Environmental Health News printed a couple of articles on empty homes last week here and here. Jake from Westminster City Council, who I happen to have a lot of time for, responded and over the last few days we have had interesting to and fro correspondence. Environmental Health News is printing some of this in their letters page. But unless you are a member of the Chartered Institute of Environmental Health you won’t otherwise see it, so here it is:
I write in response to the article in EHN on the 22nd September in which it was said that David Ireland of the Empty Homes Agency knew of around 10 councils including Westminster that had been put off using the new measures (Empty Dwelling Management Orders) because of the coverage in the press over the summer.
The City of Westminster uses compulsory purchase powers as a matter of routine practice to bring empty private sector dwellings back into use. However, Westminster has 'been put off' using the new measures but the decision to not proactively use these powers was taken many months before the adverse publicity. The publicity has had no bearing on the decision. The reason for not using the powers relates to the details of the procedure. The risk of financial loss is high. An interested party can challenge the local authority’s management scheme for the dwelling at any time during the course of what may be a 7 year period of management. Local authorities need surety at the start of the term that their management scheme assumptions relating to rent levels, void rates, repairs costs etc. are accepted by the Residential Property Tribunal. The process does not provide for this. Local authorities must also be allowed to make a reasonable surplus on an individual dwelling to allow for those cases where losses are made. Westminster accepts that an authority should not be allowed to make a profit on its EDMO portfolio. There should therefore be a requirement for a ring-fenced account for EDMOs.
Westminster made representation to the former ODPM during the consultation process to the effect that local authorities had suffered major financial losses in respect of the 'control order’ procedure in respect of HMOs under the Housing Act 1985 and that the EDMO procedure should not replicate the fundamentals of this procedure. Instead, there should be a fairer balance of risk as between the dispossessed parties and the local authority. This plea fell on deaf ears.
Sadly, the legislation was introduced at the 11th hour during the Parliamentary process and we were not able to make these points to the legislators.
It's quite ironic that certain parts of the press have become so exercised about EDMOs. If I was a landlord I might be tempted to buy an empty property in a local authority with a proactive EDMO policy - sit back whilst the local authority takes action and collect my guaranteed market rent. I would bide my time waiting for a few years to elapse after when, staff changes have taken place; paperwork might have been mislaid; memories fade as to the details. Then I would appeal. Many readers involved in HMO enforcement will be familiar with this scenario.
Private Sector and Energy Manager
City of Westminster
I didn’t want to imply that Westminster City Council had been frightened off EDMOs by the press. Their position on EDMOs has been very clear for a long time, they don't like them; other local authorities do. Fine with me, EDMOs are a discretionary power and it's entirely appropriate for local authorities to make policy decisions like this. But Jake, I can’t let your points about risk and cost go unanswered.
Risky? The risk of financial loss is only high if the local authority chooses the wrong properties to use an EDMO on. You can estimate likely costs, you can calculate the likely rent, if A is bigger than B don't use an EDMO.
Financial Loss? If an owner asks for an EDMO to be revoked they can apply to the RPT, if it is revoked the owner will need to refund all the local authorities outstanding costs.
Costly? EDMOs are the only method of tackling empty homes that enable the local authority to recover their costs. I was in Newham a couple of weeks ago and they told me an average CPO costs them £13,000. Many council’s happily give out grants of £20,000, and a recent benchmarking exercise I saw showed informal approaches to get empty homes back into use cost around £2,500. Use EDMOs properly and they are free.
The Daily Express has promoted enough misinformation about EDMOs lets not create any more.
I accept your points about the relative cost-effectiveness of grants (dependant on the details - our policy until recently was to balance the grant level with our savings from the nomination rights) but not CPOs. We have not lost a penny in CPO enforcement in living memory. True - there are the costs of officer time but there would be such unrecoverable costs under the EDMO procedure.
I stand by what I say about the financial risks of the process - many years down the line the owner can argue that the rent charged was too low; the cost of refurbishment was too high; the works carried out were unnecessary etc. We've seen it all before on control orders. Critically local authorities housing management process aren’t geared up to account for a profit and loss account relating to one dwelling. Things get subsumed and details lost. Alternatively, if a property is micro-managed and bespoke accounting systems put in place the high costs of doing so are open to challenge.
Your response about risk solely addresses the scenario where a local authority chooses a dwelling where the costs of refurbishment are so high they are unrecoverable over a 7 year period. I agree with you, if there are major works involved an LA need to allow a generous safety margin for unforeseen works and ensure that the initial survey is accurate. You have not addressed my substantive points.
Let me give you a hypothetical but realistic example about rent. We take possession of a 2-bed flat in a reasonable part of Westminster. We believe a reasonable market rent is £450 p.w. Six years into the EDMO the owner goes to the RPT claiming we were out by about 10% - should have been £500. Wins the argument. Cost to the LA - £15,600 (ignoring interest and RPI uplifts). Why not have this thrashed out at the start?
So I stand by my main points.
1. The LA needs to be able to go to the RPT at the start of the Final EDMO process to get the management scheme rubber-stamped.
2. They need to be able to make a surplus on an individual dwelling.
Not too much to ask.
I suspect we agree on more than we like to admit. EDMOs like all housing enforcement measures are likely to be difficult and time consuming. I'm not encouraging anybody to use them. I'd far rather they got results through voluntary agreements with property owners. However, where all else fails, EDMOs are I think a useful enforcement tool. Not totally without risk, nothing is, but if managed properly the risks are, I would suggest, small and no greater than any other similar enforcement measure. If local authorities mess it up by loosing their records or not keeping proper accounts you can hardly blame the legislation.
EDMOs are not the same as control orders, whilst there are wide ranging appeal provisions for the owner, it’s not a free for all. The owner can appeal against the rent and other details in the management plan, but only for 28 days after the management order has been served. Thereafter the owner can only appeal against the council for not sticking to the management plan, (and a few other special circumstances around the end of the final management order). Therefore your hypothetical example could not arise.
You can, of course, make a surplus on an individual EDMO. The question that arises is what do you do with it. The guidance says pay it to the owner, I agree. What else could a reasonable council do? Using it to subsidise a loss on another EDMO would be grossly unfair to the first owner.
I've now had a closer look at the legislation and I now see there is a 28 day appeal period after which in theory at least the order and by implication the management scheme is determined to be final and conclusive. Sadly, I was relying on someone else's interpretation of the statute and believed that there wasn't an appeal period at this stage of the process. The position is not therefore as bad as I painted. However, there remains the latitude for the RPT to waive the 28 day appeal period - but presumably this has to be a reasonable extension - not months or years.
More importantly there is the on-going right to appeal against a decision by a LA to refuse to vary a final EDMO. There is therefore an on-going right to challenge the management scheme. However, overall, the position is not as bleak as I first thought. But the risk of losses remains unnecessarily high in my opinion and I would still urge local authorities to use CPO powers rather than EDMO powers particularly given that LAs are charged with disposing of their leased units in order to meet the target of reducing by half the amount of temporary accommodation.