Firstly, although a property may be empty for any length of time, the ones that the government are really concerned with are those that have been empty for more than six months (it is usual for empty homes to have been so for considerably longer than this even). The reasons they become empty are varied and include:
- they have fallen into disrepair and the owner does not have the funds needed to put it right;
- the properties are located next to businesses such as flats above shops or former tied agricultural accommodation;
- regeneration schemes with decanted residents that are no longer going ahead;
- unsold or un-let properties within private developments.
Aside from "official" sources of information, such as the central Homes and Communities Agency or independent charity Empty Homes Agency, it also seems that the media are jumping on the bandwagon with both the BBC providing information on their website and Channel 4 launching its own "Great British Property Scandal" campaign.
There are a lot of statistics being bandied about, some of which seem to contradict each other (it brought to mind that old saying about "98% of statistics are made up"), but there would appear to be some commonality in the following:
Average number of new homes built each year in last 10 years = 162,000Demand for new homes this year = 232,000
These figures show a deficit of ~70,000 properties per year; output would have to increase across both private and public sector house construction by 43%. This is an unlikely feat given the current situation of the financial sector who are reluctant to lend money for capital programmes. As the government's own Housing Market Strategy points out: "Lender's won't lend, so builders can't build and buyer's can't buy".
So it would be right to look at alternatives, of which empty homes may be considered a prime candidate.
However, my own personal views are that there are simply too many obstacles to overcome to make this a viable, sustainable alternative. Here are my main arguments against the empty homes strategy:
1. The homes are in areas where people don't want to live:
There are two prongs to the attack on empty homes that are aimed at the public at large, and they are for those people who currently own an empty property and those who don't.
For those who do there are some sweeping assumptions being made about why properties aren't being used, but none of them look at the fundamentals of whether the properties would, in a good condition, be desirable in future based on location, size and price. There are a multitude of reasons why properties become empty, but the end product may still fail to meet demand (which is defined as what the customer wants) if the two don't match up. Are these properties in low-value, run down areas where social problems are rife? Do we need small flats for couples or larger family accommodation? Are these empty properties in areas close to amenities, employment areas and have good transport links? Changing the aesthetics won't solve these problems if they lay at the heart of why the property is empty.
For those who don't own an empty home there is plenty of encouragement for them to go out and find an empty property, buy it, renovate it, then sell it back or rent it out. Again, if the property fails to meet the basic customer need then it will never be of any use, short of wrenching it up from the foundations and moving it somewhere else (the film "Up" springs to mind here). That means that people who buy an empty home with this expectation may find themselves with a nasty surprise at the end of their renovation project, as they fail to realise the revenue streams their finance packages rely upon.
An important consideration is the decision to rent it out versus selling it. We are all well aware of the depressed housing market, which will make margins tight if individuals choose to sell afterwards, but more importantly the people in need of housing at the moment are those in society who cannot afford to buy on the open market - thereby defeating the point of this exercise. Therefore renting as the preferred (only) option may put pressure elsewhere in the welfare system. Take this scenario, which I fear may become more common as we move towards the introduction of universal credit:
There is not enough social housing stock so households rent privately, and the household claims Housing Benefit. This inevitably costs the taxpayer more as it's not a subsidised rent. It may also not cover the entire rent so the shortfall will have to be made up by the household. If the property is in an area of low employment (the reason why it was empty in the first place) then the household may struggle to find work. If they fall behind on rent payments then eventually they will be evicted, reverting to the local authority's homelessness register and waiting list. The debt to the Landlord will never be repaid, or if a court order is granted it will take many years to repay at ~£3 per week. The cycle continues.
Furthermore, private rental sectors use Assured Shorthold Tenancies rather than lifetime tenancies, which means a higher turnover of households (possibly every 6 months) and therefore less community stability. A method of tackling one form of antisocial behaviour may bring a sting in the tail later on...
The research I've conducted also suggests a north-south divide in the country, with more empty homes in the north than the south. Is the north a less desirable area to live in? That's for customers to decide.
2. The numbers just don't add up:
There are 350,000 long term empty homes, of which just 12% are in the public sector - yet it is councils and housing associations who are being tasked as the vehicle for implementing this policy through local housing strategy and collaborative working. So much of it is out of their control and dependant on private market forces and cooperation instead.
There are no exact figures published, but when you deduct the number of homes that are empty because they are in the process of being bought or sold, second or holiday homes, belong to service(wo)men or those that are caring for relatives or being cared for in a home or are going through Probate, I expect that would leave very few empty homes left.
The Homes and Communities Agency are very keen to point out that 16,000 empty properties were brought back into use in the first year alone. However, the Empty Homes Agency points out that there is a mismatch in the way those figures are calculated. Councils have been making enquiries on occupation of properties where it has been indicated on the council tax returns that they are empty. If they are found to be occupied then they submit this as a newly occupied home, thus claiming the New Homes Bonus. There is no reverse procedure being carried out to see if seemingly occupied homes are in fact empty - as that would of course mean they would have to pay back some of the funding. These statistics are at odds with the figures published by the Halifax every year, because those figures are based on the Housing Strategy Statistical Appendix (HSSA) returns (figures that are compiled by the local authorities for their respective areas, showing the number and type of housing stock). The HSSA returns would lead us to believe that the number of empty homes is increasing, whilst the councils claim that the numbers are decreasing - so it is confusing to ascertain the true picture.
Moving onto my next part of this argument, the government has pledged £150 million for bringing these properties back into use. (Cunningly the government has excluded existing social housing from grant funding, instead "incentivising" local authorities to bring them back into use through the New Homes Bonus.) Running some quick calculations shows that the budget equates to £3750 per property (assuming all empties are brought back into use): The Empty Homes Agency unfortunately states that the average cost of renovating a home is £10,000. In actual fact, the cost of renovating a property varies widely, depending on the amount of work required to make it habitable. A much better guideline is to assume 20-30% of your property’s value as a renovating budget. (However, this guide doesn’t help if the property is already de-valued because it has been stood empty for some time and been subjected to antisocial behaviour or squatters!) Therefore, some typical costs for a standard family home are shown below:
Renew central heating system £3000Damp proofing to all ground floor £5000Upgrade windows to double glazing £5000Rewiring electrics £3000Fitting of new bathroom £1000Fitting of new kitchen £2000Decorating & carpets £2500TOTAL £21,500
Even with the funding capped at £10K per property that would only bring back into use 5% of the empty homes, or rather contribute ~6% to the total housing required in order to meet demand each year.
The media are selling this idea to private individuals, encouraging them it's everybody's responsibility rather than solely the authorities. In fact, it's something only the private sector can really effect! Television shows such as Grand Designs propagate the romanticism of turning something old and tatty like this:
picture taken from the BBC Homes website - section on how to rescue an empty property
into something new and sexy (Let me tell you it will take 000,000's not 00,000's to change this into a habitable dwelling, and that's providing it gets planning permission....)
The people involved in such shows have considerably larger budgets than the meagre £21,500 outlined above, and even then the majority manage to exceed them! (And do not get me started on the idea that just ANYBODY can project manage a major building project successfully - they can't and it just undermines the real profession - perhaps another blog?).However, you could take the BBC's advice which very helpfully points out the following:
"Work out a proper renovation budget before you start. Rescuing a house doesn't have to be expensive, but if you run out of money half way through you'll be skint AND homeless. Build £200 into your budget to spend on a treat for yourself at the end. It'll help keep you focussed on sticking to a budget."
Undertaking renovation works, even with grant subsidy, would still require gap funding to meet the difference. Another nugget of advice from the BBC is:
"Mortgages can be tricky to find if you want to rescue an empty property. The problem is that old wrecks aren't worth much until they are renovated. Many people want to borrow more money for the combined costs of purchase and renovation, than the property is actually worth in its wrecked state. From a lender's point of view this is high risk, because if you default on your payments the property isn't worth enough for them to recover the loan if they repossess the property. Happily, the situation is improving fast." [Italics by me for emphasis]
The Beeb site goes on to list such "happy" lenders. Is this sound advice given the risky lending practices that led to the banks' downfall all too recently?
Another thing to be aware of that isn't widely publicised in all this propoganda is that VAT is currently chargeable at the standard rate (20%) on renovation works, unlike new builds which are zero rated. So the government is encouraging you to renovate those empty homes because they get money back from doing so!
3. There is a potential violation of human rights with this policy:
If you've made it this far then you may have turned off at the mere mention of human rights; unfortunately this piece of legislation has been abused many times over the past 12 years which has contributed to its lack of appeal. However, I hope you will just hear me out for this one final argument....
A significant problem with empty homes may be that the owners just cannot be traced. In these cases the local authority can exercise an "Empty Dwelling Management Order". This is similar to a Compulsory Purchase Order, in that the local authority can assume ownership if the current owners are unable or unwilling to do something about the empty property. (See this article in the Daily Mail for further enlightenment). Local authorities so far have been reluctant to use this power - and rightly so. The Human Rights Act 1998 provides several places where property and family life are protected under Schedule 1:
Of course, this is balanced in the general or public interest, but you can see which claims it may lead to....Part 1, Article 8 – Right to Respect for Private & Family LifePart 2, "The First Protocol", Article 1 – Protection of Property
Finally, the empty property may be tied up in probate which is a time-consuming and complicated process (the details of which are beyond this discussion point). Under Probate law a claimant to an estate has up to 12 years to come forward - as per the Statute of Limitation. Any action taken on an empty property before the expiration of this time period would be deemed illegal and almost certainly a violation of human rights if subsequently a claimant stepped forward. So really there may be nothing more that could be done except wait it out.
So what can I conclude from this?
It is commendable that the government is seeking alternative ways to meet the housing shortage crisis, but it is worrying that they attempt to do so by implementing ill-thought out policies without consideration of the longer-term consequences.
Furthermore, the media that surrounds this policy is ill-informed sensationalism at its best and irresponsible at worst. Channel 4 are actively encouraging trespass onto another's property to check if it's empty or not.
Perhaps a better way forward to tackle the housing shortage would be to adopt a systems-thinking approach: undertake some root cause analysis, speak to the people who work in the system (and not just a minority consisting of yes-men as previously), and map out the process from end to end across sector borders - particularly looking at the financial sector. From this data the government could construct a policy, rather than relying on assumptions perpetrated by so-called advisors and experts "representing" their field. As Deming once said:
"In God we trust; all others must bring data."
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