HS2AA Rebut Government Spin On Compensation

The Property Bond is a tried and tested cost effective solution which deals with property blight.  HS2AA’s appearance before the Select Committee on compensation in November 2014, it was agreed that the Government would send a note on the costs on our proposal of a property bond to the Committee and they would consult with HS2AA on this topic.

The note they sent did everything but talk about costs and they didn’t bother consulting about costs. We have set out our concerns to the points raised by the Government in a further response which you can read here.

Key points to note are

  • PWC figures. The report commissioned by the Government from the accountants PWC to understand the costs and risks of a property bond estimated that the Net Present Value (NPV) of a property bond scheme out to a distance of 500 metre was between £30m (if successful – an optimistic outcome) and £158m (if not successful – a pessimistic outcome).  The Government’s note makes no mention of these figures.
  • Value of protected properties is not the scheme cost. The Government’s note refers only to a figure of £3bn which is the unblighted value of all the properties which would be covered by a 500 metre property bond.  This is not the cost of the bond scheme (but a measure of its benefit, given it relates to how much property is protected) and it is misleading to suggest it is the cost.  The note does not estimate or comment on the actual expected cost of a bond scheme.
  • Statements are contrary to evidence. The Government’s note states that the property bond represents an unacceptable risk to value for money, community cohesion and the functioning of the housing market, but this is not supported by the evidence.  In fact, PWC conclude that there would be a positive effect on community cohesion and expert evidence is entirely against the suggestion that a property bond would adversely affect the functioning of the property market, with the Council of Mortgage Lenders supporting a property bond.
  • Selective quoting. The Government’s note uses only half of a quote from the DETR Interdepartmental Working Group on Blight, which suggested that any intervention to address generalised blight risks causing blight to snowball.  The missing half of the quote had concluded that a property bond scheme used in the Central Railways Project (CRL) “came closer than any other to addressing these concerns”. The DETR report had been commissioned (in 1997) to address issues with the HS1 compensation arrangements (an exceptional hardship scheme and a voluntary purchase zone ie like HS2) as they had not solved the problem of blight.
  • Prime purpose ignored. The note appears to totally ignore the main aim of a property bond which is that a successful bond involves few purchases by the purchaser of last resort because it acts as a means of transferable insurance for property owners who are or might be affected by blight.
  • Central Rail Scheme misrepresented (yet again). The note (as did the consultation) misrepresents the geographic scope of the CRL bond scheme by saying that it only applied to properties required for construction of the line and those in very close proximity.  This is not correct.  The originator of the CRL bond scheme has given evidence that over 1,100 bonds were drawn up by 2004, and many were for homes more than 100yds from the line ie outside any “safeguarded” zone.
  • Central railway scheme evidence. Contrary to what the Government’s note suggests, the CRL scheme did work to protect residents from blight and 35% of those homes holding bonds were sold or re-mortgaged on the open market up to the point of cancellation of the CRL project (in 2006).

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