional stock that can make property identification extremely difficult for the average building surveyor. 

The problem with Non-Traditional housing

Figure 2: Corroded reinforcement due to low concrete cover on 

a Reema hollow panel system

We’ve touched on the poor thermal comfort in these properties and along with this many properties are prone to damp, particularly condensation damp due to cold bridging but also penetrating damp due to failed building joints. In general most non-traditional housing systems have performed well from a structural point of view, although some problems developed with a number of system-built dwellings. By the 1980s some fundamental problems affecting structural stability and durability began to emerge in some of the concrete system built houses. The problems occurred because of either carbonation or the presence of chlorides in the concrete and resulted in the corrosion of steel reinforcement and subsequent cracking and spalling of the concrete. The issue of carbonation was exacerbated in many of these systems by the slenderness of many of the components involved which offered comparatively little cover to the steel. Steel reinforcement should be covered with at least 65mm of concrete to afford the required degree of resistance to corrosion.

The problems of carbonation and the presence of detrimental chloride levels in reinforced concrete dwellings led to certain concrete housing systems being designated defective under the 1984 Housing Defects Legislation which was then incorporated into the Housing Act of 1985. A company named PRC Homes Ltd (a subsidiary of NHBC) was set up to licence repair schemes for housing systems designated as defective under the Act. The extent of works and costs involved in some of these repairs was very substantial. No steel or timber systems were ever designated as defective. The PRC Homes Ltd scheme was discontinued in 1996 and most of the original 10 year warranties on properties gained from this scheme will have now expired.

A lot of our non-traditional stock was never designated as defective and therefore never repaired under an approved repair scheme. The following table gives you some understanding with regard to how mortgage companies view these properties:

A	Acceptable for normal terms - e.g., some post-1960 timber and steel frame    houses, some in-situ concrete and concrete block systems.
B	Unacceptable - But special cases of high merit can be considered. These will be generally high value properties with proven demand. Properties that are accepted locally by other major high street lenders may also be considered, even if values are lower than traditionally built properties; however, there must be a proven demand for the properties.
C	Unacceptable in original condition but suitable for normal terms on completion of acceptable repair scheme. Any repair scheme must include the whole structure/block, please refer details to Risk Policy, NAC, (for PRC properties designated as defective under the 1984 Housing Defects Act, see terms F).
D	Acceptable up to 85% loan to value in original condition and normal terms on completion of acceptable repair scheme, e.g., BISF houses and other Steel systems.
E	Acceptable for houses and bungalows not more than two storey’s in height, provided that a survey and appraisal from a Structural Engineer is available in accordance with the BRE Guidance Appraisal - Part 2 of study of LPS
F	PRC properties designated as being defective under the 1984 Housing Defects Act. Unacceptable in original condition. Acceptable on completion of an approved repair scheme to whole structure/block. Limited terms may be applied.

Essentially each non-traditional property is assigned a category A-F which affects the mortgageability of that property and this is important because it gives us an idea of which types were repaired under approved repair schemes and which were not. It also gives some guidance as to which properties are subject to a structural engineer’s appraisal.

BRE Guidance

You may have noted the reference to the Building Research Establishment (BRE) contained within the table above and this is because they have been incredibly active in researching defects in non-traditional stock since the 1980’s and have built up a bank of core reference material, which is available on CD Rom and titled: Non-traditional housing:constructional details, assessments of condition, maintenance and repair.

Critically this reference material contains clear guidance on the level and detail required for surveying non-traditional stock to determine its structural adequacy and can be used in conjunction with a range of other desk top reference material to structure some survey guidance for individual archetypes. For example guidance for  ‘Cornish’ units might look like this…

Cornish Units

These are PRC properties subject to mortgage category F which means they were designated as defective under the 1984 Housing Defects Act. All properties should have undergone repair under an approved repair scheme and can be considered exempt from the structural problems affecting untreated Cornish properties if that proves to be the case. Untreated properties have a standard SAP rating of 51.8 and once potential structural problems have been assessed and remedied then refurbishment works should focus on improving the thermal efficiency of these properties. Condensation damp was a notoriously frequent occurrence in untreated Cornish properties and improving thermal efficiency will go some way to addressing any issues relating to condensation damp.

For untreated Cornish properties the following overall survey procedure should be adopted:

The site investigation consists of three stages:

1. The visual inspection of inside and outside of dwellings. 

2. The visual inspection of structural components where normally exposed on the inside and outside.

3. Examination of components by uncovering reinforcement for visual inspection and measurement of cover, by taking samples of concrete for analysis to determine chloride and cement contents and to assess the depth of carbonation and the depth of cover to rebar.

Figure 3: Cracked column in 'Unity' due to high Chloride levels

The completed survey strategy details an approach for every property archetype whether it be low, medium or high rise. We have over 400 high rise blocks in Leeds the majority of which are cast in-situ or PRC blocks and we have a strong focus on both structural integrity and fire safety in these blocks. Build archetype also determines fire compartmentation and means of escape so these issues are inevitably discussed in the final analysis.

Even where properties were subject to approved repair schemes in the 1980’s & 90’s many of these properties still suffer poor thermal efficiency and generally across all non-traditional stock, residents experience cold and damp conditions and subsequently high fuel bills. Many landlords have targeted their non-traditional stock for external wall insulation (EWI), though this is partially because some of these properties qualified for funding under the Governments Community Energy Saving Programme (CESP). You must consider the structural issues in conjunction with the cost and efficacy of upgrading properties to modern standards of thermal comfort. Whether or not external wall insulation is the best way forward in securing another 30-40 year lifespan on non-traditional stock will be the subject of the second part of this blog.

Joe Malone BSc (Hons) ICIOB Head of Asset Management ABCL

Please feel free to share this article and other articles on this site with friends, family and colleagues who you think would be interested

Information/opinions posted on this site are the personal views of the author and should not be relied upon by any person or any third party without first seeking further professional advice. Also, please scroll down and read the copyright notice at the end of the blog.