Select Committee on Transport, Local Government and the Regions Memoranda


Memorandum by Bolton Metropolitan Borough Council (EMP 48)

EMPTY HOMES

  The Borough has serious private sector housing problems. The estimated cost of rectifying private sector repair in is £640 million—a situation that is replicated across the north. The following local data outlines the situation:

    —  As at April 2001 Bolton had 4,653 empty homes.

    —  3,847 (around 84 per cent) are private sector dwellings.

    —  4 per cent of the overall dwelling stock is empty, with around two-thirds of these void for more than six months.

    —  4.4 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. 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 and an increase in abandonments. These factors then serve to accelerate the cycle of decline by attacking the fundamental stability of an area and by providing a very visible disincentive for people considering a move into the area.

  In some cases, a single derelict empty property can blight an area and trigger a cycle of decline. The importance of tackling these "bad teeth", that sometimes fall outside targeted regeneration areas should not be underestimated.

  The proliferation of empty homes in a specific location directly damages an estate's economic sustainability by reducing the value 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, as sometimes the cost of carrying out improvements is higher than the "added value" put into the property. For instance, maximum refurbishment costs may total £20,000 but the dwelling's market value may rise only from, say, £30,000 to £35,000.

  The psychological impact of empty homes on local communities should not be overlooked. There is a 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, or even spark off, local residents' overall feelings of neglect and social exclusion. Set against the background of declining house prices, low resident esteem, a lack of community spirit, and surrounded by boarded up property, the conditions for social and racial tensions are created.

  When the number of private sector empty properties increase in an area it is inevitable that private landlords, some good some bad, exploit the opportunity to purchase dwellings at "knock-down" prices. Problems arise when the numbers of such properties reach a "critical density". Rightly or wrongly, 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. To some extent this is an understandable presumption, as a landlord's "stake" in a community is primarily economic rather than social. In certain cases a property remains empty for some time because the landlord has expectations of some future grant availability, or the property "sits" dormant as an asset that 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 sooner rather than later. Further the restrictive nature of the CPO process makes it very difficult for Councils to intervene by breaking this cycle to any significant degree.

  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 regional viewpoint on void properties, so as to reduce the problem at source. By working in partnership with colleagues, at regional and sub-regional levels, we can better understand the complex chains of cause and effect that provide the conditions for empty homes. Once this has been achieved we can then move on to providing solutions to these problems. The recent CURS study into hard-to-let dwellings in the region has begun a process by which we hope to eventually 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".

  Bolton's private sector housing problems are a legacy of its industrial past—a past shared with many of our neighbouring authorities. A high proportion of the stock was built for purposes that are no longer relevant to modern day housing expectations. Homes were created at minimal costs, at high densities in terraces, close to the mills and factories that provided the urban poor with their main source of employment. Many of these dwellings were never built to be in continued use for the periods of time they have been standing. 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 that prove to be most vulnerable to becoming empty for long periods.

  The effectiveness of Government policy in terms of identifying the reduction of 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 that would actually help them solve this complex problem.

  National policy development seems to seek to arrive at a particular strategic formula for private sector housing that 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 Bolton's. Bolton believes that the Government needs to develop an overall national strategic framework that 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.

  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. These are a legacy of a previous time when Local Authorities were encouraged to promote such developments. The Government needs to consider seriously the possibility of producing legislation that 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 ten years. Clearly, one would have to introduce a system that 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 have met certain criteria that complements the local regeneration activity.

  The introduction of Council Tax payable in full on properties that 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 Compulsory Purchase Orders (CPOs) are torturous 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 back empty properties back into use. They have been used to some effect on a small scale in areas of intense targeted regeneration, usually backed up by Housing Corporation complementary funding (through purchase and repair grants) in partnership with our Bolton Community Homes (BCH) RSLs.

  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. It should do this by loosening the link between market value and compensation. 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 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 and should be used selectively within the context of a considered strategy that takes into account the changing housing needs and wants of the contemporary 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. In some cases, Bolton has been able to introduce new life into terraces through adaptation rather than demolition. We have had some success, especially in areas with a high proportion of minority communities, in making one larger unit out of two smaller adjoining properties.

  Bolton 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. It also understands that public and private sector voids should not be considered in isolation. Also 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 as to 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 selective demolition or re-modelling of some of our unpopular stock. The extensive local community planning network we have created ensures that our customers can directly influence the future re-development or regeneration of their areas.

  Bolton agrees that it should become a duty on all Local Authorities to establish an Empty Homes Strategy. Bolton is at the present time revising its own strategy:

    —  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,

    —  In the context of our own unpopular 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. Consideration may also be given to extending 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 and industrial units.

  Bolton has already introduced a register of landlords within certain targeted regeneration areas. 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 that 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 data base of all landlords that could be accessed by Local Authorities when they can prove that they are making a serious investigation into identifying a potential CPO. Those landlords who leave their properties in a derelict condition without making any attempt to rectify the problem or contact the Council seek help only to do damage to the image of those responsible landlords who do contribute positively to local housing environments.

  Properties that 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 a BCH 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 rents 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 need to be available to people considering abandoning their properties due to economic circumstances, 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 that would be set aside to ensure lenders' (landlords or owner-occupiers) continued maintenance of the property to an agreed standard.

  Bolton 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, locally based, community-led 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 much more pro-active 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. Bolton's discussions with developers have indicated that they would be willing to take a more active role in redevelopment 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.

September 2001


 
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