Seizing London’s empty homes would not solve its housing crisis

by Dave Hill

Cries from Labour politicians, including Jeremy Corbyn, for unoccupied residential properties in Royal Kensington and Chelsea (RBKC) to be requisitioned for the use of survivors of the Grenfell Tower fire have touched a chord and triggered wider media interest in London’s empty homes. It is an issue that recurs in the capital’s political rhetoric, with demands that something be done about it guaranteed an approving response. But the problem is far from the worst one London faces in trying to address its housing shortages, and solving it would not make a huge difference.

The basic numbers tell part of that story on their own. Government figures (see table 615 show that in October 2016 there were a little under 20,000 homes in London that had been empty long term, meaning for more than six months. That is a tiny amount in a metropolis of nearly 3.5 million dwellings (table 100) and the number has been falling steadily since 2004 when the dataset was first compiled. Back then it was 42,600.

What about the number of homeless households in London, temporarily housed? That presently stands at around 54,000 – two-and-a-half times the number of long term empty homes. So even if it were possible and practical to seize those empty homes and give them to homeless individuals and families, there wouldn’t be nearly enough to go round. And soon there would be more homeless people in need of help.

Two things stand out about empty homes in RBKC in particular. One is that it had the highest number of all of London’s 32 boroughs – 1,399 – at the time the figures were compiled. The other is that the number has remained broadly the same since 2004, even though the number for London overall has gone down markedly. What lies behind that persistently high figure? According to one columnist who has pounced upon the stat, all 1,399 homes are “investment nest eggs” with “large, airy rooms”. But the government data doesn’t say why the homes are empty, who owns them or how large or airy their rooms are – or, for that matter, how many rooms each property contains.

There is a widespread belief, perpetuated by journalists and politicians, that Central London is packed with posh new flats wilfully left empty by wealthy owners who live abroad and idly watch their value rise until it suits them to cash in. But a report for London Mayor Sadiq Khan by London School of Economics housing experts, published last week, found that less than 1% of new properties bought by overseas investors are left wholly empty and that the vast majority are rented out to Londoners. It also showed that without those popular folk villains, “rich foreign investors”, there would less new affordable housing built in expensive parts of London, not more as has been claimed.

And there can be several reasons why properties go unoccupied for six months or more. Some might have been bought in advance for students coming to study in London and will be inhabited in time. Older ones might be undergoing lengthy refurbishments or conversions. Completed new flats that are parts of towers or blocks often cannot be occupied until the whole tower or block has been finished, a process that can take many months or even years.

Some or all of these reasons might well apply in RBKC. It could also be that many of its “empties” are simply second homes that have existed in that borough’s timelessly wealthy enclaves for generations. The picture of empty homes in RBKC may not be pleasing, but it is probably more complicated than it looks at first sight.

There is a good case for stronger compulsory purchase powers being used more often against genuinely empty homes, but that would come at a price. Owners must be compensated for the value of their appropriated homes, and housing in London does not come cheap (especially in RBKC).

Camden Council has made use of powers – bestowed by the Tory-Lib Dem coalition government, by the way – to increase council tax by 50% on so-called “ghost homes”. It is a good policy, and one that Boris Johnson of all people has been known to favour strengthening. It gives owners an incentive to sell or let their empty properties and, if that doesn’t happen, provides councils with a little extra income. But it is not transformative.

In the particular, traumatic circumstances of Grenfell, the urge to point to empty properties locally and ask why they can’t be used for those in sudden, desperate need may be understandable. There are mechanisms for this type of solution but doing it is much harder than saying it. And filling empty homes in general, although desirable, would barely scratch the surface of London’s housing crisis.

Photograph by Max Curwen-Bingley.

 

9 Comments

  1. The definition of empty home varies from borough to borough – the Gov figures are self serving in this way masking complexity to be able to tell this simple narrative.

  2. I don’t think Corbyn was seriously suggesting these properties be handed to Grenfell survivors indefinitely, was he? Wasn’t it more of a “it puts a roof over their heads for 6 months and keeps them in the area” kind of an idea?

    • Hi, you raise a good point. It isn’t completely clear what he was suggesting, beyond advocating the “requisitioning” of empty dwellings. Given more time he might be able to explain more fully what he had in mind. It might be useful if he did that to avoid confusion. On that theme, he also described properties being left empty on purpose as “land banking”, which is a separate issue concerning the holding of land which might otherwise be built on, rather than empty properties that have already been built.

  3. “It also showed that without those popular folk villains, “rich foreign investors”, there would less new affordable housing built in expensive parts of London, not more as has been claimed.”

    This is only true under the current way homes are financed/built in the UK and London in particular. Because most (all?) new homes must be privately financed/built it stands to reason that only by selling more expensive private flats can more ‘affordable’ homes be built.

    But what if we challenge that model? What if, for instance, the state had decided that the Battersea/Nine Elms project was to publicly funded so as to build exclusively affordable housing? What if all the homes were marketed in something similar to the ‘shared ownership’ model that allows non-rich people to own a home? No doubt there wouldn’t be rooftop swimming pools connecting these tower blocks but they could still be built to a high standard (higher than most new developments are anyway).

    What if we went further and adopted a model similar to the singapore HDB system? Citizens could be allocated a home which they pay off over the next 20/30 years with very little interest because it’s paid for not with a mortgage from the financial sector but by a government bond.

    Could we then not have more affordable housing than the current system allows?

    • Hi. Thanks for your comment. We certainly do need to do things differently if we can. A big part of the problem is, of course, that the shortage of land relative to demand makes the price of it extremely high, especially in Central London. A particular characteristic of Battersea & VNEB as a whole is that none of the land concerned was held by a public body, which might have made it cheaper, therefore lessening the need for so many “high value” properties to cover the cost of buying it and at the same time making the case for more and more affordable homes there stronger. Even if the whole site were being developed by boroughs or the GLA or the government, they would still have needed to buy the land, which was in private hands. It would not have come cheap. How much public money would it have been justifiable to spend on one bit of land in London when there are so many other demands on the public purse? By contrast, Malaysian investors did not have to trouble themselves with such questions. Sadly, these situations present all sorts of difficult dilemmas which, in the real world as it is, there’s no getting away from.

  4. How do we go about fixing (or at least improving) the housing crisis?
    I don’t think I’ve heard any dissenting voices to the opinion that the housing crisis that we’re in is being caused by the imbalance of supply and demand. We’re not building enough homes and our population is growing. It doesn’t take a Nobel winning economist to work out what that will lead to.

    Since the 1980’s – we have seen an increasing consolidation amongst house builders. This means that small and medium sized builders and developers now build approximately 60-70% fewer homes than they used to and it means that 70% of our homes are delivered by about 10 different house builders.

    Why is this important?

    Well, consolidation reduces diversity and choice, and increases the power of the oligopoly.
    This means that the big 10 can build what they like, when they like and that isn’t good for supply. Is it that surprising then that a recent RIBA report suggested that 75% of us would never buy a new-build home.

    How can we improve both the quantity AND quality of the new homes being built?

    Here are 5 actionable suggestions for Mr. Sharma, our new housing minister:
    1. Create a farmer’s market of housing, where large sites are broken into smaller ones, where small and medium sized developers and builders can make a difference.
    Exactly the same phenomenon has taken place in the supermarket industry. We have seen a consolidation of grocery shops so that the vast majority of our food purchases are through the big supermarket chains. We used to spend about 2 hours cooking every day and we now spend about 27 minutes. This is mainly due to the rise of the ‘ready-meal’ – which are tasty and convenient, but have too much salt and too much sugar in them and our nation is getting more obese as a result. The rise of the farmer’s market increases diversity and encourages that back to basic cooking from ingredients.

    2. Disincentivise land trading by killing the planning arbitrage market.
    It makes no sense that planning generally now costs tens of thousands of pounds and takes over a year on average to be successful.

    3. Scrap stamp duty!
    I know that this is not really your bag, but please have a word with Mr. Hammond. Stamp duty is a (potentially) huge tax on transactions which discourages people to move out of their homes.
    If we want the elderly to move out of their large homes and downsize into new homes freeing up space for the younger, we need to make the transaction as cheap as possible for them.
    If we want families living near good schools to move on when their kids leave the school, we need to make that easy for them and cheap for them to do so.

    4. Introduce a capital gains tax on all home profit sales over a certain level.
    Fourth (again, a word to Philip), to offset the lack of tax take from stamp duty and to discourage flipping of homes and the holding of homes as investment assets, we should introduce capital gains tax on all home profit sales over a certain level.

    5. Improve affordable housing.
    At the moment, policy dictates that developers should provide around 50% of new housing as affordable (borough/council dependent). In reality this never happens because of ‘viability assessments’.
    Additionally, once a developer has agreed to provide the affordable homes, they are strongly incentivised to make these as low quality and as cheap as possible.
    Instead, councils should build their own affordable housing – they know that building higher quality will pay dividends over the long-term as maintenance and refurbishment (whole life-cycle costs) are reduced, so they should do so, just like they used to.

    If you found this insightful, useful or even just amusing, read it in its entirety on our blog – How to solve the housing crisis: An open letter to the government on https://www.inhabithomes.co.uk/custom-build-blog/how-to-solve-the-housing-crisis?utm_source=Quora&utm_campaign=Answers

  5. This is specific to Grenfell Tower Victims and not put forward as a solution to the housing crises as you sugest. It is proposed as a way to house victims of the fire no more no less. That is achievable and should be done

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