Wednesday, April 19, 2006

A Home For the Price of a Ford Fiesta

Britain's most popular car the Ford Fiesta costs around £12,000. For the same money you could create a new home.

Last year the government ran a competition challenging house builders to build 1,000 houses for just £60,000 each. To many that sounded too cheap to be true, but in a report released in January the GLA has thrown open the possibility of the £12,000 house.

The GLA’s report took a close look at the condition of London’s 83,000 privately owned empty homes. Compiling data from private sector house condition surveys carried out by Fordhams Research over the last 5 years in 15 London boroughs, the authors were able to quantify the condition and likely renovation costs of empty homes in the capital. The results make fascinating reading for everybody concerned with housing supply, and challenge assumptions held by many in the field that developing empty homes is an expensive business. Amazingly the average repair cost was just £6,800 and for long-term empty homes (those empty for more than 6 months the cost was just over £12,000.

The costs were estimated for improving each home to a good state of repair; a standard somewhere around or above the government’s decent homes standard. As you might expect empty homes were generally in worse condition than occupied houses; but perhaps not in as bad a state as you might expect. Whilst there were, no doubt, a few complete wrecks that would cost tens of thousands to restore, most were just a bit run down. Typical repairs included fixing leaking roofs, overhauling windows, replacing bathroom suites and kitchen units. The report tallies with similar survey carried out in Kent last year that showed average repair costs of between £5,000 and £10,000

To understand what’s going on perhaps we need to look at another piece of research on empty homes from a couple of years back. MORI carried out a questionnaire survey of owners of empty homes in London. They asked why their properties were being left empty and what it would take to bring them back into use. Results indicated that the major reason that homes were being left empty was because of their condition. Reasons given included “I can’t afford to repair it” “I am planning to renovate it” “the property is unlettable or unsaleable in its current condition” In other words thousands of homes are held away from the market because owners are unable, unwilling or perhaps just rather slow to carry out repairs. Read in conjunction with this report it looks as if those repairs might be relatively minor.

Of course £12,000 per property would only pay for repair, not acquisition costs. But in a vibrant housing market like London’s the priority is to increase the supply of housing. Getting the property into a habitable condition does just that. The market does the rest. When you consider that the Housing Corporation’s London programme this year equates to a subsidy of £91,000 per property to create just over 1,000 new homes, £12,000 begins to look even more of a bargain. There are 33,000 long-term empty homes in London, a figure that has been static for years. At just over a million pounds for a thousand more homes it really does sound too good to miss.

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