Too Many Posh Flats?

Every day there are stories in the US property press about what is going to happen when the property price bubble bursts. On the whole I don’t find them very interesting, but perhaps this one reported by First Rung is different. First Rung’s analysis implies that parallels can be drawn with the UK housing market. Its suggestion that half of all private rented properties are empty at any one time is incorrect. There are approximately 2.3 million private rented homes in England and only 700,000 empty homes. Nevertheless their theory that new homes are remaining empty because they are being marketed at unrealistically high prices may have a ring of truth. Anecdotes about new city centre developments such as prestige flats in Birmingham, Manchester and new waterside developments in London remaining unsold are becoming more common. The theory is that dropping prices to a level at which they will sell easily will put them into the reach of people who may tarnish the “upmarket” image of these developments. The owners consider it better to leave them empty and hold out for high prices. I’ve never seen any research on this theory, but surely like all devices that try to buck the market this is ultimately doomed to failure. Better surely to accept that their target market is over-catered-for and remarket to a different group of buyers.

Land Value Tax - The Final Answer to Empty Homes?

Land Value Tax is not a new concept it has been around since at least the nineteenth centaury. But thanks to the influential think tank the Bow Group it’s back on the agenda. Their proposal is that four separate taxes council tax, inheritance tax, capital gains tax on property sales and the TV licence fee be scrapped and a new single rate property levy introduced.

This from yesterday’s Times:
“Under the “land value tax” wealthy homeowners in London and the South East would see their annual bills rise, and would pay more than the rest of the country. But the authors of the report say that it would remove the one-off burden of inheritance tax now faced by thousands of middle-income families in the South East.
The cheapest 20 per cent of properties, worth £70,000 or less, would be exempt from the tax entirely, meaning that thousands of low-income homeowners would pay no levy.
According to the Land Registry, the average house price in London is about £307,000 while in the North of England it is £129,000. The average land value tax on a residential property in London would be £2,370 per year, slightly more than the current council tax bill plus TV licence fee, but only £590 per year in the North, a significant reduction. The tax on a £1m property would be £9,300.”

Land value tax has many attractive advantages. It is simple, and arguably fair; it taxes the most important form of wealth: property. But perhaps it’s greatest advantage is that it encourages efficient use of land and property. Author of the report Mark Wadsworth says that it would encourage older couples and single pensioners living in large homes to move into smaller properties, freeing up larger homes for young families. What he proposes is technically a property rather than a land tax, and some argue that what we really need is a tax that encourages better use of land. But either way It would also surely create a huge incentive for owners to make use of empty property.

Whatever happened to the Empty Homes Principle?

In December last year the government made an important announcement about empty homes. Empty homes returned to use would be treated the same as new build properties in terms of housing supply they said. We thought and still think it’s a hugely important policy shift and we reported it with great enthusiasm. A few months later however, there are signs that the government may be losing its nerve.

December’s announcement resulted from Kate Barker’s review of housing supply. You may remember she was asked by the government to examine the supply of county’s housing and concluded that there wasn’t enough of it. Her most widely reported recommendation was that there should be a step change in house building. Our response at the time was that we agreed. We think we do need more houses, but surely some of them can be provided from bringing empty property back into use. Kate Barker was silent on this in her report. We were disappointed but we lobbied government and were delighted when the Treasury and ODPM issued their official response to Kate Barker’s review.

“The Government believes that in addition to a step change in new provision, it must also make effective use of existing stock. One way of achieving this is to bring more empty property back to the market. Bringing empty properties back into use has fewer environmental impacts than building new homes as such properties will also be located near to existing facilities and infrastructure.“ (Treasury/ODPM Response to Barker Review December 2005)


But what does this mean in practice? We believe that it means that bringing empty homes back into use should be given equal status to housebuilding. Where local authorities have helped bring empty homes back into use they have helped increase housing supply in the same way as where local authorities have facilitated new build housing.

One place that we would like to see this equality is in planning delivery grant. And as it happens the government has just announced a review of the system and is inviting views. See the press release here and download the consultation paper here

Planning Delivery Grant is not new, it is a system that has been around for years. Currently it rewards local authorities for having efficient planning systems. But the proposed system is much broader it’s aim is to incentivise local authorities to help get more housing built. Essentially the proposal would give local authorities a sum of money for each new house that was built in their area. This is not intended to be a subsidy for infrastructure that the local authority would need to build, the government will provide that money elsewhere.

Worryingly there is no mention of empty property in this doccuemt. But don’t forget this is still just consultation on a proposal. What I would like to see is the government stick to the equality principle that they set out in their response to the Barker review. What I suggest this would mean is Housing and Planning Delivery Grant being awarded to local authorities for bringing empty homes back into use as well as facilitating new build homes. I would go further. Empty homes usually don’t need new infrastructure. They are usually on an existing road, they usually have water and sewage pipes in place and local services like public transport, schools and health services don’t need to be built or even changed because a few empty homes have been reoccupied. In other words they are much cheaper for central and local government than building new homes. Shouldn’t local authorities be rewarded double for bringing empty homes back into use as a reward for providing new homes at such reasonable cost?

May be you think differently, but what ever you think I would urge you to respond to this consultation paper (here) and give your views about empty property in answer to question 1 on the questionnaire. We will be responding too but without your views an important source of funding for empty property work and the principle of equal treatment of empty homes and new build could be lost.

An Ill Wind

The media interest that accompanied the introduction of empty dwelling management orders earlier this month was fairly unanimous in its verdict: EDMOS are a bad thing. As we pointed out in posts on this blog and in our EDMO leaflet many of the views expressed were based on incorrect information. But nevertheless there wasn’t a huge clamour of support in favour of EDMOs either. That doesn’t mean to say that support doesn’t exist. Nobody has done a survey recently (well apart from the Daily Express who’s readers unsurprisingly polled 96% against) But there was a survey a few years ago. Back in 2003 Halifax carried out a survey of public opinion and found 82% support amongst the public for the concept that was then called compulsory leasing. It’s possible of course that opinion may have changed, but there is lots of anecdotal evidence that the recent media interest has caused a lot of people affected by empty homes to lobby their council to use EDMOs. People like Mohammed Usman reported in the Bradford Telegraph and Argus yesterday. People like the woman in Halifax I spoke to yesterday who has lived next door to a derelict empty home for 30 years. People like the couple in London I spoke to a few days ago who have been unable to sell their first floor conversion flat for over a year because the owner of the ground floor flat has decided to leave it empty and let it go to rack and ruin.

Its possible that the media coverage that so opposed EDMOS may actually have indirectly put pressure on local authorities to use the powers. It’s an ill wind.

Hot Summer Day

The last time I mentioned climate change it was an unseasonably cold spring day which barely registered 0°C in London. Today it's 32°C Admittedly little if any of the difference is due to global warming. But this hot summer is a reminder of what is happening to our climate and a good point to consider what impact housing is making.

Last Friday I was privileged to be invited to speak at the Sustainable Development Commission's launch of it's excellent new report Stock Take: Delivering improvements in existing housing The UK has committed to reduce its CO2 emissions by 60% by 2050, with significant progress by 2020. Housing currently contributes 27% of UK's emissions and is arguably easier to improve than other sectors such as industry and transport. How are we getting on? Well not great so far. The last few years have actually seen emissions rise. The great fallacy in reducing emissions from housing is to presume that improved standards in new build housing are going to achieve the results. As this exert shows, this is not only wrong it's financially inefficient:

"The existing stock makes up 99% of all homes at any given time. Even with high projections of house building and demolition rates, an estimated 70% of the stock that will be inhabited in 2050 already exists. There is no option but to make the best use of these existing homes, to make them cost effective, healthy and comfortable to live in, and minimise their damage to the environment. We can significantly reduce the carbon impact of the 21 million existing homes currently 27% of all emissions. It is relatively low-cost to refurbish existing homes to high environmental standards, between a tenth and a quarter of the cost of new build (Cambridge Architectural Research 2003). Homes need constant reinvestment and modernisation refurbishing every 20-30 years, years; requiring about 1% of capital value at current market levels each year to be spent. "

Improving maintaining and renovating old housing may not be glamorous or sexy but for the sake of the planet we've got to do it.

A Cure For Empty Homes

This week we launched a new publication “A Cure for Empty Homes“. Published by the I&DeA It’s aimed at local authorities and sets out the wide range of different approaches that have been successfully used to help get empty homes back into use. From grants and loans to tenant finding services and working with auctioneers; EDMOs are just one of more than 20 options available to local authorities. A copy is going to be sent to every local authority in England and Wales. You can download it here free or we have a limited number of printed copies available at the Empty Homes Agency .

More on the "crusade"

It’s not my job to defend Tony Blair but I couldn’t help but smile at the Daily Express’ latest exclusive on EDMOs. “Untouchable - Tony Blair’s property is exempt” “the prime minister and other ministers will escape the sinister new powers which were unveiled this week on a carefully worded technicality”
Want to know what this devious technicality is? Mr Blair has rented his house out; it’s not empty.

A Response to the Daily Express' "crusade" against EDMOs

If my only information about EDMOs had come from the Daily Express I would be up in arms, aghast at the draconian new powers that had been given to local authorities. Horrified that councils could break in and steal family heirlooms and worried that my home was next.

Let me reassure you nobody is going to come and snatch your home. These powers are not there to help councils acquire property; they are there to help alleviate the problems of abandoned homes owned by people who don’t care. Not people who find them selves in the unfortunate position of having a temporarily vacant home. They are there to help deal with the problems of run down property, eyesores that attract petty crime, vandalism, graffiti, and arson. They are there to help the people who live next to these abandoned houses and are currently powerless to act.

The exemptions cover every other eventuality. If the owner is away for work or travelling however long that might be EDMOs do not apply, if the property is empty because the owner is away in hospital or caring for somebody else, if the property is a second home, a holiday home, EDMOs do not apply. If the home for sale or to let EDMOs do not apply. If the owner has plans for bringing the property back into use an EDMO won’t be made. If the property is in probate following the death of the owner EDMOs do not apply. What other reasons are there for a property being empty?

There are 300,000 long-term empty homes in England, 85% of them are privately owned. Yes publicly owned empty homes are a scandal too but there are already powers to deal with them (PRODS) and their numbers have come down dramatically. Every empty home means another new house has to be built often on greenfield land to house our growing population. Reduce the numbers of empty homes and we reduce the need to build so many new homes.

Let’s also look at some of the other myth that have been peddled by the Express:

Family heirlooms cannot be snatched. This is a misreading of a clause that actually requires local authorities to look after any contents in a house to which an EMO applies. If the owner doesn’t want the contents the local authority can’t just throw them away they have to store them safely until the owner says they want them back.

There are several; rights of appeal. In fact it’s hard to find a piece of legislation with more appeal opportunities for the property owner. The owner can appeal against the decision to make an EDMO, they can also appeal at any time during an EDMOs duration if the think the local authority is not managing the property efficiently. They can also appeal to have the order revoked if they have new plans to manage the property themselves.

Owners are not locked into an EDMO. Once it is made the owner can still sell the property at any time, and indeed if they want to manage it themselves they can apply to have the order revoked.

Council’s do have to obtain a market rent for the property. If they let it at below market rent they have to compensate the owner with the difference.

Lastly there is no programme to seize thousands of empty homes. The power is a discretionary one, local authorities make their own decision of whether to use it. I can’t guarantee that all of them will use it sensibly, but I believe the vast majority will. It is one of many different approaches that local authorities can take. Many already give grants and loans to help empty home owners with repairs, some offer tenant finding schemes, some help owners sell and market their homes. Only when these sorts of services have been offered and have failed should EDMOs even enter local authorities minds. I predict a small number of EDMOs actually being used but if it helps turn abandoned homes back into places that people want to live in and live next door to it will have been a success

New EDMO guidance and Conservatives response

The Government have today released guidance to local authorities on using empty dwelling management orders. And the Conservatives have responded with a new press release entitled "Prescott's home grab laws seize furniture & heirlooms of the dead" (it’s not on their website) Again there are some misleading comments and inaccuracies that need to be cleared up:

They say: Furniture snatched: The state has the right to possess furniture, fixtures and fittings, when the home is seized, including if the property is grabbed because the owner is dead.

This is misleading. What the power does is put the responsibility of looking after any contents in a property where an EDMO has been made onto the local authority. They have to give it back to the owner if the owner requests it.

They say: Seized for seven years: Under the Orders a private home can be seized for up to seven years; 28 days after an Order is granted, there is no right of appeal.

There is a right of appeal like all legislation there is an appeal period in this case it is 28 days

They say: Homes in good condition seized: A home does not have to be blighted or boarded up to be seized, merely empty for six months - including homes of the recently deceased.

There is an exemption for properties of the recently deceased that covers the whole period of probate however long that lasts and for a further 6 months after that

They say: Confiscated for asking too much: Homes already on the property market can be seized if a council thinks the asking price is 'unrealistic'.

Arguably true, but the point is there is a test of whether properties are genuinely for sale. It is the RPT not the council who decide.

They say: Owners can be charged for having their home seized: Once seized, there is no obligation to obtain a market rent, and social tenants can be housed in the property. The owner can even be charged and billed for their property being seized, if service/standing charges are greater than the rent, after the council deducts its "expenses".

The only circumstances in which owners can be charged is if they want to sell before the end of the management order term or if there is any outstanding service charges and there are still outstanding costs

They say: The council is not obliged to obtain a market rent, but can take any of the rent to meet its costs This is likely to leave little money left in compensation for the owner. The council is also able to deduct from the rent any expenses it has incurred.

There is and if a local authority doesn't, they have to pay the difference to the owner.

Swapped: a Paperclip for a House

A year ago Kyle McDonald embarked on one of those bizarre quests that only the internet can make possible. He started with one paper clip and claimed that within a year he was going to trade it up for a house. Exactly one year and 14 trades later he has done it. His first trade was a swap for a pen, by September he had traded up to an old van, and by earlier this summer he had traded up (or down depending on your view) to an afternoon with Alice Cooper. Tomorrow he completes the transaction that sees him acquire a house (a swap for a role in a movie) in the town of Kipling in the central Canadian state of Saskatchewan.

Who on earth would swap a house for a role in a movie? Well it turns out that Kipling is suffering from a problem we in the UK know about very well. Housing oversupply. There are more houses in Kipling than households who want to live in them resulting in lots of empty homes. What the town council has done is effectively give a way a house in order to attract new residents into the town. It’s a technique that some council’s and housing associations have used here too. We call it homesteading and it can work very well. Declining areas of Sheffield, Newcastle and Blackburn have been turned round. I wrote about it in the Observer last year you can read the article here. What the town of Kipling is going to do with the role in the movie is not recorded.

One in Five Homes in Ireland are Empty

The number of empty homes in Ireland has always been a bit of a mystery. There are no official figures and estimates from local authorities and commentators tended to be so absurdly high or so absurdly low that nobody believed them. Well the truth is out. There are 300,000. A staggering 20% of the country’s housing stock. The absurdly high figures were right all along!

This story from the Irish Independent tells how the number was uncovered by people working on the national census underway in Ireland at the moment
“Enumerators delivering and collecting the census forms were unable to contact the inhabitants.
Following inquiries among neighbours, postmen and women and apartment block management companies, the vast majority of those dwellings - some 275,000 - were identified as being vacant. In a further 30,000 cases, there was nobody at home when census officials called on various occasions.”

Today is the Day

Today is the day that Empty Dwelling Management Orders become effective. Either the end of the civilised world as we know it, or a useful contribution to the campaign to bring empty homes back into use, depending on your opinion. The government’s press release is here.

What this means is that from today Residential Property Tribunals will be able to hear applications from local authorities for interim EDMOs. The tribunals will make a judgement on whether the local authority has made reasonable efforts to assist the owner in finding a voluntary solution to the empty property. It will decide whether there is a reasonable prospect of the property being brought back into use without an EDMO and whether there is a reasonable chance of the local authority bringing it back into use if an EDMO is granted.

A number of local authorities have said claimed that they are going to be the first to use the power, a race to use a new piece of legislation? A slightly worrying thought! To help local authorities make sensible judgements two pieces of guidance will be launched this week. The first a DCLG guidance note on EDMOs provides technical gdance on how the legislation works. The second “A Cure of Empty Homes” is guidance that I have written in a joint Empty Homes Agency I&DeA publication. The purpose of this is guidance is to show the broad range of approaches that local authorities can take to bring empty homes back into use. There are over 20 different approaches explained here. EDMOs are just one of them. If there is a race it should be for a local authority to provide the widest and most comprehensive service to assist owners get homes back into use. Hopefully this guidance will help.
To support the launch of the guidance we a re running four regional seminars with I&DeA. The first was on Tuesday in Birmingham there is also a seminar in Bristol on 12th July, London 18th July and Leeds on 19th July. There are still one or two places available see here for booking information.

Kevin McLeod on EDMOs

I like Kevin Mcleod. He is an “A” list TV presenter and his shows are amongst the best property shows on television. But in his regular column in the Sunday Times yesterday he was not on top form.

"On a Friday teatime, when everybody in Westminster was already on the train home and everyone else was watching the World Cup" Friday 16th June - it was Angola v Mexico on at the time
"Kelly’s department quietly outlined details of a strategy, dreamed up by John Prescott in 2004, that allows local authorities to seize houses lying empty.”

snip

So if, for example, you’re in the unhappy position of having lost an elderly relative and are in the process of dividing up the estate, the chances are that, if you don’t get a move on, you might find your relative’s house suddenly occupied by a family from the social housing list.”

snip

“Or there again, if your auntie dies in September and you think you would like to wait for the spring upturn in the housing market before selling her place, I’d think again.”

These examples like every other one I have seen thought up by newspaper columnists these last couple of weeks actually prove the opposite of what they are trying to say. Both these cases would actually be exempt from EDMOs. In the case of the bereavements the property would be exempt whilst probate is sorted out (however long that took) and for a further 6 months after that. So no need to hurry up. In the second case the property would be exempt for the probate plus 6months and then if the owner was intending to sell exempt again. Admittedly Mcleod acknowledges the blight caused by empty homes and concedes that that “The intention behind the scheme is admirable.” But unfortunately like many other columnists on this issue he has merely recycled inaccurate reports from other newspapers.