Stop Press – September 2011
To help get acceptance of our recommended Property Bond scheme solution for Property blight caused by HS2 we need the support of the financial institutions. In the last week of the July 2011 consultation we got both the Council of Mortgage lenders to support this type of scheme (as distinct from the other types), and the British Banking Association.
The National Association of Estate Agents then followed suit.
There are agents and property owners that remember the success of the Central Railway Property Bond, that we modelled our scheme on. If it’s good enough for the private sector then why should the public sector not be allowed it too?
How you can help now
Although the consultation has ended we need to keep influencing the decision. We need more organisations signed up and supporting the Property Bond option.
You can see the current roll call of supporters for a Property Bond type of scheme.
There is a letter you can send or take to your local building society and estate agent to get them to support us too. If you believe in fair and just compensation for those affected by property blight then you can help make it happen.
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Compensation Schemes being consulted on currently
The Feb/July 2011 DfT consultation proposed 3 options for the next compensation scheme:
- Hardship scheme
- Property bond
- Compensation bond
One of the 3 options will be taken forward after the consultation and developed into a scheme. This would then be put out for further consultation in spring 2012 for starting in summer 2012. At this point the current EHS scheme would end.
The Feb/July 2011 DfT consultation also proposed 5 criteria on which they would base any future consultation scheme.
HS2AA analysis
HS2AA did extensive research on the options in 2010 when the previous (EHS) scheme was developed and implemented by DfT after a 2010 consultation. This enabled us to develop a better scheme for people affected by Property Blight. This option (the Property Bond) was then included by DfT as one of the three options in the 2011 consultation.
The current scheme (EHS) is a Hardship Scheme and helps very few. The Compensation Bond would make people wait until HS2 is built and operating (in 2027 at earliest). The Property Bond offers can help to those who want to move by injecting confidence back into the market. But even then it depends on the detail.
HS2AA latest reports
HS2AA have done various reports on the options and recommendations, as well as responded to the 2011 consultation
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a one page summary was submitted to Question 7 of the 2011 consultation
- our recommended Property Bond scheme and revised criteria for any scheme were also submitted (83% of all respondents to the previous 2010 consultation supported our ideas, and that included two thirds of all councils)
If you want to know more detail have a look at
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HS2AA’s short summary report about the options, DfT’s criteria and our specific recommendations
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HS2AA’s full report that helped us prepare our 2011 consultation response
- HS2AA’s full 2011 consultation response to Q7. We recommend you read this report if you want the detail, as it includes all the arguments and information we gleaned to make our case. It reviews all the different schemes that currently operate and describes the success of the Central Railway Property Bond Scheme on which our proposal is modelled.
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HS2AA’s Recommended Property Bond scheme
The details of our scheme are shown below. We discussed them with HS2 Ltd and DfT.
Recommended Property Bond Scheme and approach to compensation
1. Scheme Objective
‘….Where a project which is in the national interest imposes significant financial loss on
individuals, I believe it is right and proper that they should be compensated fairly for that loss.’
Philip Hammond, House of Commons, 20 December 2010
The Government appear to accept the principle that where the blighting of properties is a consequence of HS2 it should be a cost to HS2 and not to the individuals who are affected.
The objective parallels the model of ‘the polluter pays’ – commonly perceived as what is fair.
2. Approach to compensation
DfT invited comments on their proposed approach to compensation. The prime purpose should be to compensate those who have losses imposed on them and focus on what is necessary to prevent them suffering that loss. To achieve this, DfT’s proposed criteria should be amended to:
1. Fully compensating those whose properties lose value (to be the prime criterion)
2. Enable normal functioning of property market so people can move or re-mortgage
3. Supporting mortgage lenders accept unblighted values for lending/remortgaging purposes
4. Reassuring now that fair compensation will be paid
5. Enabling people to stay in their homes and communities
6. Avoiding the government unnecessarily owning large number of properties
The Council of Mortgage Lenders and the British Banking Association have said they could only support a property bond approach, not the hardship and compensation bond ones.
3. Recommended Property Bond Scheme (PBS)
Eligible property owners apply to HS2 Ltd for a Property Bond that transfers with their property and applies until one year after HS2 is operational. The Bond will guarantee that HS2 Ltd will purchase the property at an ‘unblighted value’ (in their role as purchaser of last resort) if:
- The HS2 project has reached a specified trigger point, eg planning approval date; and
- No private buyer is found at the unblighted price when the owner wants to sell.
Eligible properties to be stamp duty exempt for the life of the bond (encouraging private sales). The Bond can also be used for re-mortgaging purposes.
Any unused Property Bond that applies at termination (ie in 2027) to a blighted property entitles the then owner to ‘loss in value’ compensation (as distinct from current statutory compensation).
4. Recommended Scheme rules
Eligibility: property owners who suffer a ‘loss in property value’ due to HS2, and who move, remortgage or remain in their property until a year after HS2 is built (2027 earliest)
Process: eligible owners can apply to HS2 Ltd for a Property Bond anytime after the start date, provided they meet the ‘general conditions’. The bond can only be redeemed from HS2 Ltd (for the ’unblighted value’) when the trigger point has passed – only private sales apply until then. There would be no qualifying reason for sale, restrictions on proximity, noise etc, or threshold loss. The sole test would be there being a financial impact on market value due to HS2.
Operation: to inhibit groundless sales applications some ‘general conditions’ must be met
- A property must have been marketed for a minimum period (determined by price bands)
- No ‘serious offers’ at blight-free value (with evidence to justify this value) be made
- The belief that its reduced value is due to HS2 must be reasonable and evidenced
‘Loss in value’ is market determined i.e. blighted price is based on what people will offer to pay.
‘Unblighted value’ is professionally estimated e.g. RICS ‘red book’ valuations. If the unblightedvalue is not more than the best serious offer received, the owner pays the evaluation costs.
Appeals: an independent appeals process to operate for eligibility, process and valuations.
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Evidence on Property Blight
HS2AA conducted a report into the effects of property blight on the proposed route and submitted this as part of their June 2010 evidence to the consultation on the Exceptional Hardship Scheme (in 2010).
The pilot report showed the extent and degree of blight (as well as the institutional response of councils, lenders and valuers and the role it had in extending the blight):
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Properties in the immediate vicinity of route 3 were not selling, with minimal interest from vendors, and some sales that were in train on 11 March 2010 fell through.
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For properties in the general vicinity there was evidence of both reduced market interest and reduced prices for those where the few sales were achieved.
- Properties up to 1 to 1.5 miles from the proposed routes may have their values affected. Typically sales have occurred with a 15-30% discount, and advertised prices have been similarly reduced.
Read the full Property Blight report and covering letter .
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Exceptional Hardship Scheme
If you want to know more about this then go to this section of our website.