Regardless of your political loyalties, it’s hard to deny that the UK has a housing shortage. A 2019 report from the National Housing Federation estimates that Britain needs 340,000 new homes every year, including 145,000 social homes, to meet the housing demand.
However, underpinning the UK’s housing crisis is a seldom-covered secret. While new houses are needed, Britain currently contains hundreds of thousands of unused residential and commercial properties – a trend that’s only been accelerated by the COVID-19 pandemic.
How has this happened? And what will happen to Britain’s ghostly cityscapes of empty high streets and residential developments?
The huge number of empty residential properties in the UK is surprising. After all, we’re often told we’re in the midst of a housing crisis and this conjures up mental images of a residential sector bulging at the seams.
However, as of September 2020, 268,385 properties in England have been left empty for more than six months according to government research. If we dig a little deeper into this figure, we turn up some truly mind-boggling statistics. For example, in the London Borough of Camden,
9,595 homes remain out of regular use, accounting for one in 12 properties in the borough. What’s more, the latest figures represent a 20% increase on 2019 with over 40,000 more homes being left empty.
So why is this happening?
Well, while it might seem like madness to many of us, there are several reasons why a residential property may not be rented or sold.
Let’s start with the simplest. One of the most common reasons a property is empty is because the owner can’t raise the capital to do the property up to let it out or sell. Many of Britain’s empty homes are in varying states of disrepair and, for the owner, renovating may outweigh the returns they’re likely to receive in rent or by selling the property.
Take, for example, properties in former industrial heartlands and coastal towns. Towns and cities like Portsmouth, Middlesborough and Hartlepool consistently rank among the highest for empty homes. The equation is simple; renovation costs are high, while house prices and rents are low in comparison with other parts of the country. This offers little incentive for landlords to do the work needed to make the properties habitable.
The same is true of council-provided social housing. The public sector has spent much of the last 15 years battling one form of austerity or another. And slashed budgets have made it difficult for local authorities to allocate the funds needed to renovate dilapidated post-war social housing. This means that the properties either stand empty, decaying further each year, or the land is sold off to private developers who then use it to build new complexes with minimal social housing.
These problems in social housing and rental properties are coupled with issues at the
top end of the market. Take a look at the skyline in any major city and you’ll see plenty of gleaming new-build apartments. From luxury flats in converted offices to bijou maisonettes in former industrial buildings, redevelopment has become the watchword in our biggest cities. The only drawback is that many of them are empty.
There are a few reasons for this. Many of these ‘investment’ properties are simply too expensive for locals to buy or rent. And those who can afford to buy will often pay a premium for an unused apartment, so it makes sense to leave the property empty until the ‘right’ buyer can be found. Even if an investor is interested in letting it out, the costs involved such as wear and tear and administration can outweigh any money made in rent.
Another reason for empty properties is the nature of many of the investors behind the developments. For some time now, property in Britain’s major cities (London in particular) has been seen as a risk-free investment for foreign capital. For these investors who live outside the UK, simply owning a chunk of London real estate is the ultimate aim. The social utility of the property doesn’t come into it.
While it’s happened much more quickly than on the residential side, the commercial sector is going through its own ‘empty buildings’ crisis.
The High Street is in terminal decline, leading to a glut of empty retail space in our towns and cities. For instance, the collapse of retail giants Debenhams and Arcadia (Topman, Topshop and Dorothy Perkins) alone has led to 15m square feet of space appearing in the commercial rental market. And with many brands moving operations online, it’s not clear where tenants or buyers will come from.
At the same time, COVID-19’s impact is being felt well beyond the high street. Many businesses were forced to adopt remote working last March and, for some, it’s sparked the realisation that they can do away with some or all of their physical office space without impacting productivity. Of course, we’re unlikely to see businesses stop using commercial spaces completely – meeting spaces will still be needed – but things have changed.
This leaves commercial landlords with a big problem. What to do with the sudden surplus of office space, when it’s likely demand will never return to pre-pandemic levels?
What should be done?
Perhaps not surprisingly, the answer to solving the UK’s empty property crisis is as complex as the problem itself.
For residential properties, something needs to be done to incentivise owners and investors to bring empty units onto the market. Solutions could include grants for renovation, tax cuts, or, at the other end of the scale, state-led requisition and compensation schemes to bring the stock into public ownership. However, these solutions depend on proactive government intervention on both a national and local level – something that has long been lacking.
Alongside this, legislative action needs to be taken to ensure that properties in high-demand areas are purchased as homes and not, as Boris Johnson once termed them ‘blocks of bullion in the sky’. Such a scheme could include buy-to-let properties. What’s important is not the ownership of the property per se (although, making housing more affordable should be part of the goal) but that someone actually lives in it.
Similar action also needs to be taken in the commercial sector. The high street as we know it is gone and so too is the traditional office. So it’s time to consider alternatives. Former retail property could be transformed into community spaces or incubators for small businesses. Office space could be given over to charities, food production or residential units.
A great example of this in practice is the ‘Preston model’. The experiment in ‘community wealth building’ saw Preston council work alongside local businesses to transform a dilapidated city centre into a place voted ‘the best place to live in the North West’ in five short years.
It might sound idealistic, but initiatives like the Preston model are exactly what we need if we’re to end the UK’s crisis of empty homes and high streets. Change won’t be easy or fast. But, the alternative is to ignore the problem and hope forlornly that the supply of new homes can one day catch up with demand.
We already have enough empty properties to home thousands of people, let’s use them.