The below Parliamentary question was asked by Chi Onwurah on 2014-04-03.
To ask the Secretary of State for Communities and Local Government, what assessment has he made of the effect of buy-to-leave investments on the proportion of homes standing empty.
Kris Hopkins
[Holding Reply: Tuesday 8 April 2014]
Action on empty homes
The Coalition Government has a comprehensive package of policies to help get empty homes back into use. They include:
· A £235 million empty homes funding programme, which will deliver 12,000 homes from empty properties by March 2015 – with apprenticeships on offer to make this happen.
· Rewarding councils for bringing empty homes back into use through the New Homes Bonus – since April 2011, councils have received over £2.2 billion for bringing over 93,000 empty homes back into use, which they can then use to benefit the wider community.
· Giving councils new powers to remove council tax subsidies to empty homes, and use the funds to keep the overall rate of council tax down.
· Cancelling the last Administration’s Pathfinder programme which sought to demolish homes, instead focusing on refurbishment and getting empty homes into use.
The evidence base
This approach is working. The number of empty homes has fallen year-on-year since 2009, and at now at the lowest level since 2004. Similarly, the number of long-term vacant properties has fallen by around a third since 2009.
I note that Islington Borough Council’s recent discussion paper on so-called “Buy to Leave” tried to use the electoral roll as a proxy for measurement – yet many UK residents of foreign nationality may not be legally eligible to be on the electoral roll, or it simply may not be a priority for such individuals to register.
Moreover, in relation to London, I have placed in the Library a table showing how the number of empty homes has fallen by 30 per cent since 2009 and by 18 per cent in the last year, including a breakdown by London borough, which broadly shows falls across both central, inner and outer London boroughs. Islington has seen a drop in the number of empty homes of 26 per cent since 2009.
In that context, the evidence that “Buy to Leave” is a widespread problem is weak. Fundamentally, even where property is purchased by someone of foreign nationality, it will generally be either occupied or rented out, generating an ongoing return for the investor. It is not particularly rational for any investor not to rent out an unused flat and lose rental income, given the strong demand for private rented accommodation, especially in London.
The small number of foreign buyers
Even then, the Bank of England recently estimated that foreign buyers represent just 3% of total residential property transactions in London (Bank of England, Financial Stability Report, November 2013). Knight Frank have estimated that between 85% and 90% of new-build sales in Greater London are sold to domestic buyers, and there is no indication of a shift towards higher non-resident purchases in the last two years (Knight Frank, International Buyers in London, October 2013). Savills have reported that the proportion of sales to overseas buyers in ‘prime’ London markets is no higher than it was in 1990. But they also estimate that, in 2012, foreign investment helped to finance 3,000 new affordable homes and added a further 3,000 much needed new homes to the market-rented sector (Savills, Spotlight: The World in London, 2013).
How foreign investment helps build new housing
Both domestic and foreign investment in new housing has been helping to provide the finance needed to build it, particularly in a global city like London. Without upfront investment, financiers would not have released the cash needed for development to go ahead, and building would have stalled. These new developments not only provide homes for people to live and work, they also unlock associated affordable housing development. A good example is the Battersea Power Station redevelopment which, having laid derelict for thirty years, is now being taken forward thanks to the combination of private investment from Malaysia and public infrastructure support from the UK Government. Both were essential to move the project forward.
Marketing new build to local residents
I would add that the Government has actively encouraged the property industry to ensure that homes for sale are marketed in the United Kingdom, and not solely overseas. In response, the Home Builders Federation announced in December 2013 a new industry initiative which commits signatories to ensure that housing developments in London are marketed in the UK either at the same time as, or in advance of, any overseas launch.
The Mayor of London has also recently launched a Mayoral Concordat on new homes in the capital, writing to key developers across the UK, asking them to sign up to commit to selling new homes on every development to Londoners before, or at the same time as they are available to overseas buyers. The Concordat is already supported by the Major Developer Group, London First, the London Chamber of Commerce and the Home Builders Federation and signed by fifty developers in London.
Tackling tax avoidance
Of course, it is important that overseas owners of property pay their way. That is why this Government has taken action to tackle tax avoidance by reforming taxation of higher-value UK residential property held by non-natural persons, and also levelling the playing field by introducing capital gains tax on future gains made by non-residents disposing of UK residential property. Last month’s Budget took further steps to discourage the use of corporate envelopes to invest in high value housing to avoid paying tax.
More new housing to buy and rent
As well as tackling empty homes, the Government’s long-term economic plan is increasing investment and building more homes. According to the NHBC, in 2013, new housing registrations rose by 30 per cent in England on the year before and registrations are the highest since 2007; in London, new registrations rose 60 per cent, the highest annual total since their records began 26 years ago.