Bringing empty homes back into use: audit of privately owned empty homes

Executive Summary

Background and context

The Scottish Government, on behalf of Scottish Ministers, appointed Indigo House Group Ltd (Indigo House) to undertake an independent audit of its long-term empty homes policy and interventions. The findings of this audit will help inform how commitments on empty homes within the Housing to 2040 Strategy can best be met.

Tackling empty homes remains a priority for the Scottish Government. It sees empty properties as part of the solution to meet housing demand and the Scottish Government wants to see all homes occupied and none left empty without good reason.

The audit has considered the current picture of empty homes in Scotland; the key barriers to, and opportunities for, bringing empty homes back into use in this context; the existing approaches and interventions used to bring empty homes back into use; and whether these approaches could be improved and what further action could be taken.

In setting the brief for this work, the Scottish Government anticipated that compulsory purchase orders (CPOs) and compulsory sales orders (CSOs) may be mentioned by stakeholders when asked about their experience of using existing interventions or views on future interventions. The Scottish Government has committed to reform and modernise compulsory purchase legislation in Scotland to make the system fairer, clearer and faster for all parties. As a first step it will appoint an expert advisory panel in 2023-24 to help inform the development of options for reform. Therefore, while stakeholder views on the effectiveness of CPOs and potential for CSOs in the empty homes context is included in this report, recommendations on the future of such powers are outwith the scope of this research.

The current position of empty homes in Scotland

The total number of empty homes in Scotland estimated from council tax records across all categories has increased by 4% since 2008, but over the last decade the increase has slowed to 2%. However, over the last decade long-term empty properties over 6 months have increased by 68.4%, the number of second homes has reduced substantially by 40.2%, while unoccupied exemptions have increased slightly by 3.6%. It is important to note that the relationship between the recording of these three groups of empty homes has changed over time. From 1st April 2013 local authorities gained the discretionary power to remove the empty properties discount or set a council tax increase of 100% on certain properties which have been empty for over 12 months. This may have resulted in a shift in categorisation of empty properties from second homes to long term empty homes.

The rate of long-term empty properties is equivalent to 1.6% of all dwellings in Scotland, although there is significant variation by local authority area, with large urban areas holding the greatest volume and a similar proportion to the overall Scotland rate, while rural areas have less volume but tend to have higher proportions of long-term empty homes.

There are clear data challenges in relation to identfying the number and nature of empty homes in Scotland. The local authority survey undertaken for this audit showed most local authorities were unable to provide information on empty homes by property size and type, and the condition of the properties, and what it would take to get the properties back into use. This is because the primary source for identifying empty homes – the Council Tax Register – is not designed for this purpose.

There were differences across local authorities identified in reporting and updating of the council tax data for empty homes, including how council tax exemptions and discretions were applied. The example of unoccupied exemptions was one area where local authorities called for more transparency in published data about the type of exemptions and the length of time an exemption had been applied, to make comparisons more valid.

There were a range of methods employed to identify and actively manage a case load of empty homes including those that started with the Council Tax Register and augmented this with additional property data, to those where the starting point was new empty homes data from complaints and other referrals. There was evidence of some inaccuracy of the council tax data in relation to empty homes (although the extent is unknown), and this means the scope to put additional demands on how empty homes data is collected and reported using the Council Tax Register is limited.

Progress and barriers in bringing empty homes back into use

Empty homes impact on the availability of housing in areas of shortage, restricting the volume, type and size of properties available in the housing system, which may result in increased house prices, or may impact on the long-term sustainability of some communities. Deterioration of empty homes also has negative environmental and social impacts on communities including physical decline, vermin and anti-social behaviour, all of which add to pressure on public services and adversely impact community cohesion.

Bringing empty homes back into use can form part of strategies to meet housing need, particularly in the context that new-build housing alone cannot be carried out at the pace and scale required to meet all housing requirements. Bringing empty homes back into use can be lower cost than new build and can provide positive economic and social impacts. In rural areas empty homes strategies can help revive and sustain fragile communities, particularly where second homes contribute to housing pressure, and in urban areas, city and town centre regeneration can help reverse area decline.

The reasons for empty homes in Scotland are most commonly associated with the previous owner dying, or the property being purchased with the intention of renovation, although there have also been significant recent increases in owners moving without selling, and tenancies ending without replacement tenants.

Between 2010 and March 2023, a total of 9,014 empty properties have been brought back into use through the partnership work between local authorities and the Scottish Empty Homes Partnership (SEHP). The rate at which homes are brought into use varies significantly by area, and while there is a general correlation between areas with large numbers of homes and larger numbers of properties brought back into use, there are also areas where there is smaller volume of empty homes but where significant numbers of homes have been brought back into use. There are also some areas where there are significant numbers of empty homes, but relatively few have been brought back into use.

The barriers in bringing empty homes back into use are commonly identified as: locating and/or engagement with owners; financial barriers (often associated with the cost of repairs/improvement); and personal reasons (including difficulties which arise after an owner is deceased, and a range of family and individual circumstances). Local authorities also identified the lack of resources at their disposal, including staff time committed to empty homes work and financial incentives available for owners. Similarly, homeowners identified the main barriers to bringing properties back into use as practical reasons around repairs and refurbishment, and financial barriers. These two reasons were often interlinked and there were challenges around engagement with the construction industry in terms of availability and cost of repairs, which led to viability issues to invest in some lower value housing markets. Other key barriers were various personal circumstances which could impinge the owner’s ability and willingness to bring the property back into use, and the regulatory environment acting as a deterrent to invest in the private rented sector.

Current approaches to bring empty homes back into use

There are a range of approaches and interventions used in Scotland to bring homes back into use, focused on information and advice, sanctions through the council tax premium and a few schemes providing financial support, although these are not available consistently across Scotland.

The role of the local authority Empty Homes Officer (EHO) is a critical resource in supporting owners with information and advice, and to influence owners to bring homes back into use. Critical success factors in the EHO’s role are the importance of understanding local housing markets, and taking a bespoke approach, responsive to individual empty homeowners’ needs to build trust and persuade. However, the EHO resource is limited relative to volume of empty homes and geographic coverage. It is clear the higher the EHO resource, the better the outcomes of the number of empty homes brought back into use, and where resources are more restricted the work tends to be more reactive than strategic. EHO success in facilitating empty homes back into use is mainly due to provision of information, advice and influencing empty home owners, but this influence may also be partially dependent on the leverage from other interventions, in particular applying discretion for council tax premiums and wider incentives such as VAT, and to a much lesser extent advising on loans or grants.

Many EHOs work part time and their roles include different functions, and it is clear that most EHO resources are stretched, and if more of this resource was available and targeted to the areas with highest incidence of empty homes, then more could be achieved.

SEHP provides an important support and networking centralised service funded by Scottish Government to encourage local authorities to employ EHOs and to develop their empty homes response. The number of EHOs has increased considerably since the inception of SEHP and it is clear, given the progress in the number of EHOs now in place and the number of empty properties brought back into use since SEHP’s inception that this would not have been achieved without its support and influencing role. It is now developing its reach to third sector community-based organisations and social enterprises, as well as supporting local authorities in bespoke data analyses and providing advice on taking strategic approaches to tackle empty homes.

However, empty homeowner survey respondents were most commonly neutral or very dissatisfied about the support they had received to bring the property back into use. When EHOs were involved, satisfaction from homeowners was higher who welcomed the information, advice and support, and the expertise from EHOs. Negative comments from homeowner respondents related to lack of awareness of support, and to criticisms of the extent and scope of this support, especially in relation to lack of financial support. There appeared to be variability in awareness of EHO services which raises questions around the consistency of profile and promotion of empty homes work across Scotland.

A number of Scottish Government funding schemes have been available for bringing a relatively small number of empty homes back into use, with varying levels of effectiveness. Loan schemes appear to have been limited by differing promotion and application. A few local authorities currently fund grants and loans to prevent homes falling empty, or bring empty homes back into use and are seen as effective in some cases, but many more empty homes have been brought back into use without loans or grant. Notably, all stakeholders noted the ineligiblity of national funding schemes for energy efficiency improvement work for empty homes which was consistently argued as counter to wider climate change policy aims.

Using discretion around the council tax premium (applying it and also potentially removing the premium through negotiation between EHOs and empty homeowners) is considered an effective tool by local authorities, but it was noted that some owners will continue to hold empty homes for various reasons, regardless of financial sanctions (at current rates). While significant financial charges may be effective in encouraging some owners to bring homes back into use, this is certainly not always the case, and in fact can provide a disincentive to declare an empty home, or may cause financial hardship. The use of local taxation on empty properties is used across Europe and internationally, with up to 300% and 400% premium discretion allowable in Wales and England respectively, although wider research evidence suggests limited use of the discretion in England. There were negative opinions from homeowner survey respondents in relation to the council tax premiums, but the discretion for the premium being lifted was welcomed (usually as a result of negotiation with the EHO when the owner takes action on an empty home).

A range of local authority enforcement action powers including Compulsory Purchase Orders (CPOs) are rarely used, and according to local authority participants are unlikely to be used in future due to the levels of specialist resource required and financial compensation requirements that local authorities would have to fund. Glasgow City Council is an exception which has commited considerable resources to empty homes work and has established an effective CPO system, specific to its circumstances, but this approach is unlikely to be scalable across Scotland without more and specialist resources committed to this approach.

Value for money assessment

The VFM assessment found that over the period under review a total of 9,175 empty homes have been brought into use at a total cost of £20.734M which is equivalent to £2,260 per empty home brought back into use. In bringing these empty homes back into use, the Scottish Government provided 38% of funding and local authorities and other third party providers provided 62% of total funding.

Overall, the cost of bringing empty homes back into use is relatively modest ie £2,260 per empty home and in some cases, can be delivered at very low to no net additional cost to the public purse as the initial outlay is fully recovered over the medium to longer term. However, the cost per empty home brought back into use varies across the interventions from £1,075 (for the Empty Homes Officers and SEHP) to £152,771 for the Town Centre Empty Homes Loans Fund and includes the total estimated project costs not exclusively the funding provided which equated to £44,431 per empty home and falling to £25,817 per empty home following repayment of the loan element of the fund.

Some interventions have been more effective than others at delivering comparatively more outputs. The EHOs, for example, have delivered more than 98% of all empty homes brought back into use over the period under review (as noted above with the support of SEHP).

Taking a longer-term approach and improving the uptake in some of the interventions (the loans fund, in particular) has the potential to significantly improve the value for money of empty home interventions by reducing the average long run cost of empty homes brought back into use. Some interventions are more efficient from a VFM perspective – for example, low cost loans, in VFM terms are considerably more efficient than grant. The recycling of the initial loan (once repaid) allows the number of empty homes brought back into use to be significantly increased as the loan can be recycled 2, 3, 4,5 times relative to grant which can only be granted once). However, in conclusion a balanced package of interventions has more potential to maximise/optimise the number of empty homes brought back into use.

Areas for improvement

There is a widespread call from all stakeholders for increased financial incentives, including grants, for owners to bring properties back into use. There is also demand for increased support and resources for local authorities to focus on empty homes, including more dedicated EHO resources.

It was argued that more enforcement tools are required, including compulsory sales orders, and a few could also see the benefits in compulsory rental orders; one new approach of ‘Rent Ready’ by Homes for Good is testing a loan for rent initiative in Glasgow. Empty homeowners survey respondents did not want to see more enforcement, although a few interviewees could see the benefits in enforcement action as a last resort.

There are a range of innovative approaches illustrated that can be used to bring empty homes back into use, including those led by the community organisations and social enterprise companies. Key lessons from these approaches show the importance of co-ordination of complex funding packages which these organisations can help navigate, and the use of homesteading and other initiatives which include the additional benefits of training and skills development.

There are alternatives to CPOs – enforced sales and Empty Dwelling Management Orders used in England and Wales which do not require the local authority to purchase the property, but rather force sale or rental of the property. However, like CPOs these are still resource intensive and require specialist legal advice, but they would not require the capital outlay required for CPOs which local authorities state is often a barrier for use of the CPO powers.

Recommendations

The following recommendations are provided for the Scottish Government, Scottish local authorities and partners which, based on the evidence provided in this report, should improve the scale and pace of empty homes being brought back into use.

1. The definition of long-term empty homes should be revised to over 12 months for the purposes of public policy and resource allocation, to reflect the reality of housing market and housing improvement systems, which should enable better targeting of empty homes intervention resources.

2. Scottish local authorities should ensure that their council tax systems enable the clear definition and reporting of long-term empty homes, clearly distinguishing between those that are 6-12 months empty and those that are over 12 months empty so that action can be prioritised according to as accurate data as possible.

3. The Scottish Government should review their council tax legislation to ensure the council tax premium works as an incentive to bring homes back into use and does not act as a barrier, in particular considering potential financial hardship caused, and the creation of additional financial barriers to bring homes back into use. In addition, Council tax premiums should only be applied to long-term empty homeowners from the point at which they own the property (not carried over from designations of the property when there were previous owners). This will give new owners more time necessary to organise permissions and works etc. The council tax guidance for local authorities should also be refreshed.

4. All stakeholders should be made aware of the considerable limitations of the Council Tax Register in quantifying and monitoring the scale of empty homes in Scotland. A revised system for monitoring the number of empty homes will take considerable time and resource to develop, and it is recommended the focus should be on getting empty homes back into use rather creating a new empty homes monitoring system. Instead, the SEHP support role in bespoke data analysis will be increasingly important and should be resourced accordingly by the Scottish Government.

5. SEHP should support local authorities in a Scotland-wide, refreshed, proactive awareness raising campaign about the availability of EHOs and their role, so that empty homeowners know where to go to access information and advice and what help is available. This could coincide with a national relaunch of an empty homes loan scheme (see below), with the awareness campaign and loan scheme being funded by Scottish Government.

6. The Scottish Government should revise the Local Housing Strategy guidance to emphasise the value of bringing empty homes back into use, and to reflect the fact that the most effective means of bringing properties back into use is through an EHO being employed to prioritise empty homes action.

7. The Scottish Government and local authorities should commit more resources to empty homes work, and specifically EHO resource which represents the best value for money intervention. For the Scottish Government the best value intervention is by providing more funds for local authorities for more EHO resource through SEHP. For local authorities they should commit more funds generated through council tax, specifically for empty homes work. The Scottish Government/SEHP and local authorities should jointly consider where the priority for action should be placed in Scotland, according to the prevalence of empty homes and wider housing needs. Where the needs are greatest, then funding should be used to fund at least one full time equivalent EHO in the relevant local authority areas and for a suitable timescale to ensure an agreed amount of empty homes are brought back into use.

8. The Scottish Government has committed to reform and modernise compulsory purchase legislation in Scotland to make the system fairer, clearer and faster for all parties. As a first step it will appoint an expert advisory panel in 2023-24 to help inform the development of options for reform. The Scottish Government should also consider the merits of enforced sales and rental orders. Implementation of any revised or new powers could include the provision of a centralised and specialised resource (including legal advice) to assist local authorities to use these powers effectively.

9. The Scottish Government should introduce a revised empty homes loan scheme. This should incorporate the lessons from the previous scheme and ensure consistent promotion and implementation across Scotland. There should be a centralised implementation team with expertise in loan administration, and knowledge of the empty homes and the local authority landscape.

10. The Scottish Government should review all energy efficiency funding schemes to include eligibility of empty homes where currently, they are excluded as uninhabited.

11. The use of innovative and community-based solutions, including those that encourage learning and skills through the process of bringing empty homes back into use should continue to be supported, where these encompass the value for money conclusions outlined in this report. These are the provision of information, advice and navigation of systems, and the use of recyclable loans over grant for individual ownership/private rent, but with grant provided for social rent providing good value in the long term for the public purse.