Select Committee on Transport, Local Government and the Regions Sixth Report


    "Areas that were once vibrant and prosperous, not necessarily in a material sense, but rich in community spirit, are now wastelands, barren areas with just a few die-hards, scared for their safety."[94]

37. The problems of failing housing markets, neighbourhood abandonment and areas at risk of housing market failure are of a completely different scale to the problems found in high demand areas. They need very different solutions. As the Minister described it, "The problems that we see up in the north where you have a complete collapse of the housing market... I think a different scale of action is required."[95]

The scale of the problem of failing markets


38. The DTLR's memorandum estimated that there were 844,100 dwellings (occupied and unoccupied)[96] in places where low demand has been identified.[97] The causes of this low demand are set out below. Although there are pockets of low demand in other regions,[98] it is concentrated in the North East, North West, Yorkshire and Humber and the East and West Midlands. The problem of low demand affects properties across all tenures. 45 per cent of dwellings in low demand areas are owned by local authorities, 11 per cent by registered social landlords and 44 per cent are in the private sector. Most of the empty homes are privately owned.[99] In the social housing sector low demand tends to manifest itself through higher turnover and higher costs to fill the voids.[100] The Report of the Unpopular Housing Action Team, established as a result of the National Strategy for Neighbourhood Renewal, concluded that the problem has got worse in recent years, "Over half (58 per cent) of authorities with low demand report rising numbers of low demand local authority dwellings and 40 per cent of local authorities with problems in the private sector report an increase."[101] As the figures in the DTLR's memorandum are from April 2000 and the problem has got worse, it seems likely that the number of homes affected by low demand today would be considerably higher than 844,100.

39. Many more properties are in areas potentially 'at risk' of housing market failure. We visited Abbey Hey in Manchester which, whilst not facing the problems of abandonment we saw elsewhere in the city, had a large number of 'For Sale' signs [102] and was described by the Abbey Hey Residents Association in their memorandum as "fragile."[103] The National Housing Federation described the scale of the problem of both failing and at risk housing markets in a Northern Metropolitan area,[104]

    "There is an inner core[105] of about 75,000 properties which are particularly at risk, there is an outer ring also at risk but slightly less so, there are suburbs around that which have very good prospects and then there is some low demand peripheral areas where there are concentrations of social housing. For an area like that, it is important to have a strategic review of what needs to be done with those different types of housing. The work that has been done in that area suggests that about 120,000 of those properties, out of 150,000 are sustainable but about 30,000 would need to be cleared."[106]


40. Manchester City Council's memorandum described the rapidity with which housing markets can fail:

A Burnley resident wrote:

    "About two and a half years ago I bought my home, when this was a reasonable area but more and more people are moving out of the area and now there is an extensive quantity of properties boarded up. The repercussions of this are that the area is becoming more and more dilapidated and the value of properties, mainly for home owners, is decreasing by the minute."[108]


41. David Cowans, Chief Executive of Places for People Group, told us how a neighbourhood in decline can be identified:

An excellent indicator of decline in a predominantly private sector area is a shift in tenure away from owner occupation towards private renting. For example, the Lightbowne area of Manchester, which we visited, had moved from 50 per cent to 12 per cent owner occupation since 1994.[110]

42. David Cowans said that more needed to be done to improve information about markets at risk, stressing the importance of diagnosis and prevention:

    "Try to understand where the decline has started, because it has never just started right across the whole neighbourhood at once, it tends to start in particular pockets and then spread. If you can identify where those things start, you can often try to stop them."[111]

Local authorities and housing associations could make better use of the knowledge and experience within the private sector. Peter Williams, Director General of the Council of Mortgage Lenders was concerned that the public sector was launching a range of regeneration initiatives, such as Urban Regeneration Companies and Housing Regeneration Companies, which affect private sector housing markets. However, they rarely involved private sector bodies, such as his own organisation, which would be able to help them understand those markets better.

    "What we are typically finding is that a lot of these initiatives are public sector led about the private market without any understanding in depth of the private market. To us that seems inadequate."[112]

We recommend that local authorities and registered social landlords should work with private sector organisations such as the Council of Mortgage Lenders and local lenders, estate agents and developers to improve information about housing markets in general and specifically to identify housing markets 'at risk' of decline. This is particularly important at the planning stage prior to the development of new initiatives. This intelligence should feed into Regional Housing Statements and other regional strategies and be up-dated every year. Regional strategies are considered in greater detail blow.

The consequences of empty homes in failing markets

43. Concentrations of empty homes create significant costs to individuals, the wider local community and organisations working in the area. A self-reinforcing, spiral of decline may develop, which is described in a letter we received from a Sunderland resident:


44. Even for those with reasonable jobs, their life savings may be lost as their homes decline in value, despite significant investment in maintenance and homes improvements. People find themselves trapped in a worthless property:

Those with mortgages find themselves in negative equity:

    "I paid £28,000 for my house in 1991 and have since installed central heating and a new kitchen, amongst other repairs and improvements, costing approximately £5,000 in total. My outstanding mortgage is £24,000 and similar properties were selling for £5,000 a year ago. I dread to think how much they are worth now as the area continues to go downhill... I have decided to spend nothing on the upkeep of my property and am considering leaving it as yet another empty house."[115]

To add to the problems, living in a low demand area can be more expensive than living elsewhere. A Salford resident wrote to us as follows:

    "We are being penalised for the area in which we live. For example, we currently pay £50 per month house insurance (building and contents) and £50 per month car insurance for a house which is worth the above [£8,000] and a car which is probably worth about £1,000."[116]

45. Concentrations of empty homes have a demoralising effect on local residents,

    "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 can even create local residents' overall feelings of neglect and social exclusion."[117]

Areas also become increasingly less attractive to potential residents and businesses, Hyndburn Council's memorandum noted,

    "There is also a more potent effect on non-residents passing through the area. Such areas rapidly gain notoriety as 'derelict' or declining."[118]


46. As a community decreases in size, demand for local services falls. The North West Housing Forum's memorandum stated, "As population declines, the viability of services such as local shops, post offices, schools, health facilities, etc. is increasingly jeopardised. For schools, even if numbers remain at a viable level, the turnover of children entering and leaving the school as families move in and out of the area can impact severely on attainment levels."[119] We heard on our visit to Tower Hamlets that there is a strong link between bad housing and poor health.[120] Concentrations of empty properties also lead to increased problems of crime.[121]

Growth of the private rented sector

47. Declining property values create opportunities for the tenure balance of an area to shift from owner occupation to private sector renting, which in turn causes problems. Houses in low demand areas are being sold to private landlords for as little as £2,000.[122] As the Housing Green Paper states, "Unscrupulous landlords have sometimes been encouraged into low demand areas, where many of the remaining households are on low incomes, by the prospect of rich pickings from the housing benefit system."[123] In Manchester, "We have seen people make 140 per cent or 150 per cent return in a single year on capital by exploiting social security [housing benefit]."[124] In the Kensington New Deal for Communities area, Steve Robinson, Chief Executive of Community Seven Housing, described how housing benefit rent could be up to £80 per week in an area where housing association rent was about £42.[125]

48. Wirral Metropolitan Borough Council's memorandum described the problems caused by an increase in private sector renting:

    "Problems arise when the number 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."[126]

49. The Rent Service, an Executive Agency of the DTLR, established in 1999, was charged with ensuring that landlords could no longer extract higher rent payments from benefit claimants than other tenants.[127] From the evidence that we have received, the problems persist. The Minister told us that in future the problem would be addressed through the licensing of private sector landlords:

    "I do not think you can shift the problem off on to the Rent Service. The problem seems to me to lie fair and square with people who are using a loophole to make a very lucrative living. The way to deal with it is through the licensing of private sector landlords."[128]

We recommend that the DTLR should report back to the Committee on the extent to which unusually high housing benefit payments persist in low demand areas, 12 months after the introduction of the private sector landlord licensing scheme.

Estate agents

50. Falling house prices also affect estate agents, reducing the profits available to them and hence potentially reducing competition in declining markets. We received a memorandum identifying the consequences of this reduced competition in the Gorton area of Manchester. It alleged that the dominant local estate agent was valuing properties at a lower price than alternative agents asked to provide a second opinion, and claimed that the agent had links with the property development firm, which was purchasing the properties, making the problem of falling house prices much worse for residents in that area.[129] The estate agent concerned denied the allegations.[130]

94   Paul Palmer, Secretary of the National Association of Empty Property Practitioners (writing in a personal capacity), EMP35 Back

95   Q 596 Back

96   EMP26, Annex 1 Back

97   Local authority and registered social landlord low demand housing is defined as housing in groups of at least 50 dwellings exhibiting one or more of the following-a small or non-existent waiting list, tenancy offers frequently refused, high rates of voids available for letting or high rates of tenancy turnover. Private sector low demand housing is defined as neighbourhoods of at least 50 dwellings where private sector housing is the predominant tenure and where one or more of the following occurs-property values are low and/or falling in absolute terms, a high private sector void rate, a high turnover of population, significant incidence of long term private sector voids or abandoned properties or a visibly high incidence of properties for sale or let. Source: Guidance Notes on the Completion of the 2001 Housing Investment Programme Back

98   We have received evidence from Hastings-EMP77 and David Cowans pointed to Dover and Eastbourne (Q 3) Back

99   EMP26, Annex 1, Table 2 Back

100   Note of visit to the North west Back

101   Report by the Unpopular Housing Action Team, DETR, October 1999, Paragraph 1.5 Back

102   Note of visit to the North West Back

103   EMP62 Back

104   A case study, anonymous, northern city Back

105   The evidence we received stressed the difference between the city centre housing market, which was experiencing a renaissance and inner urban areas (see for example, the note of the visit to Manchester and Birmingham Council's evidence-Q 79) Back

106   Q 412 Back

107   EMP23 Back

108   Letter from the public, 43 Back

109   Q 6 Back

110   Note of visit to the North West Back

111   Q 7 Back

112   Council of Mortgage Lenders, Q 388 Back

113   Letter from the public, 6 Back

114   Letter from the public, 10 Back

115   Letter from the public, 14 Back

116   Letter from the public, 42 Back

117   Wirral Metropolitan Borough Council, EMP68 Back

118   EMP24 Back

119   EMP33 Back

120   Note of visit to Tower Hamlets Back

121   See, for example, Matthew Baggott, Q 488 Back

122   In Lower Beswick in Manchester, see note of visit to the North West Back

123   Quality and Choice: A Decent Home for All, DETR 200, Paragraph 5.36 Back

124   Q 231 Back

125   Note of visit to the North West Back

126   EMP68 Back

127   Paragraph 5.38, Quality and Choice, A Decent Home for All-The Housing Green Paper, DETR, April 2000 Back

128   Q 651 Back

129   EMP72 Back

130   EMP91 Back

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