Select Committee on Transport, Local Government and the Regions Memoranda


Memorandum by Manchester City Council (EMP 23)

EMPTY HOMES

1.  INTRODUCTION

  1.1  Manchester City Council welcomes this opportunity to address the Select Committee Inquiry into Empty Homes.

  1.2  Homes which are empty for any significant period of time (over and above the normal operation of the market) can undoubtedly represent a problem wherever they occur. It is, however, important to recognise at the outset that very different market conditions prevail in different parts of the country, and indeed in different parts of many regions, towns and cities. It is no less important to tackle empty properties in relatively prosperous areas with lively markets, than it is to restructure local markets in those parts of the North and Midlands where large concentrations of empty homes are in fact a clear indication of market failure. However, the strategies and measures required in these different circumstances are very different.

  1.3  This submission reflects the recent and ongoing experience of Manchester City Council in seeking to influence failing housing markets in parts of this city, and is therefore focussed on improving our strategic capacity to do this.

  1.4  This submission will aim to:

    —  describe the scale, nature and impact of failing housing markets within parts of Manchester;

    —  examine the causes of changing markets;

    —  identify the measures which the City Council believes are needed to address this problem.

2.  THE SIGNIFICANCE OF THE HOUSING MARKET IN MANCHESTER

  2.1  Manchester is a major city at the heart of the North West region, and home to a major international investment and commercial centre. As such it is an engine for economic change internationally, nationally and regionally. However, the rapid decline of manufacturing industry over the past thirty years has contributed to a massive process of change within the city, impacting upon its infrastructure, physical environment and population.

  2.2  The growth of the financial, commercial, cultural and service sectors, and of higher education and tourism, are contributing to a dramatic renaissance of Manchester's city centre and parts of the south of the city, and a thriving housing market in these areas. Sales of terraced properties in parts of South Manchester can be as high as £180,000. Average values in the City Centre are in the region of £140,00 with the highest values already at the £1m mark and expected to reach £2m in the next year. Over 5,000 units have been completed in the City Centre since 1991 with a further 5,000 under construction or with planning permission

  2.3  This contrasts sharply with the market in the north and east of the city's inner core, in areas dominated by small pre-1919 terraced housing and Council estates. Parts of the North Manchester Regeneration Area for example, have seen the value of homes drop by 40 per cent in the past five years, in comparison with an average increase nationally of 30 per cent. Average sale values are around £13,300, but this masks the fact that many properties have no market, and many transactions take place at under £7,000. Empty private homes in these parts of North Manchester have increased from 10 per cent to 25 per cent in the same period, and owner occupation has fallen from 33 per cent to only 25 per cent. This latter change is due mainly to the speculative activities of private landlords acquiring properties for which there is no other market. Similar conditions exist in East Manchester, and are beginning to be apparent in parts of the inner south of the city where housing choice is similarly limited. Ten of Manchester"s thirty-three wards currently have over 10 per cent of private sector properties void.

  2.4  This problem is focussed very much in areas characterised by monolithic housing supply, and, in particular, in areas where small terraced properties make up the bulk of the market, in contrast with thriving neighbourhoods, such as those mentioned above in South Manchester, where the property portfolio is much more diverse.

  2.5  These concentrations of empty properties are a consequence of economic change. The severe decline in traditional manufacturing and heavy industries has meant that there is no longer a "natural" population which wishes to live close to employment in large areas of pre-1919 terraced housing. In the past three decades changing aspirations, high levels of housebuilding in peripheral and greenfield locations, and financial innovations which have greatly widened access to owner occupation have all dramatically affected inward migration to these areas and contributed to extensive decentralisation of population and the delayed impact of abandonment and market collapse in the inner core of the metropolitan area.

  2.6  Many of the areas now suffering housing market failure in Manchester and elsewhere have been the subject of targeted regeneration initiatives through central government and/or European programmes in the past twenty years. These have tended to focus initially on major capital schemes (eg: through Estate Action and Urban Development Corporations) and more recently (through the Single Regeneration Budget and New Deal for the Communities) on training, social and community objectives. To some extent these initiatives have contributed to market change, obsolescence and migration from the inner core, as residents accessing new employment have taken advantage of wider housing choices in outer locations.

  2.7  The impact of concentrations of empty properties close to the centre of a major city such as Manchester cannot be over-emphasised. Within neighbourhoods, empty properties are a focus for crime or vandalism. They act as a disincentive to prospective purchasers, so they multiply rapidly. They result in increased costs to Local Authorities (through enforcement and environmental management), to the police, and to neighbouring property owners. Neighbourhoods rapidly become abandoned, or populated by people who have no other choice, such as highly mobile, benefit-dependent tenants of the private rented sector. The dwindling, and increasingly deprived, remaining population cannot support local shops or social facilities. Educational attainment levels fall, and ill-health increases. There is frequently a close relationship between a high incidence of empty properties and indicators of social deprivation and this in itself leads to a long term increase in costs to Local Authorities and the health and police services. The top 1 per cent most deprived wards nationally include ten in Manchester.

  2.8  Declining neighbourhoods and concentrations of empty properties in the inner urban core also impact negatively on adjacent areas and on the city as a whole. Frequently these areas are located between the suburbs (where potential investors live) and the city centre where the need and the potential for investment is greatest. The perception of spreading blight deters investment thus limiting the potential for renaissance in the wider area.

  2.9  This blight also acts as an engine for further decentralisation and urban sprawl, as new development and investment in the existing stock become more unattractive to individuals and to institutions. This increases pressure on green belt or peripheral "brownfield" sites and hastens yet further decline in the inner urban core.

  2.10  The speed of decline is alarming. The housing market in parts of North Manchester effectively collapsed in three years between 1996 and 1999.

3.  THE CITY COUNCIL'S STRATEGY

  3.1  The problem of empty homes has been recognised in Manchester for a number of years. The City Council's Housing Strategy has recognised this as an increasing priority, through a range of often innovative policies and actions in both the social rented and the private sectors. Our approach has changed significantly as both the scale of the problem and our understanding of it have increased.

3.2  Demand and Market Intelligence

  3.2.1  The City Council has developed a detailed understanding of the nature and causes of variable housing demand, both in our own stock and in the Registered Social Landlord (RSL) sector. We are currently working to develop our capacity to monitor and analyse changes in the private sector housing market.

  3.2.2  An increasing range of data sources are used to give a spatial analysis of demand, and identify trends over time and patterns across areas, tenures and property types. These are used to develop area profiles which take account of key market drivers (such as particular population groups, the location of significant employers and higher educational institutions) and inform strategies for management, marketing, allocations and investment.

  3.2.3  As an outcome of this work, our strategy for our own stock has shifted in recent years to incorporate a focus on our more "sustainable" estates, targeting investment to protect their relative popularity. At the same time we are working to reduce the number of unpopular property types, in particular flats and maisonettes. In the current year, no significant city-wide fall in demand has been recorded for the first time since 1996.

  3.2.4  We are now developing a comprehensive database of housing in the city across all tenures, analysed by property type, size, approximate age and tenure as built. Regular analysis of market activity data from the Land Registry and estate agents will help to inform our understanding of supply shortfall to influence our own policies on planning and land release. Contacts with developers and housebuilders focus on the aspirations of population groups (such as working families) who are key to the sustainability of the city.

3.3  Private Sector Targeted Interventions

  3.3.1  A city wide Empty Property Initiative was launched in 1995, along with a targeted local project in the North Manchester Regeneration Area. Through these the City Council and its partners has developed a menu of measures primarily directed towards empty properties in the older private sector stock, including targeted acquisitions by RSLs, homesteading grants to owner-occupiers and an innovative procedure for enforced sales. The Initiative was judged "Best Empty Homes Strategy" by the Empty Homes Agency in 1996 and "Highly Commended" in 1997.

  3.3.2  These measures have been successful in bringing approximately 1,800 empty properties into use, and continue to be employed on individual empty properties in areas which are broadly sustainable. However, in areas undergoing more radical market change, these positive steps have been swamped by widespread tenure change and abandonment. A more comprehensive intervention is required to create new markets and promote population growth. Regeneration strategies in these areas need to be focussed not just on housing, but must address the full range of land-use, environmental, social and community issues which exist.

3.4  Hulme City Challenge

  3.4.1  Hulme City Challenge is perhaps the most radical example to date of housing market intervention and restructuring by a Local Authority. Over 3,000 obsolete deck access flats have been demolished and replaced by new neighbourhoods in which the number of privately-owned homes almost equals the level of replacement housing by Registered Social Landlords. Values in the private sector have reached over £150,000 for 3-bedroomed houses and continue to rise both in new development phases and on re-sale. Vacancy levels have fallen from up to 50 per cent of the stock to virtually zero.

  3.4.2  Key factors in the delivery of Hulme were a clear vision and plan, the availability of resources of £5 million from City Challenge to pump-prime private housing development, and the City Council"s position as owner of virtually all the freehold in the area as a result of previous clearance and development.

  3.4.3  Hulme provides clear evidence that a radical, coherent and structured approach can deliver neighbourhood renewal in areas of abandonment and widespread obsolete, empty homes.

  3.4.4  The successful regeneration both of Hulme and the City Centre have reversed the trend of population decline in Manchester and contributed to net growth in the past three years. This would not, however, have been achieved by the market alone, without significant strategic investment from the public sector.

3.5  East Manchester Regeneration Framework

  3.5.1  East Manchester, host to the 2002 Commonwealth Games, is now the focus of a nationally unprecedented range of regeneration initiatives, including the creation of major new employment areas, substantial investment in the existing City Council owned housing stock, clearance and renewal in the existing older private stock, and the development of up to 12,000 new homes, primarily for owner-occupation. Delivery of the housing strategy is being supported by the development of a radically revised planning framework for the area.

3.6  Planning Policy

  3.6.1  The City Council fully supports targets for new housing development on brownfield sites as set out in Planning Policy Guidance Note 3 (PPG3) and upheld in the Draft Regional Planning Guidance for the North West (RPGNW). Indeed, most vacant land in the city has been previously developed, and the majority of land released to the market through the City Council's Corporate Disposal Programme is derelict land within regeneration areas. The Council is however aware that the availability of land is in itself insufficient to create new housing markets. Economic development is crucial to create the local wealth and opportunities needed to support new housing, together with improvements to community support facilities, a reduction in crime, better public transport and environmental initiatives.

  3.6.2  We have also come to understand the vital importance of a comprehensive approach to achieve proper phasing and balance between the development of new housing, demolition, and renewal initiatives in the remaining housing stock. This is crucial to avoid a negative impact on the demand for existing housing, both in the immediate locality and further afield.

  3.6.3  The essentially reactive nature of the planning system restricts its ability to influence the size, type and value of new dwellings which are developed. The statutory planning framework provides policy support, through the Unitary Development Plan, for a period of 5-10 years, a timescale which does not allow adequate response to sometimes rapidly changing markets in local areas. In order to address these issues, the City Council is currently revising the UDP for Manchester in the East of the City, where market decline has been most pronounced, by defining a single policy for each neighbourhood to guide the future of areas and provide a framework for regeneration and new development. This approach is supported by recently prepared Supplementary Planning Guidance and reinforced through specific Development Briefs based on local participation and existing neighbourhood strengths.

4.  FUTURE MEASURES

  4.1  In this section we set out proposals for a range of new or revised measures which are needed by Local Authorities, both to reduce the negative impact of empty properties in relatively sustainable areas, and to tackle areas of wider market failure. These include fiscal and enforcement measures, legal requirements on property owners, and broader powers to enable the declaration and development of Market Renewal Areas. While effective measures of public intervention are urgently required it is also essential that property owners are responsible in law for the condition, maintenance and if necessary long term remedy of their assets. Public funding is needed to facilitate restructure and renewal, but cannot be expected to bear the costs.

4.2  Regeneration and Planning Powers and Resources

  4.2.1  Housing Market Renewal

  Powers and resources are required to designate Housing Market Renewal Areas where the extent of market failure requires specific intervention beyond the normal capacity of Local Authorities and the Housing Corporation. Local Authorities would be expected to take the lead in forming a Market Renewal Partnership, through the framework of the Local Strategic Partnership, and producing a Market Renewal Prospectus to give confidence to private sector funders. This would show which neighbourhoods are and are not sustainable and provide a clear planning and land-use framework for the restructuring of the local economy and housing market over a period of 10-20 years, through the assembly of large sites for redevelopment for new housing and other uses. The prospectus itself must be flexible and responsive to changing circumstances in local markets over the period of the Market Renewal Intiative.

  4.2.2  Following approval of the Prospectus by Government, neighbourhood-focussed regeneration vehicles (probably Housing Regeneration Companies) would be established to develop and deliver a coherent development plan based on ongoing continuity consultation. These vehicles must have the power to deliver neighbourhood management, to trade, to facilitate land assembly through voluntary and compulsory purchase, to enter into joint ventures with the private sector and to re-invest development profits. The financial measures available must include; a) flexible investment to create affordability via the creation of public assets; b) new mortgage instruments geared to promoting investment and capturing value; c) incentives and subsidies to support pioneer owner-occupiers; and d) value indemnification.

  4.2.3  Additional public funding, perhaps through a hypothecated Market Renewal Fund, would be required to pump-prime the programme in the early years of a Market Renewal Area. Our view is that this would most appropriately be distributed via the Regional Development Agency as a regionally-focussed strategic agency which can link economic regeneration with the physical and management interventions geared to neighbourhood and market renewal, or as a hypothecated fund through DTLR in the same way as PFI credits. As the programme is implemented, however, the breadth of the initiative and its longer timescale would create the real prospect of a return to the public purse, which is rare under the present overage regime.

  4.2.4  Extended CPO Powers

  Manchester City Council has already argued (in our response to the final report of the compulsory Purchase Policy Review Advisory Group in November 2000) that there are major difficulties and limitations in the Compulsory Purchase powers currently available to Local Authorities through section 22b 1(a) and 1(b) of the Town and County Planning Act 1990. These are inadequate where demolition of obsolete property is necessary to facilitate land assembly for regeneration and redevelopment, primarily because the requirement to demonstrate that "no substantial planning impediment exists" is commonly interpreted by the Ministry's Inspectors at Public Local Inquiries to mean that a planning permission must be in place before a CPO is pursued. This is unrealistic in areas where demolition is necessary in order to create the conditions in which the normal market process can start to reassert itself. The Urban White Paper (November 2000) indicated Government's commitment to "bring forward proposals for legislation, when parliamentary time allows, to simplify, consolidate and codify the law on compulsory purchase, speed up procedures and make the compensation arrangements simpler and more equitable". These proposals are urgently required.

  4.2.5  Measures to Address Negative Equity

  In areas of market failure, some established owner-occupiers are "trapped" in their homes unable to move because the debt on their property exceeds its actual market value and the normal refinancing options are not available to them, often causing great hardship. Local Authorities in the North-West are seeking to develop pilot "Homeswap" or "Home for a Home" initiatives which would provide replacement homes of at least equivalent value and quality, with the debt transferred in most cases at no additional cost to the owner, probably with the assistance of a grant under section 2 of the Local Government Act 2000. We believe this may require the specific consent of the Secretary of State to enable the council to go beyond the restrictions imposed by existing grant-giving powers.

4.3  Statutory Duty to Establish an Empty Homes Strategy

  The Local Government Act 2000 introduced a new duty on Local Authorities to prepare a Community Strategy to promote the economic, social and environmental well-being of their areas. Housing strategies are expected to form an important component part of these. Guidance should encourage Local Authorities to monitor both cross-tenure supply and demand in their areas, and frame their housing strategies around the information gained. Strategies to address low demand and empty properties in all tenures should be prepared within this wider framework.

4.4  Fiscal and Enforcement Measures

  4.4.1  Council Tax

  We recommend that full Council Tax is payable on all properties which are empty for more than six months, in areas where there is demonstrable housing demand, with guidance to Local Authorities to allow dispensation in appropriate circumstances. Outstanding tax should be retrievable as a local land charge on the property with recovery by enforced sales.

  4.4.2  VAT

  We recommend that all works of refurbishment are subject to VAT under the same regime as newly-built properties, but that zero VAT is payable to bring back into use properties which have been empty for more than six months.

  4.4.3  Duty of Care

  A Duty of Care should be placed on all property owners to ensure that their property does not cause nuisance to neighbours or the wider amenity of the surrounding area. Civil remedies and powers of injunction should be available to enforce this.

  4.4.4  Enforcement Powers

  Enhanced powers of enforcement should be made available to Local Authorities to serve notice on property owners, undertake works in default and recover costs as a civil debt or local land charge if need be by enforced sale.

  4.4.5  Powers to Requisition

  Local Authorities should be granted powers to requisition abandoned properties, undertake any necessary works or other measures to return them to beneficial use and recover costs as a local land charge as above.

  4.4.6  Demolition

  New, or in some respects reintroduced and enhanced powers and improved procedures are needed for Local Authorities to require demolition of properties (without the need for compulsory purchase or voluntary acquisition) as part of a wider market renewal programme.

  4.4.7  Empty Property Act

Inadequacies, inconsistencies and the confusing wide spread of the existing legislation should be addressed through improvement and re-codification in an Empty or Abandoned Property Act.

  4.5  All these proposals follow the principles well established in other existing legislation, such as "the polluter pays" in environmental law, and the responsibility of business for general health and safety and food safety. Their impact would be to depress the value of empty properties, not only penalising owners for the waste and increase in local blight, but also to incentivise owners to bring them back into use and reduce the cost of this to the public purse. In areas where comprehensive demolition is required to assemble sites the costs of acquiring and compensating owners would be reduced accordingly.

4.6  Human Rights Implications

  4.6.1  The new legislative regime which is required clearly has implications for Human Rights, particularly the "protection of property" rights set out in the First Protocol, Article 1 of the European Convention for the Protection of Human Rights and Fundamental Freedoms.

  4.6.2  In contrast to this is the compelling need (and indeed duty) to protect the Human Rights of those residents living near to empty properties; the Right to Respect for Private and Family Life in Article 8 of the main body of the Convention could be deemed to apply.

  4.6.3  We would therefore suggest that balance and proportionality clearly weigh in favour of enabling effective intervention because of the negative impact of derelict and abandoned properties on nearby remaining residents.

4.7  Regulation of the Private Rented Sector

  Manchester City Council has already recommended to DTLR that Local Authorities are granted powers to provide mandatory regulation of the private rented sector in areas of declining housing demand, where alternative rented accommodation is available. This should be an extension of the scheme for mandatory licensing of Houses in Multiple Occupation (HMOs) which the Government is committed to introducing. It would be available as part of a wider regeneration or market renewal strategy. Such a scheme embraces both licensing of landlords and certification of properties and would include requirement for proper management, repair, safety and standards. The City Council strongly supports proposals for linking Housing Benefit to licensing, as currently being explored by DTLR.

Eamonn Boylan

Director of Manchester Housing

24 September 2001


 
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