MP’s Compensation & Mitigation Forum Property Compensation Hilary Wharf, Director HS2AA 28 October, 2013 1
Overview DfT offer : safeguarded area, rural area, long-term scheme, Part 1 LCA. Verdict : § DfT say : it’s ‘ generous ’; they recognise ‘ HS2 is exceptional project ’; follows ‘ HS1 & Crossrail precedents ’; they are including a bond option. § We say : ‘ rehash of statutory rules/past failures ’; ignores true extent of blight, Gov. promises, c.£6bn+ losses, effectively uses ‘means tested’ rules unrelated to blight; misrepresents the truth about property bonds. Vast majority suffering losses stay trapped for 15yrs+ & get nothing; c. 2,500 will qualify (under 2%). Need a fairer deal. Strategy : policy change for infr. projects that span Parliaments; fairer deal; use media; challenge misrepresentations; mass response campaign ……. If the Government can’t afford fair compensation, then it can’t afford HS2! 2
The Headlines 1. Human rights : private enjoyment of property is removed without proper compensation. 2. Blight : its real , extensive & severe; goes far beyond 60m or 120m from the line; typically averaging 20% loss out at 1 km. Agents quote 30% and more. It paralyses the market. 3. Freedoms : people must be free to move home and re-mortgage over the next 14yrs+ and not be trapped, unable to get on with their lives as they normally would. 4. Property Bond : should replace the Hardship Scheme (not Voluntary Purchase Scheme). 5. Long-term scheme : should not have hardship rules - these are about a person’s circumstances and unrelated to the blight. 6. Property market support : DfT say property values recover once HS2 arrives so DfT must support the market ‘til then; its loss in market value not distance, or location that matters. 7. Full loss: Government must put the full value of the loss suffered in HS2 business case 8. DfT misrepresent the facts : on Property Bonds – both HS2AA’s & Central Railway …….half a million properties are within 1km of HS2, Government must play fair 3
Scale of HS2 blight § Severity : § Average loss = 19.5%, but rurally more: Agents say up to 30%, or even 40% § Extent : § Av. outer limit = 1 km ; rurally more: agents say 1-3 miles § Phase 1 : 172,000 properties (or within 250m of tunnel). In total within 1km on full Y there are 486,000 properties. § Cost § Blight (est. loss) : Phase 1: £6bn (£4-7bn); full Y: £12bn? § Compensation (bdgt)*: Phase 1: £1.5bn; full Y: £2.5bn § Long term: Government say values recover when HS2 operating – even if true its unreasonable to have to wait 15/20yrs 4 * before money back on sales ……….so what is being offered?
What’s on offer? 5
DfT’s five criteria DfT say the decisions will provide in “Government’s reasonable opinion ” the “ best balance” between the five criteria: 1. Fairness – now redefined to “ most directly & seriously affected ” 2. Value for money – for the taxpayer 3. Community cohesion 4. Feasibility, efficiency and comprehensibility – or simplicity 5. Functioning of housing market Nothing about the ‘ polluter pays ’ Nothing about fairness to all those suffering blight Nothing about the weightings of the 5 criteria given to Deloitte …… the decision depends on weightings that are not given 6
Express purchase Proposal Issue/comment • For those in Safeguarded Area (60m from • Excludes those over tunnels. centre line on surface). • Owners (homes, small bus., & Agric units) • For compulsory purchase: your legal rights! can require HS2 Ltd to buy their property • For others: stay or ask to be bought early. before its needed (serving a blight notice). • No purchase scheme over deep tunnels. • Waved the need to prove efforts to sell. • Recognises the impossibility of a sale. • Unblighted price; + 10% ‘home-loss’ payment • Nothing extra on top of your legal rights. (capped at £47k); + moving costs. • 10% and cap inappropriate. CLA say 30%. • Property partly inside Safeguarded Area • Lack of clarity. qualifies unless small part of large property. • Rural homes have a-typically large gardens. • ‘ Sale and rent back ’ option for homeowners • Many will be hard to rent out, so win win. (for 300+ homes demolished). Also now an • Need to help those failing VfM test but who option for all HS2 ltd purchased properties. want to stay. 7
Long-term hardship scheme Proposal Issue/comment • For outside Safeguarded area • The main scheme for the thousands who are blighted. & any scheme in rural area . • Unreasonable rules given long timescales for HS2 (15yrs+) • 1 person under Crossrail equivalent scheme qualified in 8 yrs • Unblighted price. • No additions. Eligibility: strong personal reasons for selling, but can’t do so other than at ‘significant loss’ • Property : only owner-occupiers • Excludes all 2 nd homes, rented properties (even sole home) • Location : ‘ substantially • An unnecessary criteria. Should just be if blighted. adversely affected ’ . • Eligibility should instead be set by ‘ market loss in value ’. • Effort to sell: 6m. on market; • Worse than EHS (3months): unreasonable to be double. no offer <15%; HS2 is cause. • 15% threshold should be lower – it’s an unreasonable loss. • No prior knowledge of HS2. • New buyer can’t qualify (buys at lower price, bakes in blight) • Hardship rules : as EHS, but • Retaining hardship rules means most people get nothing. now includes future hardship. • Linking downsizing to financial hardship – is means testing the elderly. …….the property bond should have been the alternative 8
Recap: so what’s wrong with a ‘hardship’ basis? § Only helps a minority : the majority who lose ££ are excluded. It’s like a property tax : on those who happen to be near the line. § Unjust : individuals should not bear the loss (‘polluter pays’). § Inappropriate for HS2 timescales: for 15/20yrs involved. § Traps people : loss of freedom to move, re-mortgage. § Exacerbates blight : no prior knowledge clause guarantees a new § purchaser doesn’t qualify – and will only pay a blighted value. Paralyses the market for 15/20yrs: need the surety of full § compensation if the market is to have confidence restored. 9
Voluntary purchase scheme (VPS) option for Rural Zone Proposal Issue/comment • Rural Zone : north of Bucks/ • Unfair to exclude urban blight or over bored tunnels. Hillingdon boundary to joining • Better Zone than last consultation, but still crude limit. WCML; not over tunnels • VPS is 120m from centre line • Arbitrary cut-off – ignores topography, HS2 construction • VPS should be based on ‘ market loss in value ’. ( NB same as HS1 used) • Distance is too limited – no blight evidence provided to show all ‘ significant ’ loss is inside the area, and it isn’t. • HS2 more environmentally damaging than HS1. • Owner-occupiers (homes, small • Wrong to exclude second homes, rented out homes, bus. & Agric units) 788 covered and even when sole property a person owns. • Unblighted price (average of 2 • No other costs (as DfT say owner chooses to move). valuations (3 if >10% apart). • Worse than HS1 that paid other costs. • Property partly inside qualifies • No clarity; rural homes have a-typically large gardens unless small part . ……….so what’s the other option being offered? 10
The property bond option for Rural Zone Proposal Issue/comment • For Rural Zone only • Unfair to restrict. Should be for urban &over tunnels too. • Distance based boundary limit; • Arbitrary cut-off – ignores topography, HS2 construction. not top-up compensation. • Should be based on a material ‘ market loss in value ’. • Deloitte say a 120m distance; • No blight evidence provided . Yet EHS distances paid DfT say undecided at present. out to 1.1km; CBRE blight report (consistent with average 20% loss at 1km, and more in rural areas). • Property valuation done at • Represents up-front scheme cost & admin burden. outset when Bond is issued. • HS2AA proposed this step only when a sale is activated (like EHS); seller could pay & re-imburse if qualify. • Bond passes to private owner • Allows purchaser and mortgage company to have a • OR if can’t sell privately, HS2 Ltd tangible guarantee and so supports property market. purchase when trigger passed. • Much emphasis on untried, • The facts are not correctly presented untested, uncertain, unused ……the option is narrower than back in 2011 (property bond v hardship) 11
So why is a property bond better? § Property Bond: a “win-win” solution: § Should replace Hardship scheme not Voluntary Purchase Scheme! § Fairly compensates those affected by blight (and not up to 120m) § Restores market confidence and reduces blight itself (by providing reassurance to owners, prospective purchasers and mortgage lenders of protection against losses) § Can avoid opposition to the project driven by fear of a large uncompensated losses (by saving the indirect cost of objections and resultant concessions) § Can cost nothing if HS2 is cancelled – like Central Railway 12
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