Select Committee on Transport, Local Government and the Regions Memoranda

Memorandum by North West Housing Forum (EMP 33)



  This document is submitted to the Select Committee on behalf of the North West Housing Forum. The Forum represents the views of housing providers in the North West of England, and membership comprises local housing authorities, registered social landlords, and representatives of the House Builders Federation, the Chartered Institute of Housing, the Local Government Association, the National Housing Federation and the Northern Consortium of Housing Authorities. Many of our members will be submitting their own views to the Committee, based on the detailed experience and understanding they have developed from their own activities in relation to empty homes. This submission is intended to take a broader regional view of the issue of empty homes in the North West.


  In crude terms, DTLR figures[27] show that 137,026 of England's 757,813 empty homes are in the North West region, or just over 18 per cent of the total. With regional vacancy rates running at 4.3 per cent, compared to 3.6 per cent nationally, it is clear that empty property is a key concern for the region.


  There are a number of explanations for the existence of empty properties, but in essence these fall into two categories. Firstly there are properties which are empty as a result of the normal functioning of housing market or management systems. Estimates of the number of properties vacant during transactions within a healthy private property market vary, but this clearly accounts for a proportion. Similarly, even the most efficient social or private landlord will have properties temporarily empty between tenancies or while major repairs or improvement are completed. In areas of housing shortage especially, it is clearly vital to minimise the number and length of such vacancies. There are parts of the North West where this is acutely felt, for example in and around the Lake District, in much of Cheshire, and parts of Lancashire, Greater Manchester and Merseyside. However, it is not this category of empty property which raises most concern in the North West.

  The second category of empty property arises when demand for homes in a particular neighbourhood, or of a particular type of property, or both, simply falls below the level needed to sustain full occupation. These changing levels of demand can apply as much to the social rented sector as to private renting or owner occupation, and their emergence can have dramatic and wide-reaching implications. The Social Exclusion Unit's Policy Action Team[28] reported in 1999 that 177,500, or almost 8 per cent of private properties in the North West could be considered "unpopular". Detailed research across the urban core of the North West[29] identified some 280,000 households (or 690,000 residents) across all tenures, which were "at risk" from this phenomenon of "changing demand". With changing demand issues also apparent in parts of Cumbria and Lancashire, the extent and depth of the problem facing the North West are of huge concern.

  The causes of these changes to housing markets are complex, but a good deal of work has now been undertaken to help understand and explain them. A number of factors commonly combine in areas of the North West suffering from declining demand and property abandonment[30]:

    —  a predominance of a single tenure;

    —  monolithic housing stock (eg two or three bedrooms);

    —  concentrations of a particular dwelling type (eg back of pavement terraces);

    —  low economic activity rates and high unemployment;

    —  concentrations of elderly people dependant on benefits.

  There is evidence to suggest that growing affluence is driving the decline of some of the older towns and cities in the North West. As CURS found in their study of the M62 corridor (ie Merseyside, Greater Manchester, Halton, Warrington and Blackburn with Darwen),

    "[the] region has experienced the longest period of economic growth since the war, and there is an almost perfect statistical relationship between the fall in male unemployment and the fall in waiting lists for social housing over the period 1992-99. This suggests that without measures to improve housing choice and quality in areas which have a historically high level of low income housing, economic regeneration will lead to the deterioration in the popularity of the most marginal neighbourhoods as economically active people choose to leave.

    The worst affected local authorities have experienced large scale and persistent population loss over the last thirty years. Conversely, they are also the local authority districts that are experiencing the largest inward commuting, highlighting the fact that people have preferred to live separately from their place of work. This points to a downward spiral in localities where declining neighbourhood quality, increasing social polarisation, decentralisation and the growth of travel to work areas all interact to produce a surplus of low quality housing." (p vi)

  In essence, there are two largely separate housing markets in operation. One is an affluent suburban market, predominantly owner occupied, and sustained by internal household growth, with mobility assisted by new building. The other market operates in the inner city, still dominated by owner occupation, but with a significant private rented sector. It is this market which is also closely connected to the social rented (council and housing association) market. To quote again from the M62 study,

    "The contrast between what is offered in [suburban] neighbourhoods and the mixed property and neighbourhood facilities in the inner city has become more striking as new build strengthens the suburban area markets. Obsolescence of properties and problems associated with the population in decline make the inner city neighbourhoods less competitive. These are areas with older populations and demographic processes are releasing a supply of properties on to the market. At the same time new household formation is often higher in peripheral areas and the demand generated from within the neighbourhood is not as well sustained." (p 109)

  These conclusions reinforce those of the East Lancashire Partnership's study carried out in 1999 by DTZ Pieda Consulting[31], which forecast that by 2008, demand for local authority and ex-local authority stock would decline by 13 per cent, and demand for pre-1919 private stock (dominant in East Lancashire's older urban neighbourhoods) would fall by some 14 per cent

  So we have local housing markets in these inner areas (and also on some peripheral council estates) facing long-term decline, driven by a combination of demographic, economic and structural housing stock issues. Empty homes are thus a symptom of these deeper problems, and attempting to deal with empty property without considering these issues of neighbourhood and housing market sustainability is doomed to failure.

What are the impacts of declining demand ?

  Having understood some of the drivers for declining demand, we need to consider the consequences. One of the early indicators that demand for an area is declining is an increasing turnover of population. In the social rented sector, the average length of tenancy is decreasing, as people more and more see renting from the council or an RSL as a temporary step until they can move (or return) to owner occupation. In low demand areas, even those who intend to stay within the social rented sector in the medium term are increasingly able to move out of the least desirable estates relatively easily, producing at best areas of unstable, transitory population, and at worst leaving behind significant numbers of empty properties.

  In the private sector, the mechanisms may be different, but many of the consequences are the same. The North West Regional Housing Statement 2000[32] described the situation:

    "The speed at which an area of private, usually largely older terraced, housing can change from a poor but apparently relatively stable one into one with widespread abandonment and a range of severe social and crime-related issues can be alarming. While the precise causes may differ from one area to another, the trend of declining house prices and negative equity leading to abandonment and the arrival of less reputable private landlords is a common one (in 1996, the English House Condition Survey found that fully two-thirds of private rented property in the North West was built before 1919). A transient population of benefit-dependent tenants or the use of vacant properties as "giro drops", and increasing problems related to drug-dealing often conspire to accelerate the decline in property values. In some cases speculators have exploited the Compulsory Purchase Order system by buying property up cheaply and leaving it empty in anticipation of generous compensation from the public purse. In such situations there is little incentive to maintain property or attract stable tenants, and current regulations for the private rented sector make effective intervention by local authorities difficult. Anti-social behaviour and the fear of crime encourages more established residents to leave, even when that means accepting no return (or more likely significant losses) from their investment in their own property." (p 8)

  In summary, the problems caused by changing demand and increasing numbers of empty homes in a neighbourhood include:

    —  unstable population, making development of a real "community" more difficult, and reducing the stake each resident has in improving their neighbourhood;

    —  decreasing value of property, encouraging those who cannot sell their homes to rent them out privately, trapping others in negative equity, and in extreme cases leading to property abandonment by those who no longer see any value in retaining and maintaining the property;

    —  increasing private renting, often funded by the public purse via the Housing Benefit system, tends to attract less scrupulous landlords, who will buy property at minimal cost and spend little or nothing on maintenance of the property, in the knowledge that the combination of subsidised rental income and potential Compulsory Purchase will afford handsome returns in a relatively short period;

    —  as population decreases, 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.


  In trying to tackle some of the issues described above, local authorities and other agencies are faced with a number of practical problems arising directly or indirectly from the current policy framework.

  The main funding mechanisms available currently fail to recognise the changing demand issue as one requiring investment. A current DTLR consultation exercise[33] holds out the prospect of inclusion of a "Low Demand Indicator" within the formulae for the allocation of the Single Capital Pot to local authorities from 2002-03. However, the paper itself points out that only £15 million of resources would be forthcoming in 2002-03 were this indicator to be adopted as proposed. Indeed, allocations for both local authorities and registered social landlords have long been driven partly by the assumption that high levels of empty property in an area meant that less, rather than more, investment was justified.

  Alternative sources of funding, such as the Single Regeneration Budget, are also becoming harder to use for housing capital investment. The North West Development Agency is now concentrating its efforts much more on direct "economic regeneration" than in previous years, it would seem as a result of national direction. European Structural Funds are, in general, excluded from housing-related use. New Deal for Communities offers more possibilities, but is restricted to only a few small areas of the region. Neighbourhood Renewal Funds are insufficient to support any meaningful capital investment programmes.

  The Committee will undoubtedly receive many representations on the subject of Compulsory Purchase powers. These have been reviewed recently, but it appears that little has changed as a result. Experience in this region is that, despite the extremely low value of much of the property being purchased for clearance by local authorities (in the worst hit areas, values below £5,000 are commonplace), clearance of private sector property is very expensive. The North West Regional Housing Statement 2000[34] reported unit costs averaging "just over £20,000 per unit" for private sector clearance between 1997-98 and 1999-2000. This compares with "around £2,300 per unit" for demolition of local authority properties in the same period. With resources for activity in the private sector scarce, especially since the introduction of the Major Repairs Allowance, it is difficult for local authorities to undertake the sort of strategic clearance activity which is a necessary part of any comprehensive redevelopment scheme for low demand neighbourhoods.

  As well as failing to provide sufficient resources for capital investment in housing, past and current regeneration policy has in fact contributed to the decline of housing markets in many of their target areas. In recent years, increasing emphasis has been placed upon the need to provide training and employment opportunities for residents of deprived areas. This investment has seldom been accompanied by sufficient investment in the physical transformation of those deprived areas. By successfully offering residents the opportunities to secure increased incomes, these regeneration programmes have offered those individuals and households the opportunity to move out of the very areas they are designed to improve. Unless such opportunities are balanced by (more expensive) improvements to the living environment offered by a neighbourhood, this style of regeneration will in fact fuel the decline of targeted areas, and scupper the achievement of Government's social inclusion objectives. Some of the rhetoric around urban renaissance suggests that the need to improve the quality of living environment may now be understood in Government, but this has yet to produce real change in policy implementation.

  Another area of disjointedness in the current policy structure is the relationship (or lack of it) between housing markets and planning policy. The shift to "plan, monitor and manage" may improve matters in coming years, but there has until recently been little if any regard within the planning system for the implications of individual decisions upon the housing markets in surrounding areas. The Draft Regional Planning Guidance for the North West[35] requires development plans to "consider the impact of new housing development upon the existing housing stock and market in the immediate area and adjoining districts". This is potentially a big step forward, but the time-lag between setting such regional policies and real change having an impact on the ground is uncertain.

What needs to be done ?

  There are a variety of steps Government could take which will help in addressing the vital issues we have outlined above. Government is, of course, not the only player in these, but it is the one with the greatest scope for changing its own approach and influencing the approach of others.

  Firstly, policy makers need to view housing as a central part of the broader neighbourhood renewal and social inclusion agenda. In this context, the problem of empty homes clearly has a greater significance than the traditional view as a wasted resource. Concentrations of empty homes should be seen as a sign of failing housing markets, an indicator that a neighbourhood is likely to suffer from a range of demographic, social, economic and environmental problems which threaten the sustainability of the community. This means we need to get away from thinking in terms of raw stock numbers, and start to look at the mix of property type, tenure, location, quality, neighbourhood services, crime rates, transport provision, education and health statistics, etc. The DTLR's current Service Delivery Agreement commits it to "ensure that all social housing meets set standards of decency by 2010." This is important, but it can be achieved without having any impact on the issues we have discussed in this submission. It is concerned merely with "bricks and mortar". The Department has no equivalent target relating to low demand, empty homes, or private sector housing renewal. This is a serious omission, and serves to encourage the view that these issues are of secondary importance to the Department.

  Secondly, there is an urgent need for an overhaul of Compulsory Purchase procedures. The current system is underpinned by a presumption of stable or increasing land and property values, a presumption that is patently false in many parts of the North West. We highlight above the high costs of clearing obsolete private sector property, and the profits being made from this by some individuals who buy up property solely in the hope of securing compensation. Alternative approaches need to be developed to the whole issue of market renewal in affected neighbourhoods, such as the "New Tools" pilots being run by the Housing Corporation, and the "Homeswaps" model being developed by Salford City Council with the Council for Mortgage Lenders and DTLR.

  Thirdly, Government needs to provide the necessary funds to allow local and regional agencies to tackle the issues of changing demand effectively. The North West Housing Forum, in partnership with our colleagues in Yorkshire & Humberside and the North East, is developing a set of proposals for Government to consider as part of the next Spending Review. These are likely to suggest a two-pronged "prevention and cure" strategy for intervention:

    (i)  In many areas, the market is operating at the margins of sustainability. Here, judicious investment now may prevent these areas from experiencing more serious market failure. Resources could be channelled through the Neighbourhood Renewal Fund mechanism to allow authorities and their partners in Local Strategic Partnerships to develop and implement strategies for selective action to restore demand, and ensure that the normal flows of private and other investment are again able to sustain and develop the neighbourhoods. This should be linked to a new Public Service Agreement target for the DTLR.

    (ii)  Other areas have already reached the stage where only major injections of public resources will secure a return of mainstream private investment. In these areas, the market has essentially stopped functioning and values are too low to attract any but the most opportunistic buyers. We propose the establishment of a "Market Renewal Fund", to be targeted at these areas, and to fill the gaps in the existing mainstream funding regimes (some of which are indicated above) to allow a flexible and comprehensive approach to be taken. It should be noted that the end-product of this kind of intervention may not be resurrected residential neighbourhoods, since there may not always be demand to justify those. It should also be noted that the boundaries of "market renewal areas" need to be drawn with reference to the realities of housing markets, rather than administrative boundaries, if success is to be achieved.

  Fourthly, Government needs to balance its efforts more equitably between the two kinds of dysfunctional housing markets in England: those suffering from lack of demand and those suffering excess demand.


  Empty property is, in much of the North West, part of a much bigger issue of market failure. We would urge the Committee to visit the North West, to see some of the problems for themselves, and to hear from the people affected and from the organisations, such as our members, who are trying to make a difference.

September 2001

27   Housing Investment Programme returns 2000 (DTLR, 2000). Back

28   Report by the Unpopular Housing Action Team (DETR, 1999). Back

29   Changing Housing Markets and Urban Regeneration in the M62 Corridor (Centre for Urban and Regional Studies, University of Birmingham, 2001). Back

30   Changing Housing Markets and Urban Regeneration in the M62 Corridor (Centre for Urban and Regional Studies (CURS), University of Birmingham, 2001). Back

31   Changing East Lancashire: The Housing Market (DTZ Pieda Consulting, 2000). Back

32   North West Regional Housing Statement 2000 (Government Office for the North West and the Housing Corporation, 2000). Back

33   Allocation of Housing Capital Resources (DTLR, 2001). Back

34   North West Regional Housing Statement 2000 (Government Office for the North West and the Housing Corporation, 2000). Back

35   People, Places and Prosperity. Draft Regional Planning Guidance for the North West (North West Regional Assembly, 2000). Back

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