Friday, March 31, 2006
In last Thursdays post “VAT on Building it's Not Over Yet” I raised the idea of harmonising VAT at level above 0%. CJ agree:
“It would hardly appear to be good economic sense to build more houses when so much of Britain’s housing stock is lying empty, but could be brought back into use with some upgrading – which would be a lot cheaper under a 5% VAT regime rather than 17.5%.”
They go on to point out that refurbishing empty homes may well be cheaper and more environmentally sustainable than building new:
“London, where there are a whopping 91,000 empty homes. These would require an average of £12,000 spent on each to bring them up to a good standard of repair – much less than building new homes and a far easier, more sustainable way to provide affordable housing.
For a government so concerned with Kyoto and green issues, the fact that it's more cost-effective to demolish and rebuild public buildings such as schools, rather than upgrade them, must surely be at odds with its stated beliefs. And it can hardly be said to be sustainable, despite the fact that the new buildings meet current environmental standards.”
Good point. Of course I should add that returning empty homes to use is never going to be a replacement for building new, but it is surely an important contribution. And it’s good to see the argument being made in CJ.
Wednesday, March 29, 2006
Please let me know if I’ve got this wrong, but it sounds as if the big reason why local authorities are reluctant to give out information on empty properties is liability.
In the back of local authorities minds when considering requests is the worry that if they give out a list of addresses of empty properties the information might fall into the hands of somebody who misuses it? Possible scenarios might include a property from the list being vandalised, having architectural features stolen or being squatted. If any of these were to happen the owner of the property might claim that problems arose because the local authority made the whereabouts and occupation of the property known to the perpetrators. Potentially this might open up civil claims against the local authority.
I have taken advice and views on this issue from several experts including solicitors and Freedom of information officers. The following is a summary of their views
In order for a claim against a local authority to be successful, the claimant would need to prove a causal link between the information being disclosed and the consequent outcome. The claimant would also need to prove that the local authority was either negligent or wilfully connived in the outcome.
Common sense suggests that theft and vandalism are often opportunistic crimes and it is perhaps a little hard to imagine a vandal requesting a list of properties from a local authority before chosing one and going out to vandalise it. Squatting is a more tangible risk. But even if this were to happen the causal link and negligence tests are quite hard for a claimant to prove. Empty properties get vandalised and squatted all the time without any assistance from the local authority.
A sensible precaution would be to minimise the risks by applying some checks and balances when giving out information. These might include:
Not proactively publishing the list e.g. on an open part of the website
Requiring contact information from those requesting the information prior to making it available.
Issuing the information only to those who agree to conditions of use. These might include:
They agree to keep the information purely for their own use and not pass it on to others.
They agree to only use the information for specific purposes e.g. negotiating a sale with the owner.
Of course, even if a local authority were to apply all of these checks and balances you could not be 100% sure that a claim would not be made against you. Indeed it would not preclude the possibility of a claim being successful. But it does appear as if the risk would be very small. My view is that the potential benefits would outweigh the risk. But as somebody pointed out to me last month that’s easy for me to say because it isn’t my risk.
The Empty Homes Agency strongly values its ties with empty property officers. And we think that local government is a force for good in returning empty properties to use. We spend a lot of our time supporting and encouraging local authorities. When we think they get it right we say so. However as a critical friend we should reserve the right to say when we think they get it wrong. On this issue I think local government has, on the whole, got it wrong.
I have been writing and speaking on this issue for more than a year. On our website www.emptyhomes.com/resources/articles/articles.htm you will see a number of more sober articles, most of which I think are understanding of the multiple pressures that local government officers are under.
In addition to local government we have many other audiences. An increasingly important one is private developers and individuals looking to create homes out of empty property. I have to say that many people from this group are angry and frustrated by the approach that most local authorities have taken on this issue. On many occasions we are able to defuse problems by explaining the issues to this group. On other occasions I share their frustrations.
I know there are risks by giving out information, but my view is that the risks are outweighed by the potential benefits. All the time at the back of mind is the question “what is most likely to bring empty properties back into use?” Sometimes the answer is uncomfortable to local authorities, but that doesn’t mean to say it’s wrong.
Tuesday, March 28, 2006
Developers Urban Splash won many plaudits when they published plans for their redesign of the Victorian terrace a couple of years ago. The thinking was to reconfigure small terraced houses so that they would appeal to the loft apartment generation. The development was built in the Langworthy area of Manchester an area, an area previously littered with abandoned homes and all the signs of low housing demand.
Of course plaudits are one thing, but the proof of the pudding is in the eating.
Earlier this week the first batch of houses went up for sale. Demand was such that people queued through the night to be first in line to buy one. Congratulations to Urban Splash. http://shurl.net/Cf
Monday, March 27, 2006
Blyth Valley 348
Bracknell Forest 335
Castle Morpeth 475
Castle Point 529
East Dorset 140
Ellesmere Port & Neston 349
Epping Forest 917
Epsom and Ewell 338
Isles of Scilly 0
Malvern Hills 314
Mole Valley 321
North Cornwall 186
North Devon 446
North Dorset 664
North Kesteven 700
North Shropshire ?
North Warwickshire 412
South Holland 402
South Shropshire 260
St Albans 103
Surrey Heath 380
Three Rivers 320
Welwyn Hatfield 328
West Devon 420
Friday, March 24, 2006
Q. Once an EDMO has been commenced is the local authority restricted to that course of action or will it be possible to revert to another option if circumstances alter for example a Compulsory Purchase Order?
A. A local authority will be able to revoke an EDMO at any time. Indeed I think that it should be reviewing the situation continually to see whether circumstances have changed. If the owner demonstrates that he/she is able to manage the property and keep in occupied, why not hand it back to them? I’m not sure that I can envisage many circumstances in which it would be a good idea to revoke and make a CPO. The only one I can think of is if the property is in an area that is subsequently declared a clearance area.
Q. I have been advised that it will not be possible to gain entry into a property on the basis of a 'potential' to raise an EDMO and to determine the cost of works involved.I would be grateful for any thought you may have.
A. This is a view I have heard expressed a number of times, and I’m pleased to be able to report that it is incorrect. The Housing Act gives two relevant powers of entry for local authorities these are general powers applying to the whole act and so do not appear in the EDMO sections, but none the less apply to them:
The first is to enter the premises at any reasonable time given 24 hours notice for the purpose of carrying out a survey or examination. This applies prior to any action being taken.
The second is when an EDMO is in force. You will have the right at all reasonable times to enter the dwelling to carry out works.
With both powers you must adequately secure the premises against trespass when you leave.
Q. Could you tell me please if you have had any discussions with the Inland Revenue regarding the tax implications after the service of an EDMO.
In the scenario where a LHA serves an EDMO and then carries out repairs to the property, it would recover the cost of the work by retaining the rent until such time as the monies are recovered. Would the owner of the property have to pay tax on this rental income?
We fund repairs to long term empty dwellings and will recover the cost by receiving the rent until the loan is repaid. I have received an inquiry about the tax implications from the owner of a property which we are about to sign up to our Empty Homes Initiative. The cost of the proposed work is about £40,000. The rental income is likely to be £675 per month. The loan will be interest free. If no tax is due, the loan will be repaid in about 5 years. If tax is due the period will be substantially longer than this and therefore may not make the overall package attractive.
I have tried to get an answer on the tax implications on this issue from the Inland Revenue Help Desk. They have however declined to advise saying it is outside their brief.
This arrangement is very similar to what would happen if an EDMO was served.
A. I'm no tax expert but my understanding is that income tax is only due on the profits made on renting out property. Expenses incurred "wholly and exclusively" for the purpose of the let are allowable expenses and can be offset against the owner's letting income. In normal situations allowable expenses include mortgage interest, general repairs and maintenance, insurance and the agent's property management fees. So no the owner would not have to pay tax on the rent until such time as the local authorities expenses were met and the owner receives "cash" rent.
This does however raise one interesting point. The allowable expenses don't include costs of any improvements to the property. So if the local authority were to build an extension or put in an extra bathroom for example, the costs incurred couldn't be offset against the owner's rental income. The local authority wouldn't be entitled to do improvements without the owner's consent anyway, but it raises an important point. If you were asking the owners consent for improvements it would be as well to explain the tax implications.
Thursday, March 23, 2006
But that doesn’t have to be the end of the story. The EU window allows members states to reduce VAT on building materials and labour to 0%. Once the window closes member states are still permitted to alter VAT rates provided they don’t reduce them below 5%. So VAT can still be harmonised but at a rate of 5% or more.
This may be more realistic. 0% VAT on building materials and labour would have resulted in a large net loss to the Treasury. It wouldn’t just have been the refurbishment of empty homes that benefited, every pot of paint bought and every new conservatory built by DIYers would have had 0% VAT too.
Harmonisation of VAT above 0% would of course mean imposing VAT on new build houses. You may or you may not think this is a good idea. But at a time that the government is calling for a step change in housebuilding it will be very cautious of anything that will disencentivise builders and developers from building houses. There are two schools of thought:
1. VAT on new houses will increase developer’s costs and this will be passed on to purchasers in increased house prices. This will have the effect of making refurbishment more financially attractive and result in more empty homes being brought back into use.
2. House prices are governed by what the market will bear not a sum of the costs that are incurred in their construction. House prices will therefore be little affected by imposing VAT. Developers will have to find savings elsewhere.
You takes your money you takes your choice. I’d be grateful for your thoughts or opinions.
Wednesday, March 22, 2006
The new statutory power Empty Dwelling Management Orders will be available for local authorities to use to return empty homes to use in a mere two weeks. Judging by my mailbox quite a number of them feel unprepared and… how shall I put it? Unsupported by government. Well don’t worry. It’ll be all right. Here are six reasons not to panic:
1. EDMOs are a discretionary power. This means that local authorities are under no obligation to use them, but they are available should the local authority decide it’s the best course of action to deal with a particular empty property.
2. There is no presumption by government that EDMOs are the best way for local authorities to return empty homes to use. All the existing powers and methods of returning empty homes to use will remain and I would hope that local authorities use a wide range of them applying each on a case by case basis.
3. The regulations come into force on 6th April, but there is a 3 month introductory period meaning local authorities will not be able to apply for an EDMO until July this year.
4. Government will shortly be publishing official guidance on the use of EDMOs.
5. There will be training provided for local authorities on empty property strategies explaining the options available to them and where EDMOs fit within the options
6.There will be a guidance booklet published to support this training.
Tuesday, March 21, 2006
Housing (building, maintaining and operating) creates more CO2 than industry and transport combined. In fact it makes up nearly 50% of the UK’s emissions. There is some imaginative and innovative thinking to combat this. Some new eco houses are beginning to achieve the status of being passive – they use no fossil fuels to operate them. But take a look out of the window and I suspect you won’t see any. Most houses in the UK are old and have plenty of life left in them. Even if we were to make all new-build houses passive (which we are not doing) it would probably be a hundred years or more before they became a sufficient proportion of our housing stock to make a significant difference to our CO2 emissions. We need to improve the environmental performance of the existing housing stock too.
Tonight I am addressing The Parliamentary Labour Housing Group on this very subject. My paper has recently been published in the LHG/CHPA/SERA booklet “Blueprints for Green Homes” you can download it here. http://www.emptyhomes.com/resources/goodpractice/publications/Blueprints%20for%20Green%20Homes.pdf
Monday, March 20, 2006
For all these reasons I think BVPI64 (the best value performance indicator that measures local government performance in getting privately owned empty homes back into use) is valuable and worthwhile. However I am become a little worried that the flaws are beginning to undermine its value. I have really noticed this year how more and more people are questioning the validity of the data. There is some obvious overcounting and I suspect some undercounting in local authorities measured performance. As the time for preparing your returns approaches I would urge you all to make it accurate and meaningful this year.
To help you NAEPP have prepared some guidance: http://www.naepp.org.uk/website/drupal/BVPI64 It is helpful and well written, but I’m afraid it does have some troubling loopholes. I know what it’s like at this time of year in a local authority. There is a final push to try and meet targets. It’s probably too late for any more real activity before the 31st March cut off so it’s a case of making sure that all activity over the last year has been properly recorded. When the performance just isn’t there, there is a temptation to find loopholes instead. Two examples that I know about are local authorities counting all properties procured by RSLs and through private sector leasing schemes on the basis that the properties were vacant for days or possibly hours between lets. Secondly at least one local authority is counting successful housing advice casework that prevents an eviction on the basis that the local authority believes the property would have become empty had they not intervened. Both of these could be argued to comply with the indicator but are at best not in the spirit of what the indicator is intended to measure.
Equally bad is undercounting. Some 60 local authorities in England reported that they had brought no properties back into use last year. Some of these actually employ empty property officers – work that one out. A lot more local authorities report annual performance of bringing just one or two properties back into use a year. I have no knowledge that there is undercounting of performance in these local authorities, but undercounting certainly exists. One problem seems to be the departmental nature of local government. Some empty property officers compiling returns record just their activity. But the indicator is supposed to measure the performance of the whole authority, not just the empty property officer or the section of the council that has lead responsibility. There are many activities that local authorities undertake that cause empty properties to be returned to use. Here are a few examples:
· Legal sections recovering debt and enforcing the sale of empty properties to liquidate the debt.
· Regeneration and road widening schemes compulsorily purchasing empty properties for demolition
· Joint local authority RSL purchase and repair schemes of empty properties.
· Landlord accreditation schemes encouraging landlords to purchase empty properties or to return their own empties to use.
They all count so investigate them and see what your authority has achieved as a whole. I did speak to one local authority officer who told me he would be deliberately undercounting this year in order to draw attention to his underfunded plight. Lets not play games this year lets get it right.
Friday, March 17, 2006
Thursday, March 16, 2006
Well the numbers are out now. “New Household Projections of Households for England and the Regions to 2026” http://www.odpm.gov.uk/index.asp?id=1002882&PressNoticeID=2097 was published earlier this week by ODPM. It shows increased projections for new households particularly in the North of England and further evidence of an aging population.
It projects that the number of households in England will to rise from 20.9 million (2003 figure) to 25.7 million by 2026, an annual growth of 209,000. The biggest rise is projected to be in single households, which are set to rise by 53% over the period. Most of the increase is amongst elderly single person households.
About 60% of the projected household growth is within the East, London, South East, and the South West. But most of the additional growth compared with the previous projections is in the North West, Yorkshire and Humberside and in the West and East Midlands.
Should we be care about this? You bet we should! These numbers are going to feed the housing growth projections for the next few years. And a message that we need to be getting over at every opportunity is that some of the new households could be housed by getting empty homes back into use.
As for the numbers, I wouldn’t take them as gospel: There is an old adage about projections. “They’re all wrong, but some are useful”. On that basis I would definitely class these projections as useful.
Wednesday, March 15, 2006
Three years ago the government gave local authorities the freedom to reduce or remove council tax discounts on empty homes. Previously the rules had dictated that an owner was exempt from council tax for the first 6 months that a property was empty. After that the owner would be given a 50% discount on the standard council tax.
Several organisations including the Empty Homes Agency pointed out that this created a perverse incentive to keep a property empty. The government listened and made the change. Some local authorities steamed right in and removed discounts straight away, some bided their time and made a decision later, others are still thinking about it.
The three councils I have been in touch with this week are all considering reducing their discount from 50% and in one case removing it altogether. Not surprisingly all have faced local opposition from owners of empty properties. Their objections are not unfounded and deserve some consideration. A summary of the issues they raise is as follows:
The property is empty so I make no use of local services. So why should I pay for them?
The owner has died and probate takes longer than 6 months to complete
The property s up for sale I’ll have to reduce the sale price if I’m going to sell it before the council tax exemption ends.
I am trying to renovate the property extra council tax will mean it will take me longer to finish.
As discussed in earlier posts tax raises money for public services but it also influences behaviour. In this case, from the local authorities point of view, only the behaviour change issue is important, the extra money raised goes to the Treasury.
Of the issues raised here by objectors all except the last would probably influence the owner into returning the property to use faster than if the discount was kept. And all except the first are objections that could equally be made by an owner of an occupied house who receives no discount at all. If anything the objections reinforce my view that reducing discounts is a good idea. But what do you say to the objectors?
To the first you might very well point out that local services have to be paid for anyway and why should other people subsidise you to keep your property empty?
To the last you may want to suggest that if the property is uninhabitable the owner has the right to apply for a further 6 months exemption. If its not uninhabitable why on earth can’t it be fixed up within 6 months?
To everybody you might want to point out that the greatest benefit to the community is achieved by having as many properties in occupation as possible. Experience from across the country has shown that offering a subsidy to owners whose properties are empty is not the best way of achieving this. You recognise that the getting a an empty property back into use can be a difficult process and so the council is retaining the exemption period of 6 months where owners pay no council tax at all. This should be sufficient time to return an empty property into use. But in cases where the process takes longer you and are retaining a small discount.
Tuesday, March 14, 2006
In one US city a community group, The DDD project, has found a very effective way of highlighting its empty homes problem – paint them bright orange.
Detroit reportedly has 12,000 empty homes. “We seek to accentuate something that has wrongfully become part of the everyday landscape” a spokesperson for the DDD project said. Interestingly the local authority and appears to be onto the case and is demolishing the orange houses as fast as DDD can paint them.
Monday, March 13, 2006
An exchange last week provided a better answer to his question than I gave at the time.
Eleanor, a woman from the West Country, contacted me about an empty house opposite where she lived. The house had been empty for several years and had deteriorated, the garden was overgrown, and there had been break ins. Understandably she wanted something done about it. She had tried to contact the owner herself without success so she turned to the council. After several months of discussion and being transferred from one section to another she felt she was getting nowhere and asked for our help. I phoned the council and asked to speak to the person who dealt with privately owned empty homes. The request was met with apparent confusion and over the next 20 minutes I was transferred between the receptionist and three different departments. Here’s a selection of the responses I received when explaining what I wanted.
“We don’t do housing anymore we got rid off all of our houses”
“None of the council’s properties are empty”
“We don’t have a housing department, we transferred our stock”
“Why would the council get involved in privately owned homes?”
“It sounds like a private dispute, we wouldn’t get involved”
“I’ve never heard of anything like this before I think you should get a solicitor”
In the end a very helpful man in the legal section made it his business to find out the answer. A few minutes later I was put through to the Housing department (it does exist) and spoke to an extremely helpful, well-informed and articulate woman who it turns out is the council’s empty property officer. She was able to offer exactly what Eleanor wanted and they are now in touch and on the way to a solution.
From my brief involvement it appears that this is a council that offers a good service to tackle empty homes. But just how on earth is the public supposed to find its way to this service? Dare I say a bit of marketing and publicity might help.
Friday, March 10, 2006
VAT is currently charged at the standard rate of 17.5% on refurbishment materials and labour, but zero rated for new-build homes. The rules mean that decisions on whether to return empty homes to use, or build new homes instead are skewed. Refurbishment of many empty homes that would otherwise be cost effective is rendered too expensive when the VAT is added. Our position has always been that there should be harmonisation of VAT rates between new-build and refurbishment. Rates have been harmonised in France and bizarrely in the Isle of Mann with no apparent ill effects on the economy.
The UK government did make some welcome changes a few years ago for long term empty homes, but the issue of harmonisation remains. The government response has always been that EU rules don’t allow reduction of VAT. Historically no doubt true. But in a recent ruling the 25 EU member states agreed to allow lower VAT rates on repair, maintenance and improvement work until 2010. Member states have until 31 March to opt in or out of these new arrangements. Signs are that the government will opt out, but who knows, they might be persuadable.
The Federation of Master Builders (FMB) have started an on-line petition. Ian Davis, director general of the FMB, said: "When the other European nations decided to enjoy the full benefits and sign up, the UK government said the Isle of Man could have a reduced rate of VAT but the rest of the UK could not. Why should we miss out again? We have until 31st March to tell Gordon Brown what it is we want him to do for UK homeowners and the construction industry. If we do not, we will literally pay the price for years to come."
If you agree sign the FMB petition at http://www.cutthevat.co.uk/
Wednesday, March 08, 2006
I've had a number of queries and questions from local authorities in recent days about these new powers that may be worth sharing:
q. The legislation says that we need to get the owner's permission before we can let the property is this really the case and if so what is the point of the legislation?
a. This question comes up remarkably often and I can only put it down to people having only read the first few sections in the act. There are in fact two types of EDMOs; interim management orders and final management orders. If a local authority wants to use an EDMO it has to apply to a residential property tribunal. If the tribunal finds in the local authorities favour it will make an interim management order. This can last for up to a year and transfers some of the powers of management of the empty property from the owner to the local authority. One power it does not transfer is the power to let the property. So if the local authority wants to do this it needs to seek the owner's permission. If the owner and local authority are unable to come to an amicable agreement over the future of the property the local authority can serve a final management order. This transfers even more management powers over to the local authority amongst them the power to let the property. So under a final management order the local authority is able to let the property without seeking the owner's permission - thus bringing it back into use. And that's the point of the legislation.
q. Can the local authority charge the owner for costs such as staff time, decorating the property, legal costs, gardening?
a. The legislation isn't prescriptive on these points. The local authority needs to take a view on what costs it has incurred and what it is going to charge to the owner from the rent it receives for the property. It should set out what it will charge in a management plan to which the owner has a right of appeal to the residential property tribunal. So the answer is if you have incurred costs directly related to the property, the costs are reasonable and you can justify them if challenged I would include them. If not - don't.
q. It looks as if local authorities will only be able to get an EDMO if they can demonstrate a need for the property so this legislation will only be any use in the South of England where there is high housing demand
a. The decision the residential property tribunal will have to make is - Is there a reasonable chance of the property being brought back into use if the local authority is granted the EDMO? Clearly there is no point granting an EDMO if the local authority leaves the property empty too. The question for the local authority is - can they let the property? Housing need isn't exclusive to the south of England and if the local authority can match up the property with people who need housing then I think this could be useful. Behind this question is an important point. The purpose of this legislation is to get empty properties back into use, it's not a compulsory procurement tool for local authorities wanting to expand thier housing portfolio.
Tuesday, March 07, 2006
· The information is exempt because disclosing it may prejudice the commercial interests of owners of empty properties.
· The information is exempt because disclosing it may encourage people to enter empty properties. Some of them are derelict buildings which may be in a state of disrepair endangering the physical or mental health of the individuals concerned.
· The local authority declines to release the information because to do so would prejudice the local authorities commercial interests in managing its interests in public housing.
· The information is exempt because it is personal data and releasing it would be in breach of the Data Protection Act 1998.
· We cannot release the information because the local authority does not have sufficient resources to process the request.
· The information is exempt because the information is already reasonably accessible by other means. For example information on council voids has been reported in the local newspaper.
· The Council does not have a complete list of empty properties as requested and the only appropriate source within the Council where such information could be collated is the council tax database. This is often seen as a good source of acquiring information to fulfil other functions, but the consensus of legal opinion is that the Local Government Finance Act 1992 prohibits the use of council tax data for secondary purposes.
· We can not provide the addresses of these properties as it is exempt as we are protecting our commercial interests by not disclosing and listing these addresses for the public to know as it would leave the Council's properties vulnerable to squatters.
· The information is exempt because releasing it would prejudice the prevention or detection of crime. Namely that releasing information about empty properties into the public domain would increase the risk of vandalism, burglary and arson.
· The local authority refuses your request because disclosing the information would prejudice the prevention or detection of crime by increasing the risk of properties being illegally squatted.
· The request is refused because interrogation of computer records would further process the original data.
· The council cannot release the information because they do not have records of empty properties.
· The request is refused because it is exempt under the Freedom of Information Act.
· The Council takes the view, having regard to the circumstances of this case, the public interest in maintaining the exemption outweighs any interest in disclosing the information to you.
These extracts have been sent to us by recipients of the refusal letters. In some cases the text has been edited and some are a summary of two or more similar extracts. If you have any others please let me know
Friday, March 03, 2006
I did some work on this a few years ago. I threw all types of costs in as I was trying to demonstrate the total financial loss to the community.
Lost rent - £15,000 (£350 per week minus a 15% void rate)
Lost potential spend in local shops and services (Sainsburys provided some useful info on local spending patterns - I settled for something around £8k per household)
Deterioration of property £1500 (inland revenue allow 10% wear and tear so I made the same assumption and set this figure at 10% of rent)
Lost council tax £500 (Not applicable if the local authority has removed its empty homes discount)
Total loss to the community of doing nothing: £25,000 per year. Now how much was it you are prepared to spend again?