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


Memorandum by Metropolitan Borough of Wirral (EMP 68)

EMPTY HOMES

  The Borough has serious private sector housing problems. The cost of rectifying private sector repair is significant. The local situation is:

    —  As at April 2001 Wirral had 4,299 empty homes

    —  3,470 (around 81 per cent) are private sector dwellings

    —  3 per cent of the overall dwelling stock is empty, with over three-quarters of these void for more than six months

    —  2.76 per cent of all private stock is empty

  It is noticeable that the highest concentrations of empty homes are found in areas of greatest socio-economic deprivation. Many of these homes are now quite simply obsolete. The presence of high numbers of void properties is both a symptom of urban deprivation and a direct causative factor.

  When a private sector housing area is beginning to decline some of the first indicators are a rise in the number of dwellings being put up for sale, a shift to privately-rented properties and an increase in abandonments. These factors then serve to accelerate the cycle of decline by providing a very visible disincentive for people considering a move into the area. The importance of tackling these "bad teeth" which sometimes fall outside targeted regeneration areas should not be underestimated.

  The proliferation of empty homes in a specific location directly damages a neighbourhood's economic sustainability by reducing the values and "marketability" of surrounding property. This process of "residential devaluation" can result in householders falling into negative equity and, in extreme cases, in causing them to abandon their homes should these fall into disrepair. The low valuation also discourages refurbishment. The cost of carrying out improvements is higher than the "added value" put into the property. For our Registered Social Landlord partners, this makes improvement for sale or shared ownership non-viable.

  The psychological impact of empty homes on local communities should not be overlooked. There is a direct correlation between low aspiration, low morale and living in an area that has poor physical conditions. The manifestation of physical neglect in deprived areas (ie a high number of empty dwellings) can contribute to and even create local residents' overall feelings of neglect and social exclusion.

  When the number of private sector empty properties increase in an area private landlords can exploit the opportunity to purchase dwellings at "knock-down" prices, often 20-25 per cent below market value. Problems arise when the numbers of such properties reach a "critical density". It is a common perception amongst owner/occupiers that an above-average proportion of privately rented stock in their area means that there will be an increase in anti-social behaviour and a continued decline in local house prices. This is an understandable presumption, as a landlord's "stake" in a community is primarily economic rather than social. Property can remain empty for some time because the landlord has expectations of some future grant availability or the property "sits" dormant as an asset which can be used as collateral for borrowing purposes as part of an overall property portfolio. Council Tax exemptions on empty properties provide no incentive for landlords (or absentee owners) to bring their dwellings back into use. Further the restrictive nature of the Compulsory Purchase Order process makes it very difficult for Councils to intervene.

  The Council recognises the key importance of reducing the numbers of private sector empty properties in the Borough. It also fully subscribes to the principle of taking a sub-regional viewpoint on void properties, so we can better understand the complex chains of cause and effect. The recent CURS Study into dwellings at risk in the sub-region has begun a process to construct a robust predictive model of housing supply and demand. Further, we subscribe to the view that private sector renewal programmes have been less than successful in the past because they concentrated largely on physical improvement rather than adopting a more holistic approach. Sustainable regeneration is as much about building community capacity as it is about "bricks and mortar". In Wirral we have attempted to progressively achieve this approach. The Tranmere Housing Regeneration Partnership (THRP) is an excellent example. A copy of the THRP Annual Report for 2000-01 is enclosed.

  Wirral's private sector housing challenges reflect its industrial past. A high proportion of the stock was built for purposes which are no longer relevant to modern day housing expectations. Homes were created at minimal cost, at high densities in terraces, close to the docks and mills that provided the main source of employment. Many of these dwellings were never built to be in continued use for this long. Targeted refurbishment programmes have been successful in extending the useful life of these properties but, inevitably, growing obsolescence and market change challenges their continued sustainability. Generally speaking, the older a dwelling is then the higher the maintenance costs and the greater the need to return more often to improve it. It is these "high-maintenance" terraced houses which prove to be most vulnerable to becoming empty for long periods. The major improvement programmes introduced during the 1970's through Housing Action Areas and General Improvement Areas now need to be revisited; their 30-year life now nearly extinct.

  The Government policy of reducing empty properties as a national housing priority cannot be challenged. However, the problem lies in the policy not going far enough in equipping Councils and their partners with the level of resources and the powers which would actually help them solve this very complex problem.

  National policy development seeks to arrive at a particular strategic formula for private sector housing which can be applied throughout the country. We would advocate that this is neither possible nor is it desirable. There are as many differences as there are similarities between, say, London's private sector housing environment and Wirral's. Wirral believes there needs to be an overall national strategic framework which is sensitive to the local housing environment (set within a regional/sub-regional context) and is area focused. This strategic perspective acknowledges that a fundamentally different approach has to be adopted in areas of high demand than in low demand and between regions, because the prevailing local housing market "dynamic" differs significantly across the country. For instance, the development of a robust registration scheme might work in "rooting out" bad landlords in support of a considered holistic approach to regeneration in one locality. However, in another area where private rented stock provides the main (scarce) source of affordable housing in a high value local market with few empties, this action could result in a collapse in a vital source of economic housing provision. On Merseyside, Wirral, Sefton and Liverpool Councils have committed to joint working at a sub-regional level to address the demise of the "inner core".

  Introducing planning restrictions on the development of greenfield sites, through revisions to the Regional Planning Guidance that, in turn, cascade down into individual Unitary Development Plans, can help to reduce empty properties by checking the expansion of new-build options—whilst simultaneously achieving environmental goals. Whilst this can be achieved medium term, the problem remains that there are many outstanding agreed applications for greenfield development already in the system. The Government needs to seriously consider the possibility of producing legislation which would give planning authorities retrospective restricting powers to overcome this obstacle. For example, the draft Regional Planning Guidance for the North West still fails to recognise the impact over-provision of housing will have on existing unpopular stock.

  Whilst preventative planning measures can help to a degree, the key to encouraging private developers to move from wanting to develop new housing on greenfield sites as opposed to refurbishment is making the change worth their while. Until the inequality between profit margins for new-build and refurbishment are reduced then it will always be a struggle to engage the private sector fully as main players in private sector housing regeneration. One option worth considering is the removal of VAT on renovating empty properties. This would mean extending the relaxation already introduced on properties left standing over 10 years. This needs a system which does not actually encourage owners to make their property void so as to obtain VAT exemption (an issue identified in the Urban Task Force Report). In order to prevent this occurring the local authority could be given a key role in "policing" or monitoring the validity of applications for exemption. It may be that full exemptions are initially limited to specific target areas such as within declared neighbourhood renewal areas (NRAs) or, as part of a local community planning initiative and applicants would have to meet certain criteria that complements the local regeneration activity.

  The introduction of Council Tax payable in full on properties which had been vacant for, say, more than six months should be considered. The present argument for not charging a full amount is based upon the premise that the owners are not using the area facilities and, therefore, it would be inequitable to charge them for doing so. However, this could be turned on its head. One could argue that the empty dwelling is having a negative (not a neutral) effect on the locality in that it is contributing to a lowering of market values and other factors of decline. The onus would then be shifted on the owner to prove to the Council that there are reasonable grounds for the property to be left empty for any period of time should they wish to be considered for exemption. Whilst such a system would allow for legitimate cases of hardship, it would also serve to ensure that less committed owners are given a disincentive to leave a property empty for a lengthy period of time whilst it has a detrimental effect on its surrounding locality.

  The present rules and regulations surrounding CPO are tortuous and overly expensive. This means, for most local authorities, they are a blunt tool in regenerating areas of housing decline and provide no real threat to most of those owners who show little attempt to bring empty properties back into use.

  As well as streamlining the CPO process the Government needs to consider changes to legislation that make it a more "affordable" option for local authorities. Loosening the link between market value and compensation will do this. Properties should be valued relative to the amount of work necessary to make them fit (or by costs related to demolition if this is an end option). More fundamentally CPO should no longer be seen primarily as a form of financial compensation, rather it should mainly impose a duty on a local authority to find the dispossessed resident(s) a suitable alternative form of accommodation and covering all their reasonable removal expenses.

  Demolition is an important tool in regeneration used selectively within the context of a considered strategy that takes into account the changing housing needs of the housing market. Decisions on whether to demolish should be made after a close consideration of a cost-benefit analysis of the expected remaining useful life of a dwelling and the likely "marketability" or value of the property after refurbishment.

  Wirral has recognised that it has a problem with empty property within its own stock, though by no means to the same degree as in the private sector. We also understand that public and private sector voids should not be considered in isolation and that the negative effects of low investment and poor housing conditions can "leak" from and to public sector housing. The introduction of business planning to public sector housing has helped us look afresh at our stock and how we may best direct investment over a long-term period. This is leading to a number of key decisions on continued selective demolition or re-modelling of some of our unpopular stock. Our extensive local community planning network ensures that our customers can directly influence the future re-development or regeneration of their areas.

  Wirral agrees that it should become a duty on all local authorities to establish an Empty Homes Strategy. At the present time we are revising our approach:

    —  in light of the CURS Study findings;

    —  alongside the development of a predictive model of housing need;

    —  following feedback from our regional debates on the subject; and

    —  in the context of our own "at risk" housing discussions that cover public and private sector housing in the Borough.

  The Government may wish to consider extending this idea to place a duty on each region (and/or) sub-region to produce an empty homes strategy. This would be very much in line with the way in which our own region is beginning to tackle serious housing problems. It is important to extend this to cover all empty buildings rather than just homes. This would ensure that a holistic approach is taken towards all the different aspects of neglect and under-use. Some of the most popular housing options have emerged recently through the re-development of under-utilised or empty commercial units.

  Wirral has already introduced a register of landlords for houses in multiple occupation. The intention is to link registration with accreditation so as to provide a "stick and a carrot" approach. The key to this process is to work with, not against, landlords involving them in drawing up the criteria for assessment and providing them with incentives to become accredited (such as giving training sessions, holding advice forums, providing assistance with lettings and drawing them in as key players in local strategies). Accredited landlord's continued "performance" is monitored at regular periods so as to ensure standards are maintained.

  Whilst at this stage ours is very much a voluntary scheme we would advocate that a similar system is made compulsory. One way to encourage recalcitrant landlords to sign up would be allowing a reduction in VAT for accredited landlords or in some other way create a two-tier "benefits" process which gives advantages to those who seek accreditation/registration.

  One of the most difficult and time-consuming tasks is trying to track down absentee landlords or owners of long-term empty properties. A simple solution to this would be the creation of a compulsory database of all landlords which could be assessed by local authorities when they can prove that they are making a serious investigation into identifying a potential CPO.

  Properties which are in negative equity are vulnerable to abandonment or at least to falling into disrepair. This has been the case for a number of ex-Council properties in the Borough. The Council is willing to buy back some of these dwellings (especially when these properties are blighting an area) or to work in partnership with an RSL partner to resolve the problem. The difficulty here is that there are insufficient resources to make these schemes viable options. The Council could not pay above market value for the property and the inevitable improvement costs in getting the property back to a sufficient standard has an inflatory impact on rent levels.

  Other than providing subsidies to local authorities to help them bridge the resource gap, the Government could consider expanding the role of lending institutions by encouraging them to re-adjust loan repayments and by restricting lending in high risk situations. Provision to allow people to scale their equity down to some form of shared ownership could be encouraged, whilst incentives could be given to encourage lenders to be more receptive towards shared ownership as a general principle. A range of support mechanisms needs to be available to people considering abandoning their properties. Every effort should be made to intervene as early as possible before the situation reaches crisis point. Housing Advice Services, the Citizens' Advice Bureau and other inter-agency forums have a key role to play in this but they need additional support from Government and the lending institutions. A radical approach would involve financial institutions creating an obligatory sinking fund or bond on property transactions which would be set aside to ensure lenders' (landlords or owner/occupiers) continued maintenance of the property to an agreed standard.

  Wirral is committed to using a multi-agency, cross-departmental, regionally sensitive approach towards reducing the numbers of empty homes in the Borough. Its private sector housing regeneration strategy is based upon adopting a flexible approach using a "tool-box" of different intervention methods. The problems of urban private sector housing disrepair in the Borough cannot be solved by Council intervention alone, there is a need for a more proactive larger scale involvement from lending institutions and from private sector developers. It will be one of our main challenges in the future to increase their role in the regeneration process. Wirral's discussions with developers have indicated that they would be willing to take a more active role in re-development schemes but need to reach sufficient "mass" (scale) so as to make a sufficient impact on the local market to make it worth their while. Small-scale intervention is not perceived as an attractive option. The Government should assist us in this objective, as a priority in their investigation into the problem of empty homes. The recent CURS Study makes a compelling case for the Government to introduce new funding to establish a "Market Renewal Fund". Restructuring the housing market will make significant impact on the number of empty homes and their detrimental effects.

Department of Housing and Environmental Protection

October 2001


 
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