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

Memorandum by the House Builders Federation (EMP 59)


  1.1  The House Builders' Federation recognises that unnecessarily vacant homes are a wasted resource. However, what has been missing from the debate is that vacancies are an essential part of the effective operation of the housing market. This allows for the mobility of labour and need to renovate obsolete property. The various figures for the absolute numbers of vacancies need to be treated with some caution. The national figure of about 750,000 whilst making a good headline, is a poor basis for policy making.

  Therefore vacancies are needed for the efficient working of the housing market. In this respect, the 3 per cent rate suggested by the Government has never been properly tested as to whether it is a reasonable figure. It is significant that the DETR Local Housing Needs Assessment, A Guide to Good Practice states, "The general principles is that there should be a target vacancy rate to allow normal movement in the housing stock. Typical recommended allowances would be 4 per cent for the private sector, with 2 per cent being more appropriate for the social sector". Given that the approximate split of the housing is 75 per cent private and 25 per cent social this would imply a vacancy rate of 3.5 per cent in the total stock.

  What is significant is that areas with low vacancy rates tend to experience housing pressure and problems of affordability. This suggests a trade off between vacancy rates and ensuring the delivery of the government's objective of "a decent home for all".

  Set out below are answers to some of the specific questions raised.

2.  The consequences of so many homes being empty including the link between empty homes and urban degeneration, social and racial tension

  2.1  As set out in the Introduction, vacancies are essential for the efficient working of the market. Even a 3 per cent figure results in what appears to be a high absolute figure. The key here is the pockets of high vacancy in many of our inner urban areas. However, the high vacancy rate is not a cause of urban malaise, but rather one of the many symptoms. They are part of the wider breakdown, which includes poor economic performance linked to high unemployment, high crime rates, poor education and a decaying physical fabric. A strategy simply focusing on empty homes will not work. This was recognised in the National Strategy for Neighbourhood Renewal: a framework for consultation report by the Social Exclusion Unit, "In particular, for too long, deprivation was seen principally as a housing problem to be fixed with bricks and mortar". Only a comprehensive approach will succeed in making areas of high vacancy rates popular.

3.  Why so many empty homes are empty

  3.1  In 1996 the then Department of the Environment published a research paper "Vacant Dwellings in the Private Sector". This divided vacancies in the private sector into:

    (a)  Transactional vacancies which in an active market were those "which might be expected to be re-occupied relatively quickly". These are necessary for mobility in the housing market.

    (b)  Problematic vacancies which are houses often in poor condition where vacancy might be prolonged. At any one time there might be about 250,000 problematic vacancies. Policy must be targeted at these to have effect.

  3.2  Problematic vacancies are concentrated in pre 1919 housing stock many of which are unfit for human habitation. The most important reason for these problematic vacancies was either the death of the previous owner or their move into institutional care. In the former case, if the owner died, intestate, this prolongs the potential vacancy. In the latter example, many elderly people in moving into care are reluctant to acknowledge they may not be able to return to independent living and therefore keep their home empty for prolonged periods in the hope or expectation they can return at any time.

4.  What additional measures should be taken by the Government, the Housing Corporation, local authorities and others, and in particular whether local authorities should be permitted to change the full Council Tax on empty homes

  4.1  As set out above in Section 3, the reasons why properties are vacant tend not to be economic. Where the owner intends to return, imposing an extra cost may be perceived to be an additional burden on the elderly. Similarly, where a property is being renovated, full Council Tax would be an additional cost.

  4.2  Should there be further changes to VAT?

  The reduction in VAT for the cost of converting residential properties will have an impact as it reduces the overall cost of such schemes. Further reductions would provide a greater incentive.

  4.3  Revision of compulsory purchase

  In 1998 the then Minister of the Regions, Regeneration and Planning instituted a fundamental review of the laws and procedures relating to compulsory purchase. The report in June 2000 confirmed that the current compulsory purchase arrangements are basically sound. A particular recommendation of relevance to areas of market collapse was the concept of "equivalent reinstatement". Compensation on compulsory purchase is based on open market value. Where a market has collapsed, this valuation would not enable remaining owner-occupiers to purchase alternative properties, which could contribute to opposition to a clearance scheme. Equivalent reinstatement would provide sufficient value for the owner to purchase alternative appropriate accommodation. Clearly there would need to be tight safeguards to prevent abuse of such a system.

5.  What specific steps should be taken in areas of Low Demand?

  5.1  Are too many homes being built and proposed by Regional Planning Conferences on greenfield sites?

  The simple answer to this question is no. The house building rate has fallen to its lowest level since 1924 and is set to fall again this year. Alan Holman's, an academic demographer based at Cambridge, has estimated a need for 210,000 homes per annum to 2016. Last year some 167,500 houses were completed. Research clearly demonstrates those who are able to exercise choice do so by moving to suburban developments. If the only policy response is to prevent such development all this will do is to reduce the number of people who can exercise choice. The objective as set out earlier must be to make those areas with poor market demand destinations of choice. This will not only require supply from properties currently vacant but increased building rates.

  It should also be noted that regional guidance assumes a 3 per cent vacancy rate even where there is no evidence that rates are falling.

  5.2  Should homes be demolished?

  As outlined in paragraph 4.2, much of the long term problematic vacancies are in pre 1919 properties. These tend to be smaller, less attractive and in areas of low demand. One response is to try and encourage a greater amount of renovation and repair. There are a number of indications that suggest this is not an appropriate response. The report to the Housing Research Foundation on "The Economic Role of New Housing" stated, "The figure shows clearly that, over time, the negative trend in new building (-0.75 per cent per annum between 1960 and 2000) has occurred at the same time as a rise in Repair, Maintenance and Improvement, which has risen by an annual average 2.5 per cent since 1960; this is faster than GDP as a whole. In fact the ratio of RMI relative to new construction is now the highest in Europe amongst the major economies". Clearly there is no correct ratio between new construction and repair but the fact that Britain has the highest ratio suggests a maximum is being reached.

  To support this argument is the fact that at current demolition rates, houses will have to last well over 1,000 years. This is clearly untenable and suggests a major problem of renewal is being created. The purpose of planning is to anticipate such issues and ensure policies are in place to respond to changing needs.

  On this issue of repair versus replacement, is the question of sustainability. There comes a point where continuing expenditure on poor quality housing stock is unsustainable. New build will have to meet existing building regulations with much more rigorous standards of insulation, efficient heating and opportunities for sustainable urban drainage systems.

  As part of an overall programme for neighbourhood renewal, it will be necessary to carry out demolitions on a wider scale so that a new start can be created. There is still underlying uncertainty on this due to problems created in the 60's and 70's. However, quality as well as quantity based on mixed uses rather than soulless estates should be the basis of success rather than the repetition of failure.


  The national figure for empty houses hides significant regional and sub-regional variations.

  In areas of low demand for both market and social housing, where vacancy rates are high, stopping house building is an over simplistic response. It will merely condemn a greater number of people to live in poor quality housing. In such areas a comprehensive approach, which includes economic opportunities, transport links, education, crime and the quality of the environment, is essential. This may require substantial clearance to achieve the desired result.

  As with many housing related issues there is no one-policy response that is applicable nationwide. In areas of housing pressure, vacancy rates are low and no extra housing supply can be expected.

19 September 2001

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