What Heathrow’s compensation pledges actually mean:
In “Heathrow. Our Manifesto for Britain” dated 23.5.2016
Heathrow says: …
“we will provide compensation at full market value plus an additional 25%” for houses compulsorily purchased and (an unspecified commitment to:) … “A £1 billion fund on community noise and property compensation to reduce the impacts of the airport on local communities.”
AirportWatch comments on the compensation:
Heathrow confirms that this £1 billion is for BOTH noise compensation AND ALSO the money to compensate people whose homes will be compulsorily purchased.
£700 million was the figure that Heathrow told the Airports Commission, was the sum for noise insulation http://your.heathrow.com/wp-content/uploads/2014/09/040215-COMPLETE-FINAL-1.pdf
If the Heathrow figure is indeed only £700 million for noise compensation, (over how many years?) that works out – over 160,000 homes (Heathrow’s figure) – as just £4,375 per home. And of course, less if there are more homes.
If it is indeed just £300 million to compensate all those to be compulsorily purchased, that works out as £400,000 for each home, if considering just 750 homes to be demolished.
But Heathrow said up to 3,750 homes would be eligible for the purchase scheme, in addition to the 750 – 780 homes to be demolished. (Or does that figure of 3,750 homes include those to be demolished – Heathrow’s wording is unclear. See link ). Making a total of about 4,500 homes that they say they will offer their compensation deal to.
Supposing Heathrow paid out on average £340,000 – £350,000 for each of the 780 (approx) homes to be demolished. That works out to around £270 million. Those homes obviously cannot be re-sold. It is a straight loss.
Perhaps something like £250,000 + 25% = £312,000 + £13,000 Stamp Duty and £5,000 moving costs of – which comes to £330,000 per home?)
So for 783 homes, that comes to a loss for Heathrow of something like £260 million. That would mean (and the prices are all just guesswork at the moment) there would just be about £40 million that Heathrow has budgeted for the cost of all the other homes.
Heathrow expects between half and three quarters of the 3,750 homes would seek to be in the buy-up scheme.
So three quarters of 3,750 is about 2,800.
Heathrow has offered a 25% extra on the house price to each person bought out, and stamp duty and removal costs. That might come to, for a house valued at £250,000 as about £62,000 for the 25% mark up, and about £13,000 for the Stamp Duty, and about £5,000 for removals and legal costs. That is about £80,000 for each house.
Heathrow then has to do up the houses (or knock them down and build profitable blocks of flats?) and sell each for almost £80,000 or so more than they assessed the price to be, when the previous owner had to sell it to them.
So if each of 2,800 homes (could be 3,750) costs Heathrow £80,000 they could be stuck with a bill for £224 million. But not if they can get the equivalent of about £80,000 more on each house they re-sell (or get rent from).
Otherwise Heathrow has under-budgeted, and will have to deal with a further expense.
The £1 billion funding shortfall in Heathrow’s compensation offer
The difference between Heathrow Airport’s pledges to residents and its commitment to funding those pledges could be in excess of £1 billion. And the airport is so far staying tight lipped.
Campaign group Stop Heathrow Expansion has in the past week shone the spotlight on a funding shortfall in the airport’s compensation proposals for local residents, and Colnbrook Views has scrutinised the figures to see if they are right.
Taking what little information Heathrow has made public, and throwing in some conservative guesstimates to fill in the blanks, we’ve concluded … <drumroll please> … that the airport is hiding a HUGE funding shortfall in its compensation plans.
With bold pledges that lack the merest hint of detail and enough dubious claims to fill both sides of a Brexit battle bus, the funding black hole appears to be in the region of £1 billion, give or take a few million.
Heathrow’s property compensation has already been criticised as inadequate, offering little potential for those displaced homeowners to find similar alternative accommodation further away from the airport where property prices have relentlessly increased.
But the plight of tenants, airport workers, small business owners, and landlords – all omitted from the airport’s plans following its consultation in 2014 – is such that many in Colnbrook and the Heathrow Villages will receive nothing if expansion gets the go ahead.
Despite this our calculations show there is no way that Heathrow can afford its current pledges without further exclusions.
With inadequate compensation being offered to those being exposed to increased levels of noise pollution – or brought within the noisiest contours for the first time – and up to 60,000 left out of the airport’s calculations of those entitled, the limited pot will be stretched even further.
Naturally, we’ve asked Heathrow’s press office to comment on the “double-counting” of its £700 million package for both property and noise insulation but our enquiries have so far been met with no response. [Heathrow made the £700 million offer in February 2015 – copied below].
[The compulsory purchase figure, for 750 homes, in the calculation below, amounting to £290 million, works out at around £387,000 per home. AW note]