MIDDLESBROUGH COUNCIL

EMPTY HOMES ACTION PLAN

Executive Member for Regeneration and Economic Development: Councillor Charles Rooney

Kevin Parkes, Executive Director for Economic Development and Communities

12th August 2014

PURPOSE OF THE REPORT

The report sets out the neighbourhood and community problems caused by empty homes as well as the strong financial business case to tackle this issue due to the allocation of New Homes Bonus which is paid for every empty home brought back in to use.

SUMMARY OF RECOMMENDATIONS
  1. It is recommended that the Executive approves:

a)the implementation of the initiatives within the Empty Homes Action Plan set out at paragraphs 18 to 27; and,

b)that the Empty Property Equity Loans and associated£300,000 Section 106Affordable Housing funding be approved with delegated authority given to the Executive Director for Economic Development and Communities and Chief Finance Officer following consultation with the Executive Member for Regeneration and Economic Development to approve the final detailed scheme.

IF THIS IS A KEY DECISION WHICH KEY DECISION TEST APPLIES?

It is over the financial threshold (£150,000) / X
It has a significant impact on 2 or more wards / X
Non key

DECISION IMPLEMENTATION DEADLINE

  1. For the purposes of the scrutiny call in procedure this report is

Non-urgent / X
Urgent report

BACKGROUND AND EXTERNAL CONSULTATION

  1. Long term empty homes are a national problem with over 700,000 in England alone. In Middlesbrough there were 568private homes empty for six months or more in October 2013.
  1. The Council has already began to tackle this issue and to date has:

a)secured £1.4m from the Homes and Community Agency (HCA) Empty Homes Fund to tackle 115 properties in Gresham;

b)transferred 7 empty terraced properties to the Gresham Community Land Trust which have now been renovated and let on affordable rent to local residents;

c)brought 8 empties back into use through a Home Swap scheme for residents effected by demolition; and,

d)agreed to transfer 9 empty properties to Endeavour Housing for refurbishment and affordable rent in return for their properties required for demolition.

  1. There can be lots of reasons why homes remain empty including:

a)issues of probateand breakdown of relationships;

b)lack of demand on the private sales market;

c)vandalised in between tenants and the owner cannot afford to renovate;

d)unable to sell because of negative equity and it’s fallen into disrepair; and,

e)owner may have had a ‘problem tenant’ and has been reluctant to let the property again and it’s fallen into disrepair.

  1. Table 1 below shows the spread of empty homes throughout the town.

Table 1

Private sector long term empty properties / Oct 2011 / Oct 2012 / Oct 2013 / % change
TS1 (Gresham, University, Greater Middlehaven) / 132 / 156 / 174 / +32.0%
TS2 (Greater Middlehaven) / 0 / 2 / 19 / +1,900%
TS3 (North Ormesby & Brambles Farm, Thorntree, Park End & Pallister) / 54 / 84 / 85 / +58%
TS4 (University, Beechwood, Clairville) / 37 / 53 / 42 / +14%
TS5 (Acklam, Ayresome, Linthorpe, Brookfield, Park) / 146 / 189 / 166 / +14%
TS7 (Marton, Beckfield, Nunthorpe) / 46 / 64 / 47 / +2.2%
TS8 (Hemlington, Coulby Newham, Stainton & Thornton) / 37 / 36 / 35 / -5.4%
Total / 452 / 584 / 568 / +25.7%
  1. The problems empty properties cause for local communities are well known but in summary they:

a)deny homes to those in need;

b)attract vermin, crime, arson, vandalism, fly-tipping and anti-social behaviour;

c)are a source of anxiety for owners and neighbours;

d)reduce the value of neighbouring properties; and,

e)as a consequence, are a drain on public services and budgets.

NEW HOMES BONUS (NHB)

  1. There isaclear financial business case for local authorities to tackle this issue head on due to the ‘payment by results’ incentive provided with the New Homes Bonus (NHB).
  1. NHB is grant paid by Government to councils for increasing the number of homes available for occupancy. It is paid each year for six years and is based on the amount of Council Tax revenue raised for six years for new build homes, conversions and long term empty properties brought back into use. It is funded by top slicing local government revenue funding.
  1. The Council will receive a minimum NHB of £5,822 over six years for every empty brought back into use i.e. annual Council TaxBand A of £970.40 x 6 years = £5,822.
  1. Where the property is brought back into use for affordable rent, NHB is enhanced with a premium of £350 per annum, £2,100 over six years. Therefore the potential total amount to be received per property is£7,922.
  1. Even at the basic Band A rate of £5,822, the potential income is significant:
  • 25 empties brought back into use = £146,000 NHB
  • 50 empties brought back into use = £291,000 NHB
  • 75 empties brought back into use = £437,000 NHB
  • 100 empties brought back into use = £582,000 NHB
  1. The annual NHB calculation isn’t completely straight forward as deductions have to be made for demolitions and the amounts vary depending on the Council Tax Band of the property brought back into use, however, the figures provide the general position.

TACKLING EMPTY HOMES ACTION PLAN

  1. The various reasons why properties remain empty means that a suite of different measures are needed to bring empties back into use for individual cases which include a ‘carrot and stick’ approach.
  1. Set out below are a range of initiatives proposed for an Empty Homes Action Plan:

Housing Regeneration Vehicle

  1. On the 19th June 2014 Executive approved the development of a Housing Regeneration Vehicle which has a key objective to tackle empty properties through the use of the Council’s Section 106 Affordable Housing funding and matched funding from Erimus. The initial funding should enable the purchase, refurbishment and letting of 30 empty properties which could generate £175,000 NHB.

Empty Property Equity Loans (EPEL)

  1. To address the empties due to owners being unable to afford the necessary improvements or monthly loan repayments, it is proposed that an equity loan scheme is introduced of up to £20,000. The loan would be added as a charge to the property as a percentage of the value and repaid when the property is sold. Interest will also be charged and the level and repayment method of this will be set as the details of the scheme are developed. It is proposed the final details of the scheme are approved by the Executive Director of Economic Development and Communities in consultation with the Executive Member for Regeneration and the Chief Finance Officer.
  1. £300,000 is sought from the Council’s Section 106 Affordable Housing fundsto run a pilot scheme. It is estimated that c. 15 properties could be brought back in to usewhich would generate £87,000 in NHB. In addition, the loans will be repaid once the properties are sold.The Council will also benefit from any uplift in value.
  1. It is proposed to review the scheme inApril 2016 and, if successful, further funding maybe sought to roll it out further.

Bids for HCA Empty Homes Funding

  1. Empty homes continue to be a national priority for the HCA. As well as the funding already secured to date set out at paragraph 5aabove, a bid for a further £880,000 has recently been approved by the HCA for their next round of funding. This will enable a further 50 empties to be brought back into use town wide between 2015 and 2018, and generate £291,000 NHB.

Engagement and Promotion

  1. An important part of the strategy to tackle empty homes is actively targeting owners and providing them with information on the incentives available and the reasons why empty properties are a poor financial option. A range of promotionaland marketing measures will be introduced, including:

a)sending information to the owners of all the empty properties in the town;

b)holding a Middlesbrough Empty Homes Day which will provide information and advice to owners;

c)media coverage in the local press;and,

d)a dedicated site on the Council’s website.

Review of Council Tax Empty Homes Records

  1. The NHB award is calculated using the annual Council Tax returns submitted every September. Incorrect records or homes which are occupied but listed as empty can have a detrimental impact on the level of NHB allocated. It is therefore proposed to undertake a review of all long-term empty homes to verify the occupancy status.
  1. Plymouth Council carried out a similar review in July 2013 and of its 865 long term empties, it identified that 7% (67) of these were in fact occupied and the NHB return submitted September 2013 was updated accordingly. As a result, Plymouth Council will receive a total £400,000 additional NHB over six years.
  1. If a similar success rate of 7% were achieved in Middlesbrough an estimated 40 properties could be identified as occupied which would generate NHB of £233,000.

Enforcement

  1. In some cases encouraging owners will not be enough and the Council will need to take strong enforcement action. There are a range of legal powers that are available to Council’s which include:

a)Compulsory Purchase Orders – allows the Council to acquire the property;

b)Enforced Sales procedures – allows the Council to force the owner to sell to a 3rd party; and,

c)Empty Dwelling Management Orders – allows the Council to take ownership of the property to bring back into use as a rented home and recoup the refurbishment costs through the rental income.

  1. To date the Council has made very limited use of these powers as they are resource intensive and often require upfront capital funding. However, enforcement is an important part of the Action Plan if all the other measures fail. Existing staff resources will be used initially but requests for additional resources, if required, may be made when the Action Plan is reviewed April 2016 if there is a cost benefit business case to support this.

PERFORMANCE MONITORING

  1. The number of empties brought back in to use, and the subsequent NHB secured will be one of the strategic performance measures for the Economic Development Balanced Score Card performance monitoring and reported annually.

OPTION APPRAISAL

  1. The Council could opt to do nothing with this issue but the neighbourhood decline caused by empty properties and the compelling financial business case from NHB means that this is not a recommended option.

RISK ASSESSMENT

  1. It may be difficult to engage and encourage owners to take up the advice and products available in sufficient numbers to make a measurable impact in neighbourhoods and generate associated income.

FINANCIAL, LEGAL & WARD IMPLICATIONS

  1. The Housing Regeneration Vehicle and Empty Property Equity Loan Scheme have legal and financial details that need to be worked through before the final schemes are agreed.
  1. Table 2 below shows the potential investment, outputs and income that could be achieved in 2014/15 and2015/16.

Table 2

MBC
Investment required / Non MBC Investment / Empty homes / New Homes Bonus over 6 years / MBC Asset Value
  1. Housing Regeneration Vehicle
/ S106 £800k / Erimus £800k / 30 / £175k / c.£800K
  1. Empty Property Equity Loan
/ S106 £300k / £0 / 15 / £87k / c.£300k
  1. Council Tax Review
/ £0K / £0 / 40 / 233k / n/a
  1. HCA Approved Funding Round 1 & 2
/ £0 / HCA £1.4m / 115 / 670k / n/a
  1. HCA Approved Funding Round 3
/ £0 / HCA £880k / 50 / £291k / n/a
Total / £1.1m / £3.08m / 250 / £1.456m / £1.1m
  1. The £800k S106 funding for the Housing Regeneration Vehicle was approved by Executive at its 19th June meeting.
  1. £4.5m S106 Affordable Housing funding is due to be received August 2014 from the David Wilson Homes for the Grey Towers development and it is proposed that the £300k sought for the EPIL scheme is funded from this. It is possible that these funds may not be received on the anticipated date, and if this is the case, the start of the EPIL scheme will be delayed accordingly so that no expenditure is incurred at risk.
  1. This is a borough wide approach but with sometargeting of low demand areas where long term empty homes are concentrated.
IMPACT ASSESSMENT
  1. An Impact Assessment has been undertaken (Appendix 1), it shows that there will be no negative impacts as a result of the decision. The empty homes process does not contravene Human Rights or Equality Acts.
  1. The empty homes process will be open to all private sector empty homes owners in targeted areas. The evidence available shows that there would be no disproportionate adverse impact on someone because they hold a protected characteristic.

RECOMMENDATIONS

  1. It is recommended that the Executive approves:

a)the implementation of the initiatives within the Empty Homes Action Plan set out at paragraphs 18 to 27; and,

b)that the Empty Property Equity Loans Scheme and associated £300,000 Section 106 Affordable Housingfunding be approved in principle with delegated authority given to the Executive Director for Economic Development and Communitiesand Chief Finance Officer following consultation with the Executive Member for Regenerationand Economic Development to approve the final detailed scheme.

REASONS

  1. Coupled with the social and environmental benefits to residents within the town there is a strong financial case for Middlesbrough to invest in bringing long-term empty homes back into use.
BACKGROUND PAPERS
  1. Housing Regeneration Vehicle Executive Report 19th June 2014.

AUTHOR: Sharon Thomas

TEL NO: 01642 729600

______

Address:

Website:

1