DCHI Response to Daily Mail article

 Dear Ms Barrow

I am forced to respond to your misleading article on HIPs in yesterday’s Mail.

It is a shame that a paper such as the Daily Mail chooses to consistently misrepresent the position over HIPs. If there is any journalistic desire to inform the public of the truth, I would encourage you to publish a more balanced article or even publish the following explanation so your readers will not be duped by a series of claims by individuals with an axe to grind.

It is claimed that Homeowners have “wasted around £1 billion on ‘pointless’ Home Information Packs”. £1 billion is a nice round number to print in a newspaper so I will use nice round numbers as well and start by assuming yours is somewhere near correct.

In rough terms, if £1 billion has been spent on HIPs, about £200 million will have been on the EPC Certificate which is staying and not regarded as pointless. Another £200 million will have been on the documents that the seller still has to produce outside the HIP to prove title etc. But having those as part of a HIP rather than sourced by a solicitor has approximately halved their cost so prior to HIPs that was costing £400 million. The additional cost to sellers is therefore only £400 million of that £1 billion. But then let us look at the process itself. That £400 million has provided searches that would otherwise have had to be paid for by the buyer so they are not additional cost, just paid for by the seller instead of the buyer.

OK, I hear you argue. Many of those searches we are told have to be re-done by the buyer’s solicitor, sometimes because the buyer’s solicitor doesn’t trust them and sometimes because they are (allegedly) too old. The truth though is that the buyer’s solicitor often makes more money by re-doing searches and not all that are re-done are necessary. Generally the new one says exactly the same as the old (yet it is not the solicitor who gets accused of adding cost).

Again, because of the streamlining of the processes and the increased availability of personal search providers as a result of HIPs, the cost of these searches has also come down as much as 50% compared to the previous rates charged by solicitors. So let’s assume half of all searches have to be done again and costs have only come down by one third. The £400 million spent by sellers because of HIPs would have been £600 million spent by buyers without them, but £200 million has been spent on second searches so buyers have actually saved £400 million and sellers have spent £400 million.

So when you work it out the additional cost to home buyers and sellers over the lifetime of HIPs has been..... well actually, nothing. The £1, billion pounds spent on HIPs would have been spent on the same or similar documents without HIPs (plus or minus a small amount since we are working in round numbers). It is not really being honest with your readers to pretend that before HIPs came along buying and selling a house cost nothing and now it costs £500.

So, we have established that cost is not a great argument for getting rid of HIPs then.

It is then claimed that to sell a property the homeowner had to pay an average of £500 including VAT for a HIP. An interesting figure since most HIP providers charge less than £300 and the independents as little as £250; so where did the extra £200-250 come from? Actually if correct, and I will come back to that, it is the mark-up that the poor estate agent puts on for the incredible amount of work involved in taking a HIP that has already been prepared and giving it to their client. This amount is not a cost of providing a HIP at all, it is profit for the estate agent. In fairness to estate agents they have had a pretty tough couple of years and many will admit privately that it is only the mark-up they have made on HIPs that has kept them in business. Publicly of course the National Association of Estate Agents is not going to admit its members have actually been profiting from HIPs.

The article claims that “2.7 million home owners were forced to pay for a HIP, which was meant to contain all the information about the property, such as local authority searches and a green rating”. Why the words “meant to”? It did contain the information. Interestingly however if 2.7 million paid out £1 billion, that is only £370 for each HIP, not the £500 claimed. This still indicates that somewhere between the HIP provider and the home owner someone has added in the region of £100, probably the estate agent.

The illustrious estate agent, Mr Bullman is quoted as saying that “only one homebuyer had ever asked him to look at a property’s HIP”. What is his point? He had a duty of care to his sellers to make sure that the HIP was provided to prospective buyers so they would know the detail of the property they were looking at, planning and rights of way issues and all, and only make offers that would progress to completion. He also had a duty of care to his prospective buyers to make sure they knew what the HIP contained and how it would help them choose a property that actually met their needs. If only one asked him for the HIP then as a responsible agent, he must have explained the purpose to all but one and helped them understand how to use it to make sure they were making the right choice. Or perhaps not?

Grant Shapps, the man who encourages people to engage in consultations and then does his own thing before they are in, is quoted as saying “the Government wanted to waste no time in ‘cutting red tape that is strangling the market’. Perhaps he should try reading the news occasionally. According to the Nationwide at the end of April “house prices in the UK had risen by 10.5% in the year” (so that is a strangled market then?) and with sellers starting to outnumber buyers (so HIPs are preventing properties coming to market? It appears not).

Eric Pickles demonstrates an equally strong grasp on reality when he apparently says “HIPs are history. I hope people can use the money they save to do something useful for themselves and buy some paint or some shelving or some white goods”. Well I am sorry Mr Pickles but in case you haven’t noticed they are selling their house so they have nothing to paint and nowhere to put their shelves and white goods. Or perhaps you meant for their new home because they will probably be buying one? But hang on; the one they are buying won’t have a HIP so now they have to pay for searches to find out if it is really what they want to buy. The money they have just saved by not paying for searches on the house they are selling, they have to spend on searches on the house they are buying. Oops, there goes the paint, the shelves and the white goods.

But it doesn’t stop there. The sellers Mr Pickles is talking about will have saved the cost of searches produced very cost effectively as part of a HIP, but the ones they have to buy will probably now be done through their solicitor, so they will cost more. Scrapping HIPs has added cost to the process not reduced it as claimed. Next let us look at the poor relation in the process; the first time buyer struggling to get on the property ladder. Moving the cost of searches from seller to buyer is the worst possible thing to do if you want to help first time buyers. Two major own goals, and judging by the reported comments they didn’t even think about the implications of what they were doing long enough to realise these would happen. There is more to being a responsible government than just saying you are.

Mike Ockenden of AHIPP makes a valid point in defence of those whose employment depends on HIPs and Energy Performance Certificates. Arguably though the picture is not that simple. These individuals have gradually moved into a demand led market place that is based on a property transaction process built around HIPs. Given suitable notice of when the change will happen, and prior knowledge of what the revised process would be, these individuals would either mould their activities to support the new regime, or move out of the market. No harm done. To pull the rug with a day’s notice is not responsible government and those accountable should be ashamed of their actions.

If you have read this far congratulations, but you probably think I as staunch in my support for HIPs as Grant Shapps is a HIP hater. Not so you may be surprised to learn. Should HIPs have carried on as they are? I say definitely not. They were not delivering all they were intended to deliver for a number of reasons.

That said HIPs were better than no HIPs and a stepping stone to a real solution. What we have got now is a chaotic reintroduction of what we all knew needed changing. The move from HIPs to something better is overdue. The route to achieve that was to build on the strengths and design out the weaknesses, not to throw the baby out with the bath water.

The impetuous actions of a few people who have just been given some power and feel they need to wield it at the first opportunity leaves those earning a living in the property sector pick up the pieces as best we can. Despite the posturing and grand claims of the few who make headlines, HIPs were working. Not as well as they could, or should, but to a large extent working. Behind them was a well oiled infrastructure that delivered what was required quickly and efficiently. A little tuning and the partial solution we had would have easily become the long term answer for the property market.

All credit to messrs Shapps and Pickles for throwing out something that works, but not as well as they would like, going back to something that wasn’t satisfactory either and giving no thought to how to manage the transition. That is great leadership guys.

We still have to work towards the post HIPs solution that addresses the long term problems with property transactions. This solution was a small step from where we were, but is a big step from where we are now. We must hope that the government that has acted in haste will at least now listen to sensible advice while they repent at leisure.