Select Committee on Transport, Local Government and the Regions Minutes of Evidence


Examination of Witnesses (Questions 40-59)

WEDNESDAY 24 OCTOBER 2001

DAVID COWANS

NICK HUGHES, SUSAN HEINRICH, ROSIE MAY AND CLARE MITCHELL

  40. When you say funding, what do you mean?
  (Ms May) At the moment, empty property grants are given by a local authority to-owner-occupiers via the Housing Grants, Construction and Regeneration Act. The only trouble is, it is quite an onerous tool, it is quite a difficult one to work, there are all sorts of conditions attached to it, but that is being reviewed and wider discretionary powers are going to be given to local authorities. So up until now empty property grants have not been that forthcoming or very well publicised, and the fact that a local authority does not have an empty property strategy means that they are not necessarily going to publicise an empty property grant regime.

  41. Are there different reasons in different parts of the country?
  (Ms May) Yes, without a doubt. Obviously, the problem in the north is the overriding issue of low demand. I think the biggest indicator of the differences between the two is the fact that for low demand £15 million has been targeted by the Government for funding to tackle the issue, whereas they have given, or have targeted, £250 million to address the issue of key workers and the shortage of accommodation in the south; and that is a gross imbalance.

  42. What are the main problems in the private rented sector?
  (Ms May) The private rented sector is landlords land-banking, taking properties on and leaving them empty for a couple of years and not bringing them back into use, the lack of grant funding to bring the properties back into use, and general suspicion, as well, by owners of why a local authority would want them to bring their property back into use. So it means educating people at grass roots level that an empty property is not necessarily an asset and it does depreciate if you leave it to rot.

  43. What about owner-occupiers?
  (Ms May) Owner-occupiers as well; if the local authority were able to widen their grant policy to give grants to potential owner-occupiers, so if somebody bought an empty property, at the moment they are encouraged to rent it out, so grants are given to landlords, whereas if they were given a grant, and the reason for that, again, is the restrictions under the Housing, Construction and Regeneration Act, Housing Grants, Construction and Regeneration Act. Which means that if you give an empty property grant to an owner, and potentially occupier, of an empty home the local authority cannot set a limit on it, or it is understood that the local authority cannot set a limit; so an owner-occupier could end up with, once you take the roof off, an empty property grant of £60,000, £70,000 per property, whereas they can set a limit for a landlord grant, to, say, £15,000, £20,000. The only trouble is, landlords are suspicious of working with local authorities anyway, so therefore are not taking up the grants; owner-occupiers, who could be buying empty properties to live in themselves, are not able to do it because the local authority will not want to give them the grant. So it really is freeing up that Act to make it a more workable tool, having an effective corporate empty property strategy that is going to work to bring empty properties back into use, rather than just keep them at arm's length and to be seen to be doing something that actually, in the end, is ineffective.

  44. Would you say that the private landlords are trying to exploit a situation?
  (Ms May) I think private landlords are in the business to make money from renting out properties, and good private landlords are to be encouraged; a sustainable community is a mixed community. So private investment is needed, and rather than a local authority constantly viewing a private landlord with suspicion that they are profiteering, it is better to encourage the good private landlords form good landlord forums so they have got a network and support. And I think it is possibly a misconceived problem that they are taking advantage of the system, I think local authorities need to appreciate their good landlords and encourage a greater supply of rented accommodation in the private sector.

Ms King

  45. How do you discourage the bad? You are talking about encouraging the good. I know a lot of my constituents end up living in appalling conditions in privately rented accommodation.
  (Ms May) Measures across the board. It is about setting up working partnerships with the good landlords. In Eastbourne, they instigated a private landlord forum with the Southern Private Landlords Association, and said they would be happy to work with them, provide Council offices for their meetings, put in all sorts of measures that the landlords would want, but, in return, they would like their Code of Conduct, which is actually quite a good one, displayed in every property, with forms there for the tenant to be able to complain if they want to, without fear of reprisal from the landlord; and they were happy to do that, they understand that a good relationship between landlord and tenant will therefore carry it forward. But it really is a slow but sure process. Also, Mansfield have worked up a deal with English Partnerships, whereby they are funding them, or helping to part fund them, to buy out a local bad landlord; unfortunately, it means that he is going to get market prices for his property, and it is not really necessarily the most satisfactory situation. But there are all sorts of schemes, just lateral thinking and working with the good private landlords rather than treating them with suspicion.

Chris Grayling

  46. You have set out in your memorandum a list of policies introduced since 1997, but, in reality, the figures on empty homes have not really changed very much over the past five years, or so. Have actually the policies introduced, in your view, changed the fundamentals of the problem?
  (Ms Mitchell) There are a couple of key changes in the budgets, the Empty Homes Agency very much welcome that. My colleague will outline one measure, which was the capital allowance on the conversion of waste space above shops and flats; and the second was, of course, the reduction in VAT on properties that have been empty longer than three years to 5 per cent. The Agency is clearly calling to extend this to all properties that have been empty over a year, and obviously that will have a far greater impact; clearly, we are now seeing some of the fallout of those two measures, but it is quite early days.

  47. Can you just elaborate on something you were saying before, can you give us some examples of what you are seeing?
  (Ms Mitchell) Obviously, in terms of the reduction in VAT, that has been welcomed across the sector, and we have not got any research for findings as yet, but obviously we are hoping to do that in the future. But we are clearly very keen for that VAT reduction to be introduced and harmonised between new-build and renovation of empty property. I am sure you will be aware that at the moment you pay actually zero VAT for bricks for building new houses on greenfield sites and pay 17 per cent VAT for bricks to re-build in inner urban areas to house homeless families; and we see that as an absolute anomaly and it really must be addressed.
  (Ms May) The other reason for the figures as well, I think, to look at it with an overview, is that when the Agency first started, in 1992, there were a million homes empty then, so the figure has reduced overall. The last two or three years is going to really see an increase, because there has been a greater responsibility on local authorities to report the number of empties; and, hopefully, with the existence and the findings of the Committee and even greater pressures on local authorities, that number might possibly go up or it might come down, but we need to see what—the new best value performance indicators are calling for a report of the percentage of empty homes, so we need to see what happens with that. So I would say that, although the figures seem to have remained static, they have probably fallen, but also are being reported more.

Christine Russell

  48. Could I just go back to the point you were making about your call for a level playing-field between brownfield sites and greenfield sites. Have you actually done any research that could quantify the likely numbers of additional homes on brownfield sites, affordable homes, that would be built as a result of an equalisation of the VAT?
  (Ms Mitchell) We are aware that about 40 per cent of England's long-term empty properties have been empty for up to three years, so they are not going to be impacted at all by the changes in VAT. We have not got any specific research that shows in terms of social housing, but we have some figures I believe in the submission which look at the impact, and I can provide further details, if that is appropriate, in terms of our detailed break-down.
  (Ms May) I think also it applies to the refurbishment of empty properties more than new-build on brownfield sites; the fact is, the biggest difference is the 17.5 per cent to refurbish or convert an empty property on a brownfield site than to new-build, when those properties are in existence on a greenfield site.

  49. Can I go on and ask you about council tax. Have you done any estimates of how many homes could be brought back into use if there was a levy of full council tax on empty homes?
  (Ms Mitchell) Just to the first part, I do not know if we have any particular research, but we are aware, anecdotally, just the point that Louise Ellman made earlier about the private rented sector, of problems of landlordism and rogue landlords having a huge impact on communities, especially those communities experiencing low demand and unpopular housing. And at the moment those landlords pay a reduced council tax, and we really feel it is one measure to help address those issues, obviously there are others, the licensing of private sector landlords, and I know there is a consultation paper out at the moment, but we see council tax as one tool to address and encourage private sector landlords to activate property.

  50. Why are you confident that that would work, have you got a basis for that assumption that you are making?
  (Ms Mitchell) I suppose, one issue is if you look at the potential revenue it would bring councils; so it is actually a huge lost resource. An owner of an empty home pays only 50 per cent council tax on an empty property, and if you think there are 250,000 long-term empty homes, that is actually a huge loss in revenue and resource for councils.

Chairman

  51. But, surely, if there is low demand it is just going to penalise the landlord, is it not?
  (Ms May) That is why we say to have a discretionary power afforded to the local authority, so that way they can choose.

  52. Yes, I understand that discretionary power, but then this claim that you are going to actually bring this extra money back to local authorities is not going to happen, is it, if in those areas there is low demand, because they are not going to be able to do it?
  (Ms Mitchell) What we want is for councils to have the discretion so they target it effectively. Obviously, you could not penalise people who have empty properties they are unable to sell or do anything with in areas of low demand or unpopular housing; but it is one measure to target perhaps irresponsible landlords.

Chris Grayling

  53. Can I just ask a question on the basis of that. Is there actually an empty homes problem that relates to people who are sitting, waiting for homes? In places like my constituency in Surrey there is a homes problem but it is exactly the other way round. In the North East there is a homes problem because there is not the demand. What you are talking about is giving local authorities the option of refining demand, but, surely, actually the issue is that, supply and demand, there is a huge mismatch in this country?
  (Ms Mitchell) Absolutely, that is why we want it to be absolutely discretionary, so the councils have that discretion, because they know their housing market.

Mr Cummings

  54. In your evidence, you state that there should be a statutory requirement on every local authority to have an empty homes strategy. Is it possible to give the Committee some examples of a local authority where empty homes strategies are working well?
  (Ms May) Yes, there are a number. Westminster City Council has a very effective empty property strategy; one of the reasons for that is because they use, as a last resort, compulsory purchase orders without fear of what people might think.

  55. But is Westminster Council a typical council?
  (Ms May) Yes, it is, in the south, of an effective empty property strategy. In the north, the problems are different. So just going back to campaigning for council tax on empty properties, which would form part of an empty property strategy, the reason is not necessarily that we have done research and we know that would bring properties back into use, but it is just joined-up thinking, it is joined-up thinking that empty properties are going further up the political agenda, people are taking more notice, so it is just a good measure to give a joined-up message to people that, "We want you to bring your empty properties back into use, and, no, we are not actually going to carry on giving you a discount to keep them empty." So, although we have not got research that would bring them back into use, it is Government giving an effective, consistent message, in a local authority empty property strategy. At the moment, the best empty property strategies, and I can get a list for you, if that is okay, and send you the most effective ones, and a copy of the—

  56. What would be the best ones?
  (Ms Mitchell) Manchester is a good example of an authority that is tackling low demand and unpopular housing, and that has been mentioned by previous speakers.
  (Ms May) But at the moment the thinking is not joined up. An empty property within one area could have as many as five different council departments working on it, to the complete ignorance of each one of those. If it is attracting mice and rats and rubbish, the planning enforcement officer could go round; the RSL could have spotted it as an empty property and contacted the Housing Corporation to ask for funding; the housing representative within a local authority could have seen it and decided maybe they will approach them. So at the end of the day one particularly bad example could have five or six different letters ending up on the door mat of that one empty property. So until an empty property strategy is made a statutory duty local authorities will continue to work with a lack of joined-up thinking.

Mr Betts

  57. About joined-up thinking, it is very important; do you think, if the empty homes strategy has to be provided, there should be a link into the unitary development plan of the local authority, on a statutory basis? Because certainly the last UDP inquiry I had, in Sheffield, where people were arguing against building more homes on greenfield sites, the authority had no plan at all and no information and very little evidence about empty homes in the area and what they were going to do about it?
  (Ms May) Exactly; that is exactly the point. Then you can pull in all of the different resources for housing. Susan Heinrich is our Planning Executive, it is probably better for her to answer that question.
  (Ms Heinrich) One example I can think of is in Hastings, where they are trying to deal with the whole issue; and, in terms of their local plan, they are trying to put in allowance for empty properties, but they are being frustrated by the county council and by the local government office, who say "you cannot do that, that figure has been taken account of elsewhere". And so they are trying to do something, and that is a good example of the bit of joined-up thinking that is going on, but they are being frustrated by external factors.

Mrs Ellman

  58. You put, in your evidence, that Government, you put a whole list of things of Government policies that you think should be operating; what do you think is the most important thing that could change, what is the most important change that you would like to see in Government policy, or at a local level, to make an impact?
  (Ms Heinrich) I think, one area, in terms of planning, land use planning, is actually having targets in the land use plans from regional guidance levels right down to a local level. Because, at the moment, all the right words are in place, perhaps, in terms of policy, but the actual guidance, in terms of perhaps how it is monitored, it is very much seen as, vacancies are seen as a secondary issue. And, as I say, I gave the example of Hastings, when they were trying to do something, they were told, "Oh, no, the whole vacancy issue needs to be dealt with at a more strategic level and not a local level," so there is some frustration there. So I think actually putting targets in, making very clear that it is an issue that could be seen as a potential source of housing, rather than just sort of something you make an allowance for.

  59. But why are the 250,000 houses that have been empty for over a year empty; what is the reason for that, and what needs to be changed to relate to those reasons?
  (Ms Mitchell) I think it very much does depend upon where they are located, absolutely, so they are very different issues, as you will be aware, in the south from areas of the north. But, in terms of what we think would be most effective, it is hard to choose from, obviously, the key issues that we are campaigning for, but we really do feel that if housing is not seen, especially in areas where there are large, large numbers of vacant properties, say, in the North West there are over 138,000 empty homes, that empty homes be seen as a housing resource and counted as a housing resource at the planning level, rather than that not happening. Because obviously it is key to urban regeneration, that if you are continually building on the fringes and allowing your urban centres to abandon and empty out it is undermining urban renewal. And so we are really keen that actually empty property be seen as a housing resource, so it be included in your housing requirements, and unfortunately that is just not happening, it is not happening at the regional level and it is not happening in UDPs and it is not happening in the local plans. So that, we think, would make a huge impact.
  (Ms May) And also funding. Last year, Eastbourne Borough Council had £100,000 in their budget for empty homes, to bring their empty homes back into use, £100,000 really is not enough, so it is Government commitment to empty properties. As Clare says, seeing them as a housing resource, a serious housing resource, and providing the funding and the commitment at national level, so to have a national overview; and I think that is highlighted by the fact that £15 million has been allocated to low demand, £250 million to key workers. And, from that, I think the biggest thing that will take into account all of the aspects is the statutory empty property strategy; that way, every local authority department will have to come on board.


 
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