what is generalised blight? - publications.parliament.uk · what is generalised blight? ... a...
TRANSCRIPT
What is generalised blight?
Reductions in: – Value – Volume – Mortgage lending
Variations Causes:
– Loss of amenity and new nuisance – Uncertainty – Amplified by fear of uncompensated losses
1 A309 (1) HOC/01591/0005
2
Impact of blight
Traps people in their homes Causes stress, worry and upset
Interferes with enjoyment of property
Imposes a property tax
A309 (2) HOC/01591/0006
Cash option (10% capped) OR
Distance PwC* 2014 (rural)
CBRE 2012 (rural) (urban)
CBRE 2010 (all)
Hamptons 2014 (rural)
Others (eg agents)
Wide range of evidence and examples from Estate Agents on price effects and sales activity
Results limited to 500m from line
EHS cases: out to 1km, 46% >200m; requires 15% price reduction.
Confined to 1-3mls (NB HS1: 40% less sales within 1 mile )
Whole villages blighted. Evidence to 0.5 mile; but 1 to 3 miles too
Other points Final blight >2023: 10% - 7%. Blight unlike HS1 #.
More expensive properties will lose proportionately more. “Inertia” means low take-up of schemes.
Buyer concerns: see it; hear it; construction impact.
Over £1m homes more difficult to sell. Health/welfare effects.
120m
300m
500m
30%
40%
20%
1,000m
1 -3 miles
(Sales based) 19.5% *** (Rural = 2.5 x urban loss)
27%
15%
40% 35% (Sales based) 18.1%**
Survey 5/10%; to 25% if see it
10%
5%
15%
20%
10%
800m
Over tunnels: 10% 5%
Study covered 1,000m
* Scenario used is where the property bond is not effective (and so closest to current situation which has no bond). ** Sales-based study comparing 500m band with 5 miles (may underestimate effect due to the worst cases not selling, and including EHS cases). *** Derived from post code sales-based study ,adjusted to correct for the rural post-code areas being too large ie up to 12.5km) # “…The unique characteristics of HS2 mean that datasets which might be considered comparable are, on closer examination, not to be relied upon to accurately project the level of blight around HS2” ... PwC
How bad is blight?
Blight
A309 (3) HOC/01591/0007
What this means in money (PwC)
4
Phase 1 Average price <120m <300m <500m 120-300m 300-500m
Blight to 2023 £ £ £ £ £ £
Country South 775,000 310,000 233,000 155,000 207,000 113,000properties 265 1,133 2,930 868 1,797
Country North 425,000 170,000 127,500 85,000 114,000 62,000properties 83 541 1,820 458 1,279
average 641,000 235,500 199,000 128,000 184,000 92,000
Final blightCountry South 775,000 77,500 58,000 52,000 52,000 52,000Country North 425,000 42,500 32,000 28,000 28,000 29,000
average 641,000 59,000 50,000 46,000 46,000 42,000
Source data : PwC Cost Report, March 2014*Assumes scenario which is closest to having no bond ie pessimistic case where Bond fails to reduce blight
Derived Distance from lineAverage losses per home owner*
A309 (4) HOC/01591/0008
Properties near to HS2
Number of properties within specific bands: 0- 60m
(Safeguarded Zone)
60 -120m 120 - 300m; 300 - 500m
60 - 120m; 120 - 250m; 250 - 500m
0-500m (rural), or 150m urban or deep tunnel
0-1km or 250m of deep tunnel
0 - 1km 0 - 1 mile
Area All Rural only Rural only Urban only All All All All
Phase 1 532 (348/184)
348
1,326 3,076
1,417 3,070 5,904
43,000
172,000
236,000 (486,000 with Phase 2)
240,000 (540,000 with Phase 2)
Source DfT (urban/rural)
DfT (excl. now bought)
DfT CBRE HS2 Ltd DfT/HS2 Ltd/DbD
FOI PQ (Cheryl Gillan)
Notes Presumed to now exclude HS1/2 link
Deloitte had 788 in Rural Support (& 823 in 0-60m)
Larger figures from DfT to a PQ from Cheryl Gillan, MP, 2013 = 2,240 & 5,642.
From CBRE 2012 spreadsheet
Used by DfT as basis for alerting homes to Oct. 12 compensation consultation.
DfT used 1 km for Feb 2011 comp. consultation, and most later ones
Not used by DfT for consultations
• 172,000 phase 1 properties are within 1km/0.6 miles or 250m of a tunnel • About 1 million people live within 1km of both phases
5 A309 (5) HOC/01591/0009
Discretionary Compensation Schemes
Current – Exceptional Hardship Scheme (EHS)
Proposed – Tunnel Guarantee – Express purchase – Rent back option – Voluntary purchase/cash alternative – Home-owners Payments – Need to Sell
6 A309 (6) HOC/01591/0010
Need to Sell = EHS?
EHS Property type Location Blight No Prior knowledge Hardship
– Unemployment (financial) – Job re-location – Up-scale (larger family) – Divorce (financial) – Illness (financial) – Retirement/downsize (financial) – Executors – Repossession – Financial
Need to Sell Same Same but what about tunnels? Same Same Compelling reason to sell
– Same – Specific distance? – same – same – same – anticipate 3yr otherwise same? – Same – Same – same
7
A309 (7) HOC/01591/0011
Location and hardship criteria
Location: – Extra requirement beyond blighted – At odds with scheme’s purpose – DfT say: “to ensure …. not obliged to accept an application from
an unreasonable distance away” Hardship/‘compelling reason to sell’:
– Downsizing misrepresented to Select Committee? – Intention unchanged – relabelled, not new approach? – Means-testing applies widely – any change? – Unsuited to a long-term scheme – Personal circumstances, not blight – Human rights issues
8
A309 (8) HOC/01591/0012
What do proposed schemes do?
Cash option (10% capped)OR
Zone HS2 Schemes* Terms NosOver bored tunnel
Tunnel guarantees Before & after surveysSettlement deedsSubsoil purchase (£50)
610+
SafeguardedZone (surface)
Express purchase Unblighted value, + 10% home-loss (£47k cap), + moving costs (incl. stamp duty)
532
Rent back option Market rent as tenant (applies to anyone who sells to HS2 Ltd eg Voluntary purchase too)
Rural Support Zone
Voluntary purchase OR cash sum**
Sell to HS2 Ltd - unblighted value; OR opt to stay - 10% but capped (£30k -100k)
348
Rural Home-owners payment**
120m - 180m = £22.5k lump sum180m - 240m = £15k240m - 300m = £7.5k
388631307
Unable to sell(must meet 5 criteria)
Need-to-Sell (replaces phase 1 EHS, byend 2014)
Unblighted valueCriteria: property type, location, blight, prior knowledge, compelling reason for sale/hardship
Est. 700 (50/a)
Physically impacted
Statutory Scheme: Part 1 compensation
Loss due to physical impacts of HS2 eg noise (not views and not market loss). Typically 5/7%
30m
60m
120m
300m
**2014 consultation on proposed arrangements*New schemes start by end 2014 and last until 1yr after HS2 starts (2027), when “Part 1” applies 9
A309 (9) HOC/01591/0013
Solutions
Transparency of rules, processes, independent appeal Improvements to the proposed schemes:
– Need to Sell: remove restrictive rules unrelated to blight – on location, hardship, prior knowledge; add in other property types.
– Voluntary Purchase Scheme: add HS1 additional payments; make cover a greater distance and urban; larger cash option and reversible
New schemes: – Sold & Lost: top-up if had to sell & lost money already (open market of
EHS)
New approach – Property Bond – to limit the blight itself
11
A309 (11) HOC/01591/0015
Property bond
Purpose – To restore market confidence – Compensate those blighted – Prevent opposition based on personal interests
What it is – Agreement for Promoter to buy property at unblighted value if open market
sale cannot be found after a trigger point in project’s development • Promoter is purchaser of last resort • Agreement is transferable
Why it works – Acts as insurance (eliminating risk for seller, purchaser and lender) – Allows mortgage providers to lend at unblighted values
Advantages – Cost effective: private finance keeps market functional 12
A309 (12) HOC/01591/0016
Property Bond: support
Overwhelming public support: – EHS 2010 : 84% – Feb 2011: 95% – Sept 2013 (rerun): 76%
Supported by leading professional bodies: CML, BBA, National Association of Estate Agents
Other concerned groups: MPs Forum; Councils; CLA; NFU
DETR Interdepartmental Working Group, 1997
13
A309 (13) HOC/01591/0017
Property bond: DfT objections
DfT concerns 1. Largely untested
2. Uncertainties create risk of excessive take-up:
Costs (max. possible outlay)
Community cohesion
Market stability
3. Take too long to implement
Response 1. Central Railway experience
2. Public inertia advice suggests take-up will not be excessive (CBRE)
Ignores NPV cost – ie standard basis Opposite of PwC advice Contrary to consensus of experts. 3. Poor reason for not offering solution. People waited 4.5 years already.
14
“It could not guarantee sufficient benefits to outweigh the risks of the scheme and the significant commitment of resources that it would warrant” DfT 2014
A309 (14) HOC/01591/0018
15
Central Railway experience
Objectives: restore market confidence and avoid opposition Properties covered • A common sense approach – all properties likely to suffer general blight
Key features • Self – Assessment of pre blight valuation; could include premium • Index linked • Transferable • Bond exercisable at construction
Advantages • No purchase costs until money raised for construction • Supported private sales at unblighted values
Evidence of effectiveness • 2004 1,100 bonds of which 35% used to support re-sales or mortgage re-valuation • DETR Interdepartmental WG 1997 commended it as best to date
A309 (15) HOC/01591/0019
Local perspective
Characteristics of area Owners:
– move once every 8 years – 85% of sellers are downsizing
Transactions: down; and further when construction starts HS2 blight:
– Affecting Chilterns generally – Properties by distance:
• Under ¼ mile (400m) : 20-30% discount if can see HS2 • ¼ to ½ mile (400-800m): 5-10% loss if can’t see it, but might hear it
– Purchasers of more expensive homes more “demanding”
17 A309 (17) HOC/01591/0021
Experience with EHS
Experience 1. Means testing applies excessively &
where hardship not financial 2. Valuation process incorrectly applied,
and people lost money 3. Unresolved muddle over blight
criterion 4. Administration: bureaucratic &
unsympathetic 5. Discretion creates uncertainty & stress
EHS as operated exploits vulnerable people
Learning 1. Financial tests are
inappropriate 2. Process needs better integrity;
an appeals mechanism; redress 3. Clear properly communicated
rules 4. Staff have appropriate
competence 5. Clear rules Schemes should be fair, transparent and policed, with a complaints process
18 A309 (18) HOC/01591/0022
Frank Dobson, MP
Frank Dobson, MP for Holborn and St Pancras Urban issues:
– Construction – Small traders – Social housing – Over tunnels
19
A309 (19) HOC/01591/0023
Cheryl Gillan, MP
Cheryl Gillan, MP for Chesham & Amersham Chair of MPs Compensation & Mitigation Forum –
cross party group of MPs on route of HS2 working together to push for fairer compensation.
Change in policy needed: nearly 5 years of suffering, financial loss and unfairness for constituents affecting health & wellbeing
Rural case studies 20
A309 (20) HOC/01591/0024
Hc7 ~
ALLIANCEUncertainties about the performance of a bond appears to have led the Government to assess it on the
basis of the maximum liability that a bond might create. They assess this by the purchase cost
exposure to purchase all properties that might be eligible for the bond eg just over 1 bn if it were a
300m boundary.
First, this is despite the fact the PwC model, even in its ̀ pessimistic' scenario model shows the bond to
result in greatly less outlay. For example with a 300m boundary the exposure would be to properties
worth just over a £1 bn, but with an expected worst case position of about a half having to be bought (ie
£509.4m)..
Secondly, and more importantly, to use the gross cost figures is not a correct valuation of the cost of
the bond.
The Government assess costs in terms of the net present value cost of options ie the end column of
Table 9. The Government would purchase properties at the unblighted value, followed some years later
by the sale of the same properties when the railway is operational and values have recovered to their
long term final level. The interim would involve management and maintenance charges that are
counterbalanced by rental income. It is the net cost that is the measure of cost normally used by
Government to make such decisions.
Although the Government quote the exposure to purchase cost as the critical cost of the scheme47, eg
£1.1 bn at 300m, PwC correctly assess the property bond on the basis of its estimated net present cost.
They calculate this to be in the range £30m to £158m fora 500m scheme. This is less than 1 % of
the £16,667m subsidy that the Government plan to spend on HS2.
The principle risk to the scheme having a moderate cost is not in fact the number of properties that the
Government might need to purchase, but the failure of open market property prices to recover to near
the unblighted price when HS2 is operational. However, there is no justification for making owners
suffer if this occurs, as it will be due to a failure to sufficiently mitigate the adverse effects of HS2 —
which the Government and not the property owner controls.
There are clearly perverse incentives when the Government funds the costs of mitigation, but not the
loss in value resulting from inadequate mitigation.
The situation is in fact even worse: the costs of mitigation enter the Governments social cost benefit
analysis —but the losses to individuals from their properties being devalued do not.
It is indefensible that Government should reject the scheme on value for money grounds relying on an
inappropriate gross cost parameter. If the scheme is a success (the optimistic scenario) its cost is
extraordinarily low eg £18m at 300m and £30m at 500m, and it still has a modest cost if it is less
successful in propping up the property market eg £85m out to 300m and £158m out to 500metres.
It is HS2AA's view that the findings of the report have not been appropriately used.
Reason 3: "Unacceptable burden on the taxpayer"
The Government conclude (at pars 8.3.7 of their April 2014 Decision Document) that were the bond
scheme to fail to operate successfully, then "a wide-boundary bond scheme would be likely to result in
costs so high as to, in fhe Government's view, represent an unacceptable burden on taxpayers".
This is reiterated in their final summary (para 8.3.10) where they state: "The fact that the analysis is
based on subjective assumptions cast doubt on the reliability of the results. As a consequence we have
decided that the financial risks are too great and the likely outcome of such a scheme too uncertain to
warrant the implementation of a property bond scheme.'
All models are necessarily based on assumptions, and in the case of the PwC model it was informed by
a wide range of experts and professional judgement as well as consultation with both Dff and HS2 Ltd
47 David Prout, DG of Dff (High Speed Rail), Presentation on Property Compensation, slide 4 Property Bond
Proposal, June 2014
30 September 2014 29 www.hs2actionalliance.org
29
A310 (29) HOC/01591/0053
"ACTIONALLIANCE
Appendix 4: ̀Helstrip' v HSZ Ltd Judgement
Extract from Appeal to Information Commissioner; Helstrip v HS2 Ltd; Case No
EA/2012/0201, Decision dated 29 January 2013
Decision by Judge., Chris Ryan
4'1. All parties accepted that.a. the EHS scheme way intended to help those who own a blighted
pro~~erty at a time when other circumstances are forcing them to sell;
b. the praperry market i~ nUt entirely rational end uncertainty abo€~t a
planned project may tem{~orarily undermine property values across an
area that is much larger than that in which such values will be seen to
have beEn permanently reduced, once the project has been
completed.
42_ We also received evidence, tivhich was not seriously challenged by HS2; to
the effect that estate agents in the area close to the Appellant's property
considered that paces had been significantly reduced across an area
extending up to three miles either side of the pro{~osed route.
43. In those circumstances it may be said that the Loc~~tion (:riterion imposes an
unnecessarily strict limitation on qualifying properties, in that it requires proof,
not that the property in question is suffering a tem{~orary price deterioration
due to market ~erc~ptions of the likely effect on it of High Speed T~vo, but that
it will act«ally be -'s~~hstantially adversely affected" by it. This wocrld seem to
us to give rise to the rea[ possibility that i7iarket misperception will lead to
individuals, with an urgent need to self a property (thus satisfying the
Hardship criterion), finding it impossible to sell a pro~erry (satisfying the
Efforts to Sell Criterionj, and yet not qualifying for EHS assistance because
the panel decides that, ultimately, the adverse effect tivill not be as great a~ i~
currently assumed.
44. The evidence of the HS2 witnesses, as supplemented by the answers they
gave to questions posed during the hearing, su~gestecf to us that the terms of
the Location Criterion assisted in rnaintaininc~ what they perceived as a
responsible attitude to not ex~cFrhating plight. Yet it seems clear from the
official explanation of the purpose of EHS that it was nit created in order to
control blight, but to providE redress wherever blight occurred, regardless of
what may have caused it. Public misperceptions may cause blight to extend
across a wider area than HS2 think is really necessary, but the harm suffered
by those trapped w~tllin it at a time when they are forced to gel! is r~o less real
for that_ AI( that is different is that HS2 will ultimately stand a much better
chance of recovering its outlay than in the case of properties closer to the
planned route.
30 September 2014 57 www.hs2actionalliance.org
57
A310 (57) HOC/01591/0081
Council of Mortgage Lenders
Robert Syms, MPChair of High Speed Rail (London -West Midlands)
Bill Select CommitteeHouse of CommonsLondonSW 1 A OAA
17 November 2014
Dear Mr Syms
HS2 Enquiry
The CML is the representative trade body for the residential mortgage lender industry that includes
banks, building societies and specialist lenders. Our 125 members currently hold around 95% of the
assets of the UK mortgage market. In addition to lending for home-ownership, the CML members also
lend to support the social housing and private rental markets.
In our responses to the earlier consultations we have referred to the fact that lenders will prefer to see
a method of compensation which will provide for valuations and purchase on an un-blighted
basis. This will give greater certainty to owners and lenders. For these reasons both the Voluntary
Purchase Scheme and the Property Bond Scheme would be preferred over the Hardship Scheme and
the Compensation Bond.
Yours sincerely
Chris Smyth
Chris SmythInterim Head of PolicyCouncil of Mortgage Lenders
address North West Wing Bush House Aldwych London WC2B 4PJ
telephone 0845 373 6771 fax 0845 373 6778 website www.cml.org.uk
A310 (67) HOC/01591/0091
o`~siaenrai~
'~
NASA "~ ICBA NAVA I~ P
14 h̀ November 2014
Robert Syms MP
Chair of High Speed Rail (London-West Midlands) Bill Select Committe
e
House of Commons
London
SW1A OAA
Dear Mr Syms
HS2 Select Committee
We write as the leading organisation for sales and letting agents in th
e UK to support the concept of
a property bond. We contributed to the PWC Report and spoke with
them at length. The property
market in the UK is dependent upon sentiment and certainty. Anyt
hing that is a cause of concern
both now and in the future affects saleability and demand. Whilst th
e property bond has a cost, we
believe this should be balanced against helping the homeowner an
d homebuyer in clarifying the
situation and giving impetus to the market along the proposed route
.
We would be very happy to provide further detail if so required.
Yours sincerely
MARK HAYWARD
MANAGING DIRECTOR
THE NATIONAL ASSOCIATION OF ESTATE AGENTS
~..~ n~
11~+OPP(rational Fedarntion o"r Property Professional
s
Arbon House, 6 Tournament Court, Edgehill Drive, Warwick CV34 6LG
T. +44 (0►1926 496800 F. +44 (01926 417788 E. [email protected] www.nfopp.co.uk
Clutha House, 10 Storey's Gate, Parliament Square, Westminster, Lon
don, SW1P 3AY T. 0207 222 6172
Conference House, 152 Morrison Street, Edinburgh, EH3 8E6 T. D131 200 6000
Registered in England Nn. 8979D7. Registered address Warwick office.
6 9
A310 (69) HOC/01591/0093
arise are unemployment, job relocation, divorce and splitting of assets or perhaps people who are approachingretirement and wanting to downsize and release capital —because homes are major investments for so manypeople. they want to release the capital for retirement. The beauty of this scheme is that it does not have to waitfor hardship to occur. People can come to HS2 in advance and say: "We're seventy. We want to downsize. Wewant to release the capital. If we can't sell this property, will you buy it?" If they can demonstrate a need to sellat an early stage, if they cannot sell it at reasonable price then the Promoter will acquire it.'
This appeared to differ from the information provided on the ̀ Need to Sell' scheme in its consultation:
"43.25 For example, a couple who are approaching retirement age might find that as they are facing a reducedincome they need to downsize in order to reduce their outgoings and realise capital. Such applicants would only
have to prove a need to sell in the near future, allowing them to plan in advance for their retirement." (PropertyConsultation 2073 for the London-West Midlands HS2 route: Consultation document, Sept 2073, p28)
The subsequent decision document was less specific and simply gave an example of a "compelling
reason to sell" as
"5331............"the need to release capital for retirement" (Decision Document. Property Compensation
Consultation 2013 for the London to -West Midlands HS2 route, April 2014)
In the consultation materials at least, there appeared to be a clear requirement, that the "need to sell"
had to be driven by prospective financial hardship, ie by facing a reduced income that would
presumably make it hard to continue to live in and maintain a now too expensive property.
Our understanding is that there are a number of grounds under the proposed scheme that may not
require the demonstration of financial hardship, notably:
• Winding up the estate of a deceased person
• Moving due to job relocation
The passage from the presentation to the Select Committee suggests that downsizing for (or in)
retirement may be another such ground, as there is no financial hardship qualification mentioned
about facing less income in retirement, just "wanting to downsize and release capitaP'.
Can you please confirm the correct position?
Is the presentation to the Select Committee correct, ie a ̀compelling reason to sell' is, for a retired
person, to downsize and realise capital (as their property no longer meets the owner's needs for
example because the house is now too large for them or the gardens too extensive under the
circumstances of retirement). Alternatively, does there still need to be actual or prospective financial
hardship — eg that because of reduced income the owner could not afford the costs of residence and
upkeep in retirement —and that the unsuitability of the size of home by itself is an insufficient basis.
As I am sure you will appreciate, it is just these sort of differences that determine whether the
scheme can be characterised as means tested or not.
Numbers of properties in nroximity to the line
Recently published data in various documents have revealed considerable differences in the
numbers of rural properties close to the line, excluding those over tunnels, provided via Dff.
The Price Waterhouse Coopers (PwC) March 2014 report 'HS2 property bond: Cost report' page 7
provides a table of the number of properties by distance from the line in rural areas. These numbers
are sourced from CBRE and generally correspond with those contained in a presentation given byDavid Prout on 3 June 2014 titled ̀ HS2 Investing in Britain's Future: Property Policy
Announcements'.
2
r~:~A310 (76) HOC/01591/0100
Reference: FS50498174•
~~O•k+e.~~~.«~,~.
its consultants, who were specialist property consultants, throughprofessional judgment. It explained that the figures used by theconsultants were not arbitrary figures but were figures that lookedbroadly realistic.
19. The Commissioner accepts that it may have been possible for thepurpose of the exercise that was being undertaken for the Dfi7'sconsultants to have entered arbitrary figures, which bore noresemblance to reality, in respect of the percentage diminution inproperty values in the models for comparing different combinations ofcompensation schemes. However, it appears that they did not enterarbitrary figures.
20. The Commissioner acknowledges that the figures that were produced bythe consultants may not have been intended to have been preciseappraisals of the potential impact of the development of HS2 onproperty prices. However, the figures that were used were clearly anattempt to assign some form of realistic judgment to the impact of HS2on property values by consultants who had relevant expertise in theproperty field. Although they may not have been intended to have beenprecise estimates or predictions of what might happen, they were a formof estimate. Consequently, the Commissioner has determined that thediminution figures contained in the Df7's models constitute estimateswhich fall within the scope of the complainant's request.
21. Having determined that the information identified by the Di-T fell withinthe scope of the complaint's request, the Commissioner went on toconsider whether it constituted "environmental information" under theEIR.
(ii) Is the information "environmental information" under the EIR?
22. The Commissioner notes that "environmental information" is defined inregulation 2(i) of the EIR as:
"...any information in written, visual, aural, electronic or any othermaterial form on -
(a) the state of the elements of the environment, such as air andatmosphere, water, soil, land, landscape and natural sitesincluding wetlands, coastal and marine areas, biologicaldiversity and its components, including genetica!!y modifredorganisms, and tine interaction among these elements;
(b) factors, such as substances, energy, noise, radiation orwaste, including radioactive waste, emissions, discharges andother releases into the environment, affecting or likely toaffect the elements of the environment referred to in (a);
5
A310 (83) HOC/01591/0107
HS2 property bond
However, many of the assumptions that have been required to develop the cost model cannot be based entirely
on empirical data and therefore involve making a number of subjective judgements.
Where these judgements have been required, a collaborative approach has been encouraged which has sought
to leverage relevant experience from other major infrastructure projects, HS2 Ltd's existing property schemes
and the professional judgements of a number of informed parties.
A series of workshops and meetings were facilitated with representatives from DfI', HS2 Ltd, VOA (Valuation
Office Agency), HMT and we have also met with professional organisations such as CBRE to draw upon their
experience in refining the assumptions that are detailed in section 3 of this report. A number of refinements
have therefore been made to the assumptions as a result of these discussions. In addition, separate discussions
have been facilitated by DfT and HS2 Ltd with RICS, CML, CBRE and NASA about specific assumptions and
their views have been considered and reflected in the base case cost model inputs.
Given the subjective nature of a number of the inputs, a range of sensitivities have been run on the cost model
which demonstrate the impact on the model results from changing a specific assumption. Details of these
results are included in section 5 of this report.
2.3 Scenarios
Based on the approach to developing inputs outlined above, for several assumptions it is believed to be
inappropriate to only include a single assumption within the cost model as the actual outturn position is likely
to fall within a range and there is little basis for selecting a specific value relative to any other. Therefore, the
cost modelling has been prepared on the basis of two scenarios:
• `Optimistic' scenario —this assumes that a properly bond achieves many of its objectives and a
relatively viable property market is maintained. In particular, the presence of the bond limits the
number of owners looking to sell their properties, there are lower levels of blight and most properties
(other than those in close proximity to the line) are able to sell in the private market at an un-blighted
value; and
• `Pessimistic' scenario —this assumes that a property bond does not achieve all of its objectives and
the property market does not function as intended. In this scenario, we are assuming that a higher
number of property owners would look to sell their properties, blight levels would be higher and there
is limited demand in the private market to acquire properties at an un-blighted value, hence HS2 Ltd
purchase more properties,
It should be noted that these two scenarios do not represent all possible outturns and there is a possibility that
actual performance of the scheme would be outside the range captured by these two scenarios. In particular, the
`pessimistic' scenario should not be considered to represent the ̀worst case' scenario as this would reflect a
situation where a very high proportion (90+%) of property owners look to sell under a property bond and there
is a material level of ongoing blight.
In addition to the ̀optimistic' and ̀pessimistic' scenarios, the cost model has also been prepared based on three
potential eligibility criteria. These are all distance based and consist of:
• i2om from the line in rural areas;
• 3oom from the line in rural areas; and
• 5oom from the line in rural areas.
Section 3 includes details of where the assumptions that have been adopted are assumed to vary based on the
different eligibility criteria.
5 • PwCCost report
115
A311 (9) HOC/01591/0139
HS2 property bond
3.~ Level of blight
The level of blight experienced by properly owners during the construction and operation of HS2 is important
in determining the overall cost of a property bond as well as influencing a number of other assumptions.
The blight assumptions have been developed based on:
• anecdotal evidence around the level of blight that exists in the current market as a result of HS2. It
should be noted that this tends to be based on a very small sample size and involving properties that are
not typical of the properties that would be captured within any potential scheme;
• drawing on the experience of other professional advisers (including CBRE who prepared a December
2oro Blight Study for the HS2 scheme) around the available evidence in respect of blight on HSr and
other major transport schemes; and
• considering the available academic literature on the nature of blight and the shape of the ̀blight curve'.
It should be noted that the unique characteristics of HS2 mean that datasets which might be considered
comparable are, on closer examination, not to be relied upon to accurately project the level of blight around
HS2. For instance:
• HSi was predominately constructed adjacent to existing road and rail corridors and the sound
mitigation measures that HSi introduced meant that for many property owners the introduction of HSi
actually led to a reduction in transport related noise;
• HSi included intermediary stations which meant that many of the communities that had the potential
to experience the greatest blight as a result of HSi were also able to benefit from improved transport
connections and this has led to house prices increasing faster than the regional market in some areas
such as Ashford;
• similarly to HSi, road schemes generally provide a benefit to those living near the scheme from being
able to use the improved transport network which can offset other forms of blight; and
• other infrastructure schemes where local residents do not benefit from improved amenity but
experience blight tend to include airport expansions and nuclear power stations. In the case of nuclear
power stations, these tend to be sited in remote areas where comparatively few properties experience
blight. In addition, nuclear power stations tend to employ large numbers of people and therefore can
significantly increase housing demand in a local area. Airports similarly employ large numbers of
people and therefore can increase demand for property in the proximity. In addition, the limited
development of aviation facilities in the UK in the last 20 years means that no project comparable to
HS2 has been undertaken where blight patterns can be observed.
In the absence of robust data from other schemes, the blight levels for Phase i HS2 have been prepared based
on the following assumptions:
• experience shared with us when consulting other professional bodies suggests that for other transport
projects, generally the highest level of blight experienced is in the region of 35-40 %and can be lower;
• blight was highest on HSi for high value properties where the number of potential purchasers is lower
and their perception of value tends to be most affected by large infrastructure projects. HS2,
particularly in the Country (South) section of the line contains properties with an average value that is
significantly in excess of the national average at £775k with a number of higher value (£im+) homes;
and
17 • PwC Cost report
127
A311 (21) HOC/01591/0151
HS2 property bond
• whilst there is limited supporting data, it is generally accepted and logical that blight follows a curvethat is at its peak during the construction phase of a project before dropping and values moving back inline with the norm as construction completes and a project commences operations.
On this basis, following discussion with DfT and HS2 Ltd, the cost model has been prepared on the basis of theblight curves shown in the graphs below.
All of these curves follow a similar pattern involving:
• a constant level of blight from the introduction of any property bond to 2023 when construction beginsto complete (NB: the traditional blight curve shows blight increasing as construction approaches. In thecase of HS2, the route has been public knowledge for up to 5 years prior to any property bondcommencing so it is assumed that blight could already be at its construction level);
• the peak blight is 40% in the i2om pessimistic scenario which is at the upper level of what hastraditionally been experienced for individual properties in other schemes but reflects a prudent viewthat blight could be more severe as a result of HS2 than other recent transport schemes;
• blight declines from 2023 to 2026 with the level of ongoing blight at the end of the scheme rangingfrom io% in the pessimistic i2om scenario to 2% in the optimistic 5oom scenario; and
• the level of blight is expected to be lower the greater the distance from the line.
18 • PwC
Level of blight -120m scenario
5CJ%
44%
30
20%
1096
0°.6
2015- - --
2Q16 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026
—120m Optimistic --124m Pessimistic
Level of blight - 340m scenario
40%
30%
20%
1096
0%
2015- - — -
2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026
30Dm Op#imistic 300m Pessimistic
Cost report
128
A311 (22) HOC/01591/0152
Birmingham
~t3MPTONSINTL'H\AT!(1YAL
Linking Housing Markets
The effect of transportinfrastructure on housing
i■r u~' ui ~■iur m ur ui
n~unnn11111111!?UI ....1111i111~~N11 ~ ~ ~ ~ ~~~
llitlll l l l 11 11 1iUiili ~ ~ ~ ~ ~ ~ ~
_~ ~ ~ ~
1 ~~
1 ~•
• ••
HS1
.~~..,~~1 ,
~~~ ~~~ ~~~ ~~~ ~f
~~~ ~~~ ~~~ ~~~ ~.'i• C'
~.
~~
A311 (49) HOC/01591/0179
LINKING HOUSING MARKETS
Impact of
Uncertainty on Pri
ce
ithin 500m of the HS2 route outside of London
aver
age pr
ices
dec
line
d both from 2009 (when
the current roide was pro
pose
d) and since 2012,
when the government con
firm
ed tha
t the project evould
go ahead. Prices within 500m of the route fe
ll by ~.5 per
cent in thr last yea
r and are
seven per
cen
t lo
wer than in
2009, To pu
t th
is in co
ntex
t. prices in
Eng
land
& YVa
les
incr
ease
d by d.R
per
cen
t in
the last ye
ar and by fiv
e pe
r
cent
since 2009.
At fur
ther
distances fro
m the li
ne the
re has been
litt
le effect
on pri
ces th
at can
be attributed en
tire
ly to HS2. As wit
h the
8/9
HSi Det
ling
and Har
riet
sham
example there seems to have
been no spe
cula
tive
and ant
icip
ator
y effect on pri
ces as
ther
e is no ben
efit
in te
rms of
tra
nspo
rt.
Looking just at the section of
the lin
e that falls w
ithi
n the South
East
region, mai
nly Buckinghamshire, r
t seems that th
em may
be an exaggerated n=dative efiert up to a mil
e frorn the li
necausing pn
ces to fa
ll i
n ihF la
st ~ 2 mon
ths.
Opp
osit
ion to
the
route is
most voc
ifer
ous in
this pa
rt of th
e country an
d this is
like
ly to be a maj
or con
trib
utin
g fa
ctor
. In co
mpar
ison
, pr
ices
in
the wi
der Buckinghamshire ar
ea increased by 4.3 per
cen
t in
2013 and by 8.8
per
cen
t si
nce 2009.
aoo oa
u ooa
oao 00
0 000
aoo oo
u o00
000 00
0 000
i
Change in Prices by
Dist
ance
from HS2 Route
(exc
lude
s London)
500 METgES
0
0
oo ~ ry a o
r 7D
N .~-
V' ~
12 mamas
~~] From 2009
HIGH SPEED 2
Change in Prices by
Dist
ance
from HS2 Route
in the
Sou
th East 0
0
V'
~ N r
500 METRES
15
14 —
13 —
12 —
11 —
10-
9-
8-
7-
6—
5 —
4—
w 3—
a 2_
O
~
Z ~ 0—
z a x U
.~ —
w c7 Z '2 —
U a
-3 -4 —
-5 —
-6 —
-7
A311 (53) HOC/01591/0183
r C1
LINKING HOUSING MARK[RS
O
Surv
ey of Agents
e con
duct
ed a sur
vey
among buy
ing and lettings
agents in
the
vic
init
y of th
epr
opos
ed route in
oMer to gauge the
effe
ct the
HS2 scheme is
having now
and exp
ecta
tion
s of
how the
local
markets ar
e li
kely
to behave in f
utur
e.While the sample size is quite sma
llthe re
sult
s still give an insight into the
market from th
ose cl
oses
t to
it.
The resuRs echo the
exp
erie
nce of
HS1
in that
it is
the
are
as cl
oses
t to
the
line
which are mostaflected. Un
like
HS1,
the route wi
ll not
foll
ow a mot
orwa
yuntil f
t approaches Birmingham so there
is pot
enti
ally
mor
e to lose, but
this is
offset by mo
re tu
nnel
ling
. The tu
nnelling
will
mitigate t
he ef
fect
on the
lan
dsca
peafter c
ompl
etio
n, but
disuption from
construction while the wor
k is
ongoing
will
rem
ain.
The sur
vey re
sult
s sug
gest
that
the
area
s fu
rthe
r up the route tow
ards
Birmingham are
less likely to se
e an
impact, wh
ich
is not
surprising gi
ven
that
the
se are
as are
less densely
popu
late
d. Ov
eral
l respondents
were
sanguine ab
out the cu
rren
tef
fect
of HS2 on the local housing
mark
ets.
Mast respondents did not
thin
k there is
any
eff
ect on markets
right now, wi
th the exc
epti
on of those
area
s closest to
the
route. Here the
uncertainty ab
out the impact on the
view is paramount. Th
is unc
erta
inty
Conclusion
The experience of HSi con
stru
ctio
nteaches us some things ab
out what
we should expect with HS2. The
lack of access to stations means that
unlike HS1 there vas
no upl
ift i
n pr
ices
in ant
icip
atio
n of
ben
efit
s of
bet
ter
hans
port
. In
stea
d, li
ke the Det
liny
and
will continue un
til the ro
ute is
mapped
out in det
ail (
there may yet be
alte
rati
ons to account fo
r en
gine
erin
g)
and may continue to dis
tort
markets
for lo
nger
than is
des
irab
le.
Looking ahead, respondents expected
any impact to be largely confined to
a!h
ree mile radius. There was a notable
and in
tere
stin
g ex
cept
ion to this wh
ich
reve
aled
an ex
pect
atio
n th
at residents
may move wit
hin th
e lo
cali
ty but
just
furt
her away from th
e line
Ther
e was a bro
ad con
sens
us th
atab
out a quarter of
enquiries t
o bu
ypr
oper
ty raised qu
esti
ons ab
out HS2.
In the
are
a closest t
o th
e pr
opos
edro
ute,
unsurprisingly, t
his r
ose to th
ree
quar
ters
. The fa
ctors of
most co
ncer
nwe
re con
stri
ctio
n di
snip
tion
, bli
ght hom
pote
ntia
l noi
se and
spo
iled
views.
Interms of
the ef
fect
on prices, th
e re
sult
s
were
difficult t
o in
terp
ret as it
is se
nsitive
to the pre
cise
location. Res
pond
ents
did re
port
, how
ever
, that properties
clos
est t
o the li
ne wee proving di
fficult
to se
ll. Tho
se properties wkhin half a
mile but wdh no view of
the line wer
eestimated to
hav
e between a 5-10 per
cent dis
coun
t. Homes va
ithi
n ha
lf a mile
with
a dis
rupt
ed view we
re dis
coun
ted
by los
er to
25 per ce
nt.
Apart f
rom th
e ar
eas cl
oses
t to
the line
there was li
ttle evi
denc
e th
at ex
isting
residents were keen to sel
l. Disruption
caus
ed by co
nstr
ucti
on wor
k was
Harr
iets
h2m ex2mple
all o
f the ri
sks
are skewed to th
e clom~nside.
Unlike HS1, the HS2 rou
te does no
tfo
llom
~ a~ ex
isti
ng motorvaay so the
risk
s
to the
lan
dsca
pe are eve
n mo
re negative.
Undo
ubte
dly this would lead us to
expe
ct a lar
ger e
ffec
t on local housing
ment
ione
d in almost ev
ery case as a
reas
on to co
nsid
er moving away or
not move in. One res
pond
ent sa
idth
at th
is was th
e only fac
tor affecting
markets, im
plyi
ng tha
t the effect is
temporary and con
diti
ons will ret
urn to
normal on completion of the line.
Over
all,
the
survey results br
oadl
yconfirm that housing mar
kets
in the
vicinity of HS2 in Buckinghamshire
will be affected
in a sim
ilar
way
to the
exp
erie
nce in
are
as close
to the
HS1 rou
te where there was
no additional tr
ansp
ort benefit.
Uncertainty is cle
arly
a cri
tica
l fac
tor
creating fear about the potential
cost
s in
ter
ms of th
e le
vels
of
disr
upti
on and the
eventual ef
fect
on the landscape. Th
is unc
erta
inty
has fr
ozen
mar
kets
to an ext
ent and
caused prices to tal
l in
the
are
ascl
oses
t to
the
lin
e, as was the
case
in HS1. The fear of
blight seems
to have had a bi
gger
effect on the
HS2 rou
te, probably because, un
like
HS1, it
does nit
follow an existing
motorway. Lo
okin
g ahead, the
fea
rsassociated wit
h other infrastructure
proj
ects
tur
ned out to
be ove
rpla
yed
and thi
s may well tu
rn out to be the
case wit
h HS2. One quote from
an off
ice cl
oses
t to the line sums it
up wel
l. "The number of po
ster
s/ba
nner
s (r
elat
ing to
HS2] ev
erywhere
is als
o not helping."
mark
ets in
the ea
rly s
tages an
d that
seems to
be the case.
If th
e ex
peri
ence
of HS1 and
oth
er in
frastructure projects
which th
reat
en to bl
ight
landscapes ho
ld
true, these mar
kets
will ret
urn to
nor
mal
and th
e ne
gati
ve impactwill no
t be as
significant as fe
ared
.
Compensation Schemes
Once the
rou
te was confirmed home
owners whose properties fall who
lly or
partly within the defined 'safeguarded'
area
(app
roxi
mate
ly 60m of the route)
were able to ser
ve a statutory blight notice
requ
esti
ng the
Government to pu
rcha
seth
e pr
oper
ty. S
tatutory Blight Cl
aims
entitle
the owner to the un-blighted value of
their pr
oper
ty plus ahome-loss payment
of 10% of it
s value (up to £47,000) and
reasonable mov
ing ve
sts.
Even though the
owner is
ent
itle
d to
com
pens
atio
n, ther
eis
still un
cert
aint
y ab
out how much of a
disc
ount
the
blight causes.
-.,
I,
The Exc
epti
onal
Hardship Scheme (EHS)
is designed for those who, for re
ason
s of
exceptional hardship, ha
ve an ur
gent
need
to se
ll but
hav
e not been able to
wit
hout
substantially discounting their property, as
a dir
ect r
esult of
the announcement of
HS2.
Qualification is on a case by case basis
whic
h adds to the uncertainty .The same
unce
rtai
ntie
s abo
ut the
level of discount as
seen in St
atut
ory Blight apply.
HIGH SPEED 2
The current pro
pose
d ro
ute co
mpri
ses th
e fo
llow
ing
broa
d el
emen
ts:
►A Lon
don te
rmin
us st
ation at Euston;
►An in
terc
hang
e station at Old Oak Common in
West London;
/The mai
n ro
ute of
the
high sp
eed
line. This wo
uld ru
n in
a tun
nel f
rom ne
ar Eus
ton,
surfacing in West Lon
don an
dleaving Lo
ndon
via a tunnel at Nor
thol
t un
til
it re
surf
aces
atWest Ruislip. I
t would the
n proceed largely in a tun
nel f
rom
the M25 as fa
z as Hyde Hea
th. The lin
e the
n continues t
o th
ewest of Wendover and Ayl
esbu
ry, pa
rtly
in tun
nel an
d pa
rtly
following the ex
isti
ng A4~3 and Chiltern Li
ne co
rridor, wRh
an inf
rast
ruct
ure ma
inte
nanc
e de
pot ne
ar Ca
lver
t. The next
section would broadry utilise the
lar
gely
preserved tra
ck bed
of the former Great Central Ra
ilwa
y, passing to th
e ea
st of
Brac
kley
before co
ntin
uing
in al
lort
h-We
ster
ly dir
ecti
on to
pass
between Ken
ilwo
rth an
d Co
vent
ry to ne
ar Water Ort
on.
Here
the li
ne would divide with one arm serving Birmingham
city
centre (
part
ly in
a tunnel an
d with a ro
lling stock de
pot at
Washwood Heath) and
the other con
nect
ing with the
West
Coas
t Main Lin
e north of
Lichfield.
►Spu
rs to
accommodate the
routes t
o Leeds
and Ma
nche
ster
;/ An int
erch
ange
station on the
outskirts o
f Birmingham;
►A ce
nVal Birmingham te
rmin
us st
ation at Cur
zon Street in
the Eastside reg
ener
atio
n area.
10/1
1
A311 (54) HOC/01591/0184
Final FteY~ort
1. Introduction
1.1 It u w►~ely perctrved tit the emergence of Excxioaals for mayor infr~atrucnue
pmjccu carries with is the pcxential fur ciepreciztion to the lcxal pcuperty market and
lores co busincs profi~~bility in addition to the wiser henefia the pmpasals ue designed
to bring. Althcwgh this perctpticxi is not new, plaru for a high speed rail luilc from Lamd~.m
to [he Kenr coast ha~•e generated a Ko~cl ckal o(debatr, partly bec~u~e of the numhers nt
people affecteJ by the ~+n>pueyl~, uuj par[ly hetaust of tfie n~rvelty — in the 20th century
— of a plan her the cnnsrruceion d a major new n~lrray. Thu pherwmenon w~ieh links
depret~ation in ptvpertY values, and butine~ Icx~aes, durctl~ to wuertnin~ics Reiunccd 6y
Fr~uale fog tn~j~x development prujecu is known as generalised (cx perceived) blight.
House of Commons Select Committee on the
CTRL
1.2 The Hewx u(G~enrtux~s Select Qimm~ttee nn the Channel Tunnel Rail Link
(CTRL) Bill way concerned a[ t!u diFficultiu experience 6y property owners a{ong ehr
routes which hac! F+een pn>FxxeJ fur the CTRL Mtn~bten th~trf~xe a~ahlished :u~
intenie~vtmenrnl w.xking getup un bligh~ (I[~WGB—'the Cirwp') to r~v~ew the xupr,
ca~cac and effects of blirht aru~ng durin6 the varicxu ~tagcs d map~t infrastrvctwc pro~ecrs
aru3 to c~xu~er whrthrr any ptactu~l chu~ges can be made ro the ex~snn~ arranRcmcnes
for propem' ~+urthax arul compensation. The Full trrnu ~~f reference ase a~ Anaex A.
The work of the group
1.3 A detailed proRtess tepcxt and ~n account d the rcprescntatioro made to the Group
was prrscntcd to Parliament on 20 No~•~mhet 1996. In wmmary•, the Gtoup puhlvched a
duc~Kxi ~apet in June 1996, in response u~ Which more than 60 wbmunons wrrc
received. The Group held H numE+er of mcettngs with ~n.3ividuaL~ a»d organisa~k~ns,
~nclueling uffuiata from overseas g~n•rmment ~3epanmenu. it also collrcte~ evu3ence vn
prc~erty price [rends en areas affectrd b~~ prc~+cuals for major ui(rasinxturc pnijects.
Exceptional hardship
1.4 As a rewlc of an undertaking Qiven to the Select C:cmimittee vn the Parliamrntar~•
Q~mmissx~ner for Administratwn, the Cn~vemment formulaeed a scheme co pruvicle
redtes~ w those affected to an exneme and exceptional .kprce by gencralued blight from
the Channel Tanncl Rail L~n]c bctM•ccn ]unr 1990 acid .Aril 1994. The re~•icw nut cif
M~htch the scheme emerged had ~ quire J~fferent rcmi~ to th~c of the IUWGB uu! ~ra~
u~ncemed with Aeneralued bl~Yhc refaced specifically to a parwd v( uncem~inry aMut the
route d the CTRL dunng the ,3evel~~ment of the project. lr x~ not a general
a~nsiderotion of bli¢ht and prc~crty purchase arringrm~nts. 6nyumea a~~ut thr
'E~cceptwnal Hardship' xhtme shxwld br addrarrul to CTRL D~visbn, Deparcmcnr of
she Env~ronmrnc, Trans~rt and the ReQicros, Zone 3J29, Grcot Mmurr HoLL~r,
?9 H~xsefem~ R~u~.~, L.~mdun SW I P 4DR.
164A311 (58) HOC/01591/0188
Property Compenzatio~ Cons~itateon zoi3 for the Lwfdo~-West Midlandz HSz route ~ Long•tertn hardship scheme (LTHS)
the inherent flexibility of the scheme to ensure applicants are treated fairly. We willexplain more aboutthis in the scheme guidance that we will issue when the schemeis implemented.
5-3~~6 Second, it was suggested that potential buyers would be discouraged by this criterion.The Government does not consider it reasonable, however, to underwrite the valueof properties purchased by individuals who have full knowledge of HSz. Governmentcannot be expected to purchase properties on the basis thatthey cannot be sold foran un-blighted value due to H5~ if the property owners themselves had knowledge ofthe source of the project.
5-3~z7 Criterion S (hardship) generated a very strong response from the public duringconsultation, and the Government has amended the criterion with the intention ofallaying, where possible, public concerns. Though it is not reasonable to expect theGovernment to intervene in the property market by buying properties without acompelling reason, the Government's aim in proposing a hardship criterion has beenfrequently misunderstood.
5-3-z$ ~Ne recognise that we should clarify our intentions in order to ensure that eligibleproperty owners would not be discouraged from applying to such a scheme due to amisperception of what we mean by'hardship'. Respondents' comments frequentlysuggested that the hardship criterion was indicative of asystem ofmeans-testing'applicants or that only financial hardship would be considered valid. In looking atconsultation responses it was of great concern to the Government that individualsin challenging circumstances would have been put off from applying to the schemebecause they did not feel that their circumstances warranted the label ̀ hardship'.Further, some responses suggested that as'hardship' was not defined with referenceto specific circumstances through a strict definition, it may be misapplied by panelmembers to the detriment of applicants.
5.3.zg It is due to these comments that we will change the hardship criterion to ̀Compellingreason to sell', a title which more accurately reflects the purpose of the criterion,which is to ask that applicants demonstrate that they need to sell their property andthat the Government therefore ought to assist the individual directly. Therefore thescheme name will be changed from'Long-term hardship` to'Need to sell'.
53-3o With this in mind, we have also considered whether or not to provide a list of specificcircumstances which demonstrate a'compelling reason to sell'. While superficiallyattractive, we would not want such a list to become shard-edged set of inflexiblerules. It is not possible to specify all the circumstances in which householders mightfind themselves, and it is important that a panel considering any individual request isfree to consider the merits of the case put to them.
53-31 To provide some clarity of the GovemmenYs broad intent with this criterion, we wouldlike to indicate at this point some of the scenarios where we consider applicants couldmake a strong case that they have a ̀compelling reason to sell'. These scenarios include:
• unemployment;
• relocation for a newjob;
• dividing assets as part of a divorce settlement;
29
190
A311 (84) HOC/01591/0214