Monday, 19 June 2017

Controversy of empty London buildings

After the Grenfell Tower fire there have been interesting questions raised in the news, and these are seen as Labour vs Tory, but are not so simple I am sure.

The issue, it seems, is there are many empty houses in London for various reasons, and there have been some calls to force those to be used to house people stranded after the fire.

Before I am start on my musings on this issue it is worth pointing out that this question should not have come up, surely?
  1. It should not have happened - no way a tower block should catch like this - we have building codes, and health and safety nightmare legislation for a reason.
  2. Why can the council simply not cope - it is a building managed for the council - but there has to be some fire insurance, and anyway the council must have contingencies to take care of people in an emergency, surely? The council can pay for people to be in hotels if needed. The landlord should surely have some responsibility for this?
But, rants aside, my thoughts here are really on the issue of empty houses, and the idea of commandeering them to house people in this emergency.

Owning property is a right!

The issue comes down to basic rights to own property. If you own a house, whether you are living there or not, you have rights. We have basic concept of property rights in this country. These will always be unfair by their very nature - i.e. if I own a thing (whether an empty house in London or a Mars bar) and you need it, but cannot afford to pay for it, then that is a problem. If you are starving and I have a Mars bar, do I have a moral obligation to give it to you? Probably, unless I am starving, or I was going to give it to someone else who is starving and giving it to you would deprive them. Ethics and morals are hard, aren't they. Even so, however unfair property rights are, they do exist, and we do not want to abandon them on a whim or even an emergency like this.

So what does it mean? Well, we do have laws that curtail some property rights. There are rights over monopoly control of things, where people can set any price they like as they own all of something. There are rules for landlords even when they own the properly (rules that should make them responsible for helping tenants out in cases like this I am sure). But we only curtail these basic rights in very rare cases. Is this such a rare case where new laws should apply?

Emergencies only?

One thought is some sort of emergency measures arrangement - where something like this would be some sort of special case. But that is complicated. There are around 600 homeless after the fire. So is 600 homeless people an emergency deserving a law allowing homes to be commandeered? Seems legit, until you realise that "Shelter calculates that 170,000 people are homeless in London today" so if 600 is an emergency we would have a permanent emergency and nobody would want to have an empty house in London. Indeed, anyone investing in London property would take down the house, or make it uninhabitable, so they avoid this special emergency legislation. Such a law would not actually help...

Of course, if you do allow houses to be taken over, how far do you go. Does everyone with an empty bedroom have to take on an otherwise homeless stranger? Where would you draw the line?

But some people want to help!

This is good news, there are builders that have finished flats and houses about to go on the market but offering for free as an interim measure. Apparently this is an issue, as anyone taking such a place apparently gets taken off the council housing list to find somewhere (as they have somewhere now!). This is bad for them, and the person offering the temporary accommodation.

In fact, it is hard to offer temporary accommodation without issues with sitting tenants or squatters that you cannot get rid of. Normally this is good for tenants - having strong laws to help them. But this is probably the very reason why there are lots of empty houses. If renting them out was a "safe" thing to do, people would do it and make more. Sadly, if they do, then selling their investment property is harder - they have to find someone prepared to take over the tenant or some way to get rid of them, so simpler to keep the place empty. There is, perhaps, the real problem here.

Maybe we need some type of tenancy where you have a fixed term and an absolute right to evict at the end of that time, come what may, but not a moment before. That would allow a very clear cut arrangement, a house for 3 months, but not a day more unless you are offered an extension. Safe for landlord - no messing with court orders, etc, just evict - and safe for the tenant as he knows where they stand and has security for that fixed period.

Of course, if such tenancy agreements existed, they would be used all the time, so that is not good. Maybe an arrangement like this could work where there is zero rent. People would only offer such arrangements in emergencies like this, but would not be hindered, or stuck with squatters, if they do offer generosity like this.

To be clear here, I am not saying that people will stitch up someone being kind, but they may find themselves with no choice. If you are homeless today, offered a house for 3 months, and then find the only option is being homeless again you may choose to become a squatter if that is allowed or at least prolongs your stay. If the alternative is being homeless for those 3 months instead, surely it is better to have someone prepared to offer somewhere, even on a short term arrangement like that?

Is there a solution?

The issue is people feel it really unfair that there are so many empty houses, and so many homeless (not just because of the fire). Maybe the existing legal framework is skewed just a tad too far towards the tenant? Maybe if there were some changes that could make it sensible for people with empty houses to rent them out then we would not have empty houses. It may simply be a case where the law has pushed too far in favour of one side of a commonly adversarial contractual arrangement (tenancy) to the ultimate detriment of both parties, and hardship of potential tenants.

Conclusion

Needless to say, I once again think the issue is not the symptom we see (empty houses) but what legal and economic framework resulted in that being a sensible thing to come about. That is what needs fixing, not the symptom. People need to "take a step back" a little more often.

11 comments:

  1. Perhaps tax is part of the answer? Let people keep as many empty properties as they want but if they start doing that then they pay more for the people unable to get on the property ladder? Perhaps a higher rate of council tax for each such empty property?

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  2. There does seem to be a significant problem in London, specifically, where international investors have bought up or developed residential property, but would rather leave it empty until scarcity forces rent prices up to a point at which they are happy to 'release' it to market at.

    Or, to put it another way, abusing Price Elasticity to artificially drive up rent prices.

    The idea of a Land Value Tax - proposed by several parties in the recent election - might be used to alleviate the problem: as Patrick commented above, it could be used as a punitive tax against property investors/developers who deliberately leave property empty in order to artificially raise PED/PES.

    As an aside, it's worth mentioning that several of those international investors in the London property market would best be described as 'of dubious repute' - often investing in London property as a way of getting money out of their home country - in some cases obtained through means of dubious legality - under the radar.

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  3. Among the many London issues we need to face up to sooner or later; we have centralised as many high-paid jobs as we possibly can into London.

    If you want to do telecoms stuff, you need to be in or near London for the datacentre access, meetings with high level BT and VM staff etc.

    Television and media is concentrated in London - Sky, Global, parts of the BBC etc are all London based.

    High tech concentrates in London - it's why I commute to London, because I can roughly double my pay by doing so.

    Finance jobs concentrate in London, if you want the high pay.

    The best legal firms are London based, too.

    Government-linked jobs (those that need access to senior civil servants and to MPs) are concentrated into London.

    This means that infrastructure is cheaper in London (although rents are higher), and there's a good choice of potential employees here; the downside is that you have to pay through the nose.

    We need to think about this, and work out what we're doing - there are practical things that we could do (tax incentives, moving Whitehall and Parliament, to name two) that would reduce the degree to which London takes over, but they're part of a hard conversation we have to have about the sustainability of UK business.

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  4. "Maybe the existing legal framework is skewed just a tad too far towards the tenant?"

    I'm fairly sure that the UK has some of the lowest levels of rights for tenants in Europe. Certainly compared to somewhere like Germany. (https://en.wikipedia.org/wiki/Rent_regulation#Germany)

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  5. I think we at need to look at ways of encouraging better use of land. There's plenty of people sleeping rough in Glasgow tonight, but lots more empty commercial real estate where they could at least get some shelter - why are we allowing these huge office blocks to go empty.

    They're already camped on the steps of the old BHS, why not let them inside?

    What if we had a carrot and stick approach to rates and council tax. If a property is unoccupied for a year, ramp up the rates. If the property - or a reasonable portion of it is being used for some social good whilst the owner was looking for an occupier - It doesn't have to be a pop-up homeless shelter, some sort of community group, charity or pop up social enterprise could use it - then you get a discount.

    Unreasonable?

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    1. In many cases it just isn't possible to use business premises for safe shelter without major works. Many such buildings simply don't have an infrastructure to support that. The power, fresh water, waste water and heating requirements for living are far greater than that for many retail and office environments and the utility supply is often simply inadequate for such use to be safe and "humane".

      It ought to be possible through planning legislation to require all new retail/office space to meet the basic requirement for residential occupation so that such a building would be more versatile in the future should it become empty, but sadly that won't affect existing infrastructure.

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    2. Still should compare favourably to the doorstep of said unsuitable building.

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  6. "Apparently this is an issue, as anyone taking such a place apparently gets taken off the council housing list to find somewhere (as they have somewhere now!)."

    And therein lies the real crux of this particular case! As a landlord of a building no longer fit for habitation through (allegedly) its own dubious renovation surely the council should have a legal duty to re-house all tenants irrespective of whether they have found shelter through family, friends or benevolent strangers.

    I wonder what pressure the same council and central government would be putting on a private landlord had it been a privately owned block? But then private landlords are not permitted to "self-insure" (read not bother having insurance) and so they would have the ability to pay for a response without sacrificing local services.

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  7. You're advocating short term tenancies to support landlord, there's also the opposite campaign going to have much longer tenancy agreements, so that people know that they can stay in the property for a long time and not have to move every 6-12 months as sometimes happens. These longer term tenancies are common in other European countries, which is why home ownership is often less common there.

    I suppose both extremes could be useful to have as options.

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    1. Well, I was only saying as it seems the current "crisis" needs some short term accommodation whilst the council sort it all out.

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  8. Its down to political damage, the tories determined with all the media attention, they will spend the money and give these 600 people special treatment, of course all the other homeless people dont get so lucky.

    Compared to other countries like germany, our tenants have very poor rights, landlords can simply choose to not renew a tenancy for "any" reason and its common practice to only get 6 mnths worth of security, to conclude the private rental market is broken.

    What really needs to happen is we start the council house building program again at a mass scale, this is the only solution to the problem, the private market can only reasonably provide for flexible short term living arrangements. Aside from security we also have the problem that rents are rising rapidly and it usually costs more to rent than to pay a mortgage.

    Obviously building houses needs capital, but in the long term it pays for itself, consider the 10s of billions paid out in housing benefit thats gets funneled to private landlords, instead that would stay within the state and just go on cheaper rents to councils. In emergencies we would have spare empty properties as well instead of paying for hotels and the like.

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