HS2AA has worked extensively on what measures would help address the problem of “Generalised Blight”.
Our proposal on this issue, known as the “Property Bond”, we believe, offers a realistic and sensible way forward- it can provide confidence to the property market and reduce blight whilst ensuring the cost of fair compensation is managed effectively.
The objective of the scheme reflects the principle that ‘the polluter pays’ – commonly perceived as what is fair. The approach is backed by the experts-groups like the British Bankers Association, the Council of Mortgage Lenders, the National Association of Estate Agents and the Country Landowners Association.
How would it work?
The Property Bond Scheme would be available to property owners who suffer a “loss in property value” due to HS2. It would come into force as soon as possible and remain in effect until one year after HS2 becomes operational (2027 at the earliest for Stage 1).
Such eligible owners would be able to apply to HS2 Ltd for a Property Bond. The Bond would guarantee that HS2 Ltd will assume the role as purchaser of last resort and purchase the property at an ‘unblighted value’ if the HS2 project has reached a specified trigger point, eg planning approval date and no private buyer is found at the unblighted price when the owner wants to sell.
The benefit of the Bond would transfer with the property, meaning property purchasers could have the confidence of knowing that they are covered by compensation arrangements if the impact of the line reduces the value of their property.
There would be no qualifying reason for sale, restrictions on proximity, noise etc, or threshold loss. The sole critieria would be whether or not there is a financial impact on the market value of a property due to HS2.
Any Property Bonds in place when train operation has begun would entitle the then owner to compensation of the loss in value from HS2 as distinct from the current statutory compensation approach which is a lot less generous. Properties covered by Property Bonds should also be stamp duty exempt for the life of the bond to encourage private sales. The Bond could also be used for re-mortgaging purposes.
How It Would Address Blight?
The Property Bond would inject confidence into housing markets which are currently paralysed, as buyers would have the confidence of knowing they would be able to sell their property or be eligible for compensation in the future. The current hardship based scheme doesn’t provide such confidence that the costs of blight will be addressed because anyone buying in the knowledge of HS2 is not entitled to EHS compensation should they need to sell in the future.
Has It Worked Before?
It is based on private sector best practice, most notably the scheme offered by the private sector consortium seeking to reopen a freight line from the South Coast to Liverpool, known as Central Railways. With that scheme a property bond approach was successfully used to minimise the impact of blight on impacted communities.
How Would It Deliver Fair Outcomes For the Public Purse?
In order to deliver value for the taxpayer some ‘general conditions’ would have to be met
- A property must have been marketed for a minimum period (determined by price bands)
- No ‘serious offers’ at blight-free value (with evidence to justify this value) be made
- The belief that its reduced value is due to HS2 must be reasonable and evidenced
In addition calculations of ‘loss in value’ would be market determined i.e. the difference between the blighted price, based on what people will offer to pay for a property and what the property would have been worth at an “unblighted value”. The unblighted value would be professionally estimated, using standard approaches adopted by the Royal Institute of Chartered Surveyors. If the unblighted value is not more than the best serious offer received, the owner would have to pay the evaluation costs.
As an additional measure to ensure fairness. to ensure the process worked properly, there would also be an independent appeals mechanism to oversee decisions taken on eligibility, process and valuations.