National Empty Homes Loan Fund brought to an early end

Helen Williams, the new Chief Executive of the charity Empty Homes, has announced that hte National Empty Homes Loans Fund is to be discontinued less than a year after it was launched. A statement from Empty Homes reads:

The Empty Homes Agency has written to all the local authority members of the National Empty Homes Loans Fund to advise them that is regrettably closing the scheme because it has not been able to find a way of making the scheme work without an unacceptable level of financial risk to Empty Homes.

Empty Homes are also writing to all applicants to advise them of the situation and following this up with a telephone call to discuss further. Empty Homes is also liaising with the applicants’ local authorities to discuss what local advice they might be able to give applicants as well.

Rumours about the scheme struggling to meet delivery targets had been circulating for some time, and Dave Stott, the scheme manager, made no secret that he was seeking changes to the scheme when he gave a presentation to our Empty Homes Conference on 20th May in Birmingham. Dave's efforts at that point were being directed mainly at gaining agreement from DCLG to allow the loans to be unsecured and sourcing another lender with whom the new approach might bear fruit. One way or another, it seems that the obstacles to change were insuperable. In a letter sent by Empty Homes to participating local authorities, Helen Williams noted:

You may know that we had been seeking a new lending partner having concluded with the Ecology Building Society that the secured loan product they could offer was unsuitable given the financial circumstances of the property owners seeking a loan. However, we have not been able to find a way of making the scheme work with another lender and cannot proceed with alternative arrangements which would have involved an unacceptable level of financial exposure that could have threatened the future of the Empty Homes Agency

The demise of the scheme will be a matter of regret for all those who hoped to benefit from it, whether individual applicants or local authorities seeking to enhance their empty homes toolkits. Nearly 60 local authorities had signed up to the scheme by December 2013 and no doubt more had come on board since then. The scheme was launched with considerable fanfare, including support from George Clarke, the government's Empty Homes Adviser, who had been promoting a loan scheme in his Great British Property Scandal programmes on empty homes. When the funding was announced in July 2012, George is reported to have said:

“This is fantastic news; the loans fund will help ordinary people and property owners get homes back into use for people who need housing. The fund will recycle loans, meaning it will be able to operate long into the future and bring many hundreds if not thousands of empty homes back into use”

The scheme was allocated £3,091,000 out of Round 1 of the Community Grants Programme administered by Tribal Group, which was on the basis of bringing 324 properties into use. The award was more than double the next biggest allocation and represented over 10% of the entire programme in money terms and nearly a sixth of the anticipated number of units. As the money was recirculating, the eventual total number of units that could have been delivered would have been much higher.

The 15 months that elapsed between the funding being announced and the formal launch of the scheme in September 2013 is some indication of how difficult the model proved to set up - hardly surprising for a small and under-funded charity faced with cautious lenders and a labyrinth of regulation around consumer lending, whether secured or unsecured, and garnished with grant conditions imposed by the Treasury or CLG. The fact that they got as far as they did is a credit to the vision and perseverance of those involved. People who know Dave Stott's track record can reasonably assume that everything that Empty Homes could have done to make the scheme work, they did do.

Nevertheless, not least of the questions that arises is how a small organisaton with minimal assets was suposed to perform the feat of alchemy whereby an interest-bearing loan, to be repaid in full, would be able to deliver affordable homes: not as impossible as changing lead into gold, but contrary to decades-worth of previous experience during which tens of billions of pounds were paid out to housing associations in non-repayable grant in order to produce affordable housing. It seems that the smaller you are, the more is expected of you. Thank goodness Empty Homes did not find itself so deeply in the quagmire that it could not extricate itself.

Any strategic review of the overall empty homes programme will have to address the question whether a bidding process amongst charitable and voluntary organisations was the best way to try and establish a national scheme of this sort given that the government's Empty Homes Adviser thought that it was an important outcome to achieve.

Some local authorities that run successful loan schemes may feel disgruntled that more was not done to build on those successes. Indeed, it is known that the managers of one such scheme (running across a group of authorities) had at one time been approached - entirely outside of the context of the empty homes programme - about the possibility of expanding nationwide. In the end, this was not followed up by the governmental agency involved for other reasons, but it was apparently considered viable by the loans organisation in question. Some of organisations did bid to the HCA for funding for their individual loan schemes but that is a different matter from an planned approach to developing a national loans fund which would have required effective national leadership and direction.

And a key practical question that now arises is - what happens to the underspend from the CGP programme? There have been many significant successes achieved under CGP and we hope that the government will look seriously at returning the underspend to the programme and letting it roll on until all the money is spent.

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The story didn't make clear, as  it might have done,  that no loans were actually approved by the Ecology Building Society although we understand that nearly 200 were referred to them.