Could empty homes strategies assist local authorities struggling to balance the books?

Inflationary pressures, increased service demand and rising interest rates are generating a number of concerning indicators that more local authorities may be in a position where issuing a section 114 notice (indicating an effective “bankruptcy”) is a possibility. Meanwhile, the number of empty homes across the country remains stubbornly high. More local authorities could consider how an empty homes strategy could ensure recovery of costs as well as provide an increased revenue stream.

The issue of empty homes will be in the spotlight throughout Empty Homes Week (4 – 10 March) for good reason - the Department for Levelling Up, Housing and Communities indicated that there are 676,304 empty homes as of October 2022, with 248,149 of these homes being classed as “long term vacant” properties meaning they have been vacant for more than six months. 

Beyond Empty Homes Week, local authorities should adopt a long term strategy in relation to empty homes. A forward thinking strategy can not only address the immediate issues caused by long term empty homes including vandalism, damage to adjacent properties, vermin infestation and allowing recovery of debts such as Council Tax arrears, care home fees and the costs of enforcement, but is also a method for increasing revenue to the Local Authority by way of Council Tax receipts and the possibility of claiming the New Homes Bonus. 

Local authorities have a range of powers to bring empty homes back into use, including Empty Dwelling Management Orders, enforced sales, recovery of council tax and care fees, the provision of loans and compulsory purchase. Two particularly effective routes to bring a property back into use which Bevan Brittan provides regular support and advice on are enforced sales and empty property loan schemes. 

Enforced sales

Local authorities have various powers (including, for example, the Public Health Act 1936), that allow them to serve notice on an owner of a property, demanding that they carry out repair or improvement works. If the owner refuses to comply, the local authority can carry out and pay for the work itself. Once this work is carried out in default, the local authority charges the costs incurred in doing so to the owner and registers a local land charge against the property. Then, if payment is demanded and not received, a legal charge can be placed on the property in question, allowing for an enforced sale to be carried out. Once the property is sold, the local authority is able to recover charges and debts (including the cost of works and legal fees, as well as debts such as Council Tax arrears and care home fees) owed to it from the proceeds of the enforced sale of the property. 

This process, applied to a long term empty home, means that the local authority will have remedied a “problem” property through carrying out the required works, and brought it back into use through the subsequent sale. The public money applied to carrying out the required works will be recovered, and the new owner will almost always be paying Council Tax. The New Homes Bonus may also be applicable, further boosting this new revenue stream. 

Loan schemes

Local authorities have found success in granting short term (usually three years) low interest rate loans to support works required, to bring long term empty homes back into use. Funds are put towards acquisition costs and development costs. The development works could range from renovation and conversion works required to bring the empty or derelict home back into use, all the way through to new build projects delivering multiple new homes.  Works carried out under such a loan scheme would always be required to deliver properties that meet the Decent Homes Standard, meaning that public money used in these loan schemes are delivering homes of a suitable standard. 

Loans can be granted to owners, landlords and developers, lending is subject to robust monitoring and lending applications need to align with a lending criteria approved by the local authority. Funds are most commonly secured against the empty home requiring works, and when larger sums are required to carry out works, lending can be released and secured in tranches to mitigate security risk. Empty homes brought back into use with the assistance of lending provided by a local authority may also be eligible for the New Homes Bonus, further enhancing the Council Tax payments received in respect of the property, once occupied. Due to the recyclable nature of a loan fund applied in this manner, it can deliver sustainable long term results, driving up Council Tax revenue and offsetting costs incurred in administering the scheme through interest and fees collected from applicants. 

If you would like further information or advice on enhancing your empty homes strategy, please contact Lyndon Campbell or Derin Taylor.