Property Compensation Hilary Wharf, Director HS2AA 28 October, - - PowerPoint PPT Presentation

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MP’s Compensation & Mitigation Forum

Property Compensation

Hilary Wharf, Director HS2AA 28 October, 2013

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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!

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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

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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
• perating – even if true its unreasonable to have to wait 15/20yrs

*before money back on sales ……….so what is being offered?

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What’s on offer?

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DfT’s five criteria

DfT say the decisions will provide in “Government’s reasonable

• pinion” 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

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Express purchase

Proposal Issue/comment

• For those in Safeguarded Area (60m from

centre line on surface).

• Excludes those over tunnels.
• Owners (homes, small bus., & Agric units)

can require HS2 Ltd to buy their property before its needed (serving a blight notice).

• For compulsory purchase: your legal rights!
• For others: stay or ask to be bought early.
• 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

(capped at £47k); + moving costs.

• Nothing extra on top of your legal rights.
• 10% and cap inappropriate. CLA say 30%.
• Property partly inside Safeguarded Area

qualifies unless small part of large property.

• Lack of clarity.
• Rural homes have a-typically large gardens.
• ‘Sale and rent back’ option for homeowners

(for 300+ homes demolished). Also now an

• ption for all HS2 ltd purchased properties.
• Many will be hard to rent out, so win win.
• Need to help those failing VfM test but who

want to stay.

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Long-term hardship scheme

Proposal Issue/comment

• For outside Safeguarded area

& any scheme in rural area .

• The main scheme for the thousands who are blighted.
• 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 2nd homes, rented properties (even sole home)
• Location: ‘substantially

adversely affected’ .

• An unnecessary criteria. Should just be if blighted.
• Eligibility should instead be set by ‘market loss in value’.
• Effort to sell: 6m. on market;

no offer <15%; HS2 is cause.

• Worse than EHS (3months): unreasonable to be double.
• 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

now includes future hardship.

• Retaining hardship rules means most people get nothing.
• Linking downsizing to financial hardship – is means testing

the elderly.

…….the property bond should have been the alternative

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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.

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Voluntary purchase scheme (VPS)

• ption for Rural Zone

Proposal Issue/comment

• Rural Zone : north of

Bucks/Hillingdon boundary to joining WCML; not over tunnels

• Unfair to exclude urban blight or over bored tunnels.
• Better Zone than last consultation, but still crude limit.
• VPS is 120m from centre line

(NB same as HS1 used)

• Arbitrary cut-off – ignores topography, HS2 construction
• VPS should be based on ‘market loss in value’.
• 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
• bus. & Agric units) 788 covered
• Wrong to exclude second homes, rented out homes,

and even when sole property a person owns.

• Unblighted price (average of 2

valuations (3 if >10% apart).

• No other costs (as DfT say owner chooses to move).
• Worse than HS1 that paid other costs.
• Property partly inside qualifies

unless small part .

• No clarity; rural homes have a-typically large gardens

……….so what’s the other option being offered?

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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;

not top-up compensation.

• Deloitte say a 120m distance;

DfT say undecided at present.

• Arbitrary cut-off – ignores topography, HS2 construction.
• Should be based on a material ‘market loss in value’.
• No blight evidence provided. Yet EHS distances paid
• ut to 1.1km; CBRE blight report (consistent with

average 20% loss at 1km, and more in rural areas).

• Property valuation done at
• utset when Bond is issued.
• Represents up-front scheme cost & admin burden.
• HS2AA proposed this step only when a sale is activated

(like EHS); seller could pay & re-imburse if qualify.

• Bond passes to private owner
• OR if can’t sell privately, HS2 Ltd

purchase when trigger passed.

• Allows purchaser and mortgage company to have a

tangible guarantee and so supports property market.

• Much emphasis on untried,

untested, uncertain, unused

• The facts are not correctly presented

……the option is narrower than back in 2011 (property bond v hardship)

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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

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How property bonds are misrepresented in consultation

• Central Railway scheme: DfT/Deloitte claim:
• Not targeted on property blight : UNTRUE
• Just for line-side homes needed for construction : UNTRUE
• No evidence of effect of bonds on property market: UNTRUE
• And all explained to HS2 ltd/DfT in a meeting back in 2010
• HS2AA: DfT/ Deloitte claim
• High up- front cost from getting valuations: UNTRUE
• No one has had a scheme without a distance limit as HS2AA’s: UNTRUE
• Our scheme included statutory add-on sums: UNTRUE
• Again all explained in our consultation responses, even in court

……a fair Q? An option between a certain sale within 120m or less certain one?

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Could a balance be struck?

• Government fear unlimited liability-

blight is small until they come to pay it!

• Fairness requires compensating all material

losses, and they are not neatly clustered within so many metres of the line. The property bond could consider a mixture of:

• a base distance limit eg 500m or
• being able to demonstrate a minimum threshold loss

.…it’s surely time to take a step forward in modernising arrangements?

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Consultation questions

The 7 questions ask for your views on the: 1 The Criteria put forward to assess options for long-term discretionary compensation? 2 The proposals for an express purchase scheme? 3 The proposed long-term hardship scheme? 4 The sale and rent back scheme? 5 The alternative proposals for renting properties to their previous owners? 6 The proposals for a Voluntary Purchase Scheme in a “Rural Support Zone”? 7 The option to introduce a time-based Property bond scheme within a Rural Support Zone as an alternative to the Voluntary Purchase Scheme? There are Maps, Consultation Document, a Deloitte report on HS2 Ltd website: HS2AA have published some guidance to consider www.hs2aa.org .

……remember the 4 December 2013 deadline

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The Postcard campaign

As before we have postcards to get a mass response. It’s a simple PR tool to get the message across. In Jan. 2013 consultation we had 26,000 returned. They were all included in the DbD summary. There are 540,000 properties within 1 mile of phase 1 and phase 2 – that’s over a million people affected.

….everyone can help, and they won’t be ignored.

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Summary: our agenda for change

• 1. New policy: We must modernise compensation arrangements for national infrastructure
• projects. Compensation must reflect the real extent & severity of the blight, not

60/120m limits that are not grounded in evidence; or ignore huge construction disruption.

• 2. Property Bond approach:
• To replace the Hardship Scheme (not Voluntary Purchase Scheme, VPS).
• To apply to properties beyond any VPS area /Safeguarded area.
• A possible balance between a distance-based limit and a minimum threshold loss.
• 3. A long-term scheme: should not contain hardship rules - these are about a person’s

circumstances and are unrelated to the blight.

• 4. A Voluntary Purchase Scheme: should be driven by the blight (not 120m or just rural).
• 5. The loss suffered: Government should put the full value in the HS2 business case.
• 6. DfT corrections: of false statements on Property Bonds – HS2AA’s & Central Railway.

…….half a million properties are within 1km of HS2, Government need to play fair