According to research there are some 870,000 empty homes in the UK so any scheme aiming to bring some back into use is worth a look at. Or is it?

One scheme being put forward by involves the use of a loan to upgrade an empty property in England (not the UK as a whole) so that it meets the standard for letting it out on an affordable basis.

The National Empty Homes Loans Fund (NEHLF) can provide a loan [1] (secured where a first charge exists) of between £5,000 and £15,000 over five years at a fixed interest rate of 5%. Early Repayment Charges at 6% do apply.

To be eligible the potential borrower must:

* be the owner of an empty property in England that has been empty for six months or more

* be over 18 years of age

* not borrow more than 70% of the property’s value in total (including the NEHLF loan)

* have the ability to repay the loan.

It is also structured for letting out after refurbishing, so will be of no interest to 'house flippers'. Nor will it be of use to those whose loan to value on their current mortgage on the property is 70% or more already.

But this, just like all similar schemes, attempts to go against the market by piling more debt into it.

The best way to bring these properties back into use is to force their sale at whatever price can be achieved. Then market forces will come into play and it would make these homes really affordable.

Empty Houses by Carl Baker via Wikimedia Commons

Empty Houses by Carl Baker via Wikimedia Commons

After all, if the homes aren't financially viable today, how can more debt possibly help? Consider that if the owners of these properties cannot get a loan from traditional sources for upgrading these properties then any other loan they get where the requirements are less stringent will, by definition, be a sub-prime loan. Look where that got us last time.

What we need is a tax system that penalises empty properties so forcing them back into use as quickly as possible. It will pass ownership from those that just sit on the property in the hope that prices will eventually rise into the hands of those that would do something productive with them.

It will be interesting to see how many loans are made from this scheme.


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