In the year-ended March 31st 1927, the Bank completed 1,007 mortgages, resulting in an increase of £292,713 in the balance outstanding. This large increase in business was mainly due to the City Council’s desire to increase the number of owner-occupiers by selling Corporation houses under The Assisted House Purchase Scheme.
In a period when there was a shortage of bricks and bricklayers, the Corporation chose to look to other methods of house construction not requiring the traditional method of building with bricks. Consequently, on the Pype Hayes Estate in Erdington, a number of houses were erected using concrete – these were known as Boswell Houses, as they were built by M A Boswell & Co Ltd of Wolverhampton under his registered patent "system of semi-dry reinforced concrete".
When problems arose with houses constructed by this method, the Bank began to have problems with loans falling into arrears as the owners protested by withholding payments on their mortgages. A number of conferences were held involving all the Corporation Departments involved in The Assisted House Purchase Scheme to consider this, and other problems arising under the scheme.
In December 1927, the Bank had 189 (out of a total of 5,725) mortgages in arrear. Of these, the largest category was 53 houses on the Pype Hayes Estate. A Pype Hayes Protest Committee was formed in order to present their grievances to the City Council. Inevitably, the situation on the Pype Hayes Estate was raised by the press, including an article in the Birmingham Post on December 7th 1927:
It has been obvious for some time that the building on the Pype Hayes estates was going to be one of the liabilities – rather than one of the assets – of the Public Works Committee. The work was done hurriedly because houses were urgently needed. It was done in an almost untried medium, because our local force bricklayers was unable to meet the public need. It was done, to a large extent, by unskilled labour. In the circumstances complaints were inevitable. None the less, we think the Council was right, yesterday, when it defeated Mr Simmons’s proposal for an independent committee of enquiry. Alderman Bower’s arguments leave us quite unmoved. If the Municipal Bank is really getting worried over the million or so of money it has advanced on municipal houses, then the independent enquiry ought to be into the methods of the Municipal Bank, rather than into the methods of the municipal builders. Are they, in fact, laxer in their inspections of municipal houses on which they lend money than they would be with other houses? In any case, neither the Bank nor the owners of houses generally seem to have any good reason to be afraid. Even on the Pype Hayes estate the number of bad houses is infinitesimal. Certainly, no owner-occupier can fairly deduce therefrom that he has made a bad bargain; nor need the Bank have any real fear in respect of its mortgages. The one good reason for an independent committee would be some evidence that the owner-occupiers of the bad houses are being unfairly treated. That evidence is wholly absent. The Committee’s proposal is to put right minor defects without disturbing the occupier; in the case of major defects to supply alternative accommodation – paying the cost of a double move – while reconstruction is taking place. That seems to us a fair enough proposal. What is the reply of the tenants? Some refuse access to a contractor anxious to make repairs. Others, who have bought houses, ask not to be given good houses for bad, but to be given – without purchase – tenancies that they would not have secured if they had been content to stand, so to speak, in the queue of would-be tenants. With neither class will the general public have much sympathy. Still less will it support those who wish to make political capital out of one of the rare reverses of a very efficient housing authority. Admittedly there have been faults in the Pype Hayes houses. But there have not been many and the Committee is anxious to repair them. Certainly they ought not to be an excuse for giving purchasers a special benefit; nor for administering a rebuke to a Committee that, on the whole, has done extremely well.
Shortly after this article was published, the Bank’s Chairman, Sir Percival Bower, presented a report to the City Council that included reference to the problems at Pype Hayes. This event was reported in the Birmingham Post on December 14th together with an article critical of Sir Percival:
Alderman Sir Percival Bower moved the approval of the report of the Bank Committee, and recorded a steady, all-round development in the bank’s work. The inadequacy of the head office premises was giving the committee cause for considerable anxiety. There was a lack of public space, and very cramped working conditions for the staff; and it was necessary for the future prosperity of the bank that adequate office premises should be provided as speedily as possible.
Referring to the question of repayment of mortgages in connection with municipal houses, Sir Percival said the committee had been and still were seriously concerned at the course of action taken by certain purchasers of houses, particularly on the Pype Hayes Estate. He had figures at his disposal which would go far as the repayment of principal and interest to the bank by the mortgagors was concerned, they had little or nothing to be apprehensive about – as a matter of fact the percentage in relation to the total amount lent to mortgagors was 0.109%, so that the Bank Committee could say it was in an extremely happy position. But their concern arose from the fact that they had a considerable amount of money involved in one venture. At the meeting of the Council a week ago he indicated the concern of the Bank Committee in this matter. His remarks apparently led the “Birmingham Post” to publish an article in which the following paragraph appeared: “Alderman Bower’s arguments leave us quite unmoved. If the Municipal Bank is really getting worried over the million or so of money it has advanced on municipal houses, then the independent enquiry ought to be into the methods of the Municipal Bank rather than into the methods of the municipal builders. Are they, in fact, laxer in their inspections of municipal houses on which they lend money than they would be with other houses?”.
“The writer of the article,” said Sir Percival, “at the very outset clearly indicates his attitude towards myself, but let me at once say that so far as that issue is involved, I am but very little concerned. (Hear, hear.) What I am concerned about, however, is that he should endeavour to draw attention away from the question of faulty houses by having a tilt at the Municipal Bank. I want to say, without a moment’s hesitation, that I can appreciate the fact that the rapid development of the Municipal Bank may not suit his particular views on municipal banking, but that is no reason why he should have written so foolishly as he did. I feel it necessary to say at once that if this Council thinks it desirable that there should be an enquiry into the working of the Municipal Bank because of the complaints as to the condition of houses erected under the supervision of another committee, we won’t resist it, as we have nothing to fear. Again I would assure you, as I would assure the citizens generally, that the Bank Committee can be trusted to look after the interests of its depositors quite as assiduously as the ‘Birmingham Post’ looks after its friends.” (Laughter and a voice: “That’s the stuff to give them.”)
For ascertaining the value of a house, Sir Percival proceeded, the committee employed a competent valuer engaged in private practice outside the city in whom the committee had every confidence. In arriving at the valuation every care was taken adequately to protect the interests of the bank and its depositor. So far as non-Corporation houses were concerned, the committee were satisfied that the advances which had been made were fully covered, and that in no case was there the slightest likelihood of a loss being sustained. But in regard to Corporation houses, the valuer relied upon the private builder having carried out the work according to contract conditions, and upon the fact that the houses had been passed as satisfactory by an official of another department of the Corporation. On that assumption the valuer furnished the committee with his opinion of the value of each house, and the bank undertook to grant advances up to four-fifths of the valuation. Houses could be bought with a deposit of of £20 for the non-parlour type and £25 for the parlour type, the rest of the purchase money being found by the bank, with the Finance Committee guaranteeing the bank for the amount above 80% of the valuation. The financial effect of this arrangement was that of the total of £846,493 advanced by the bank on Corporation houses the Finance Committee were responsible under their guarantee for £179,028.
When he said that the bank were naturally concerned at the position which they found themselves in consequence of developments in a certain direction, he had in mind the fact that not only were the bank concerned but that the Finance Committee were heavily concerned as well. The Finance Committee had relied, just as the bank had partially relied, on the honesty of the private builder, plus reliable service from their officials. The bank was quite safe as regards its liabilities, but it was possible – and he was not going to raise any of the issues again – for defective houses to be sold to purchasers, it was naturally the concern of every member of the City Council and particularly of the Bank Committee and the Finance Committee. No one who had the well-being of the citizens at heart could fail to be disturbed at the difficulties which had arisen in connection with the problem, and it was up to the Council to meet those difficulties in a straightforward manner. The Bank Committee would continue to discharge its duties to the depositors, for whom they acted as trustees, with exactly the same thoughtful deliberation as they had always done. The interests of those depositors would not be sacrificed in any way, whether the “Birmingham Post” leader writer was satisfied or not. “It is very evident,” concluded Sir Percival, “that this particular gentleman could not quite appreciate where his line of reasoning would carry him, for if the Bank Committee has been disappointed in relying on the private builder and our own officials to see that the only good homes were built, if anything other than the position as accrued, he must see as everyone must see, the reflection is not on the Bank Committee, but rests in another quarter.”
The report was approved, as was also the report of the Watch Committee.
The Council adjourned at 8:20.
Municipal Bank and Housing
Meanwhile, a somewhat remarkable speech of Sir Percival Bower’s compels us to return to a topic on which enough (we should have supposed) was said at last week’s meeting of the Council. Sir Percival, it seems, is angry with us, because of some very obvious comments we felt bound to make upon his demand for an independent enquiry into allegations of bad building on the Council’s estate at Pype Hayes. In particular, he is offended by the suggestion that “if the Municipal Bank is really getting worried over the million or so of money it has advanced upon Municipal houses, then the independent enquiry ought to be into the methods of the Municipal Bank, rather than into the methods of municipal builders.” We gather from his prolix and (if we may venture to say so) surely somewhat muddled explanation, that he regards this criticism as (1) foolish and (2) animated by a spirit of hostility to the Municipal Bank. On the latter point he is, of course, entirely mistaken. As to the former, it seems to us the only reply that needs to be made may be conveniently taken from the confession of Sir Percival Bower himself. Why was he so anxious a week ago to secure an independent investigation of the position at Pype Hayes? It was because he wanted to know “the absolute truth”, he said: and he indicated that doubt as to the quality municipal building “was by no means confined to Pype Hayes”. “Personally”, he declared, “he was very uneasy indeed. He had accepted the chairmanship of a committee which acted as trustee for something like 250,000 depositors in the city, who had advanced millions of money for the purpose of housing. At the moment, the committee had 1½ millions of money outstanding on mortgages. Naturally, the committee desired to be quite assured that not only were the people satisfied to whom advances had been made, but that the committee were treading on safe ground”. He was “very uneasy, indeed”; he wanted to be assured that Bank authorities were “treading on safe ground”; and the inference is that when he spoke, he was acutely conscious of lacking such assurances. We now know why. It appears that when municipally-built houses have to be valued for the purpose of advances, the Bank authorities dispense with some precautions which they rightly take when dealing with other types of property. But that admission merely makes our point the stronger. If Sir Percival Bower is, or was, as “uneasy” as he represented himself to be, he has no ground for complaint against our natural and moderate criticism. If he is not uneasy, how did he come to make such a speech as that delivered in the Council Chamber last week! We might suggest an explanation. But we do not suppose Sir Percival Bower would much like it; and it would be more satisfactory to have his own.