Saturday, 26 October 2013

Assets of dubious value

The 2011 Localism Act allowed local authorities to designate non-residential buildings as “assets of community value”:
Nominations for community assets can be made by parish councils or by groups with a connection with the community. Individuals cannot nominate community assets. If the nomination is accepted, the group will be given time to come up with a bid for the asset when it is sold.

The right to bid only applies when an asset’s owner decides to dispose of it. There is no compulsion on the owner of that asset to sell it. The scheme does not give first refusal to the community group, unlike the equivalent scheme in Scotland; and it is not a community right to buy the asset, just to bid. This means that the local community bid may not be the successful one.

So far, over 170 pubs across the country have been granted this status. However, it’s important to note that it is no more than a means of buying time for threatened pubs. And, while it may work in well-off villages in National Parks, it’s unlikely to be of much value to urban pubs in transient communities with other nearby alternatives. The most likely result is pubs remaining closed and blighted for months with no realistic prospect of ever coming back to life. It stems from a misty-eyed view of “community pubs” when, in reality, most local residents will never go in their nearest pub from one year to the next and many will see a pub not as a cherished local hub but as a source of nuisance and late-night noise.

There’s a classic example of this in the campaign to save the Chesham Arms (pictured) in Hackney in East London, where the owner has failed in an attempt to have its status as an ACV rescinded. It’s a nice-looking building, but it is right in the middle of a residential area, and the name of the owner perhaps gives an indication as to why its prospects are uncertain. All this is likely to do is to delay its conversion to flats. Incredibly, the campaigners even want the council to compulsorily purchase it to maintain its status as a pub, which surely is taking socialism a bit too far.

This whole approach exemplifies the misguided view that I referred to here that the recent decline of pubs is mainly due to a combination of pubs being poorly run, and being sold off by greedy pub companies acting in association with rapacious supermarkets and property developers. I do not for a minute seek to defend the policies of the pubcos, but they are essentially a reaction to declining demand, not a cause. The pubcos borrowed up to the hilt to bet the farm on a projected outcome that just didn’t happen, and are now counting the cost.

The fact is that there has been a long-term secular decline in the overall demand for pubs which no amount of good management and enlightened corporate governance can do much to reverse. I wrote about the reasons behind this here. The current “pub crisis” is essentially a crisis of demand, not supply. All the planning controls in the world won’t save a single pub if the underlying demand isn’t there in the first place. While it is possible to turn round a failing, badly-run pub, for the most part that will simply be at the expense of others appealing to the same population of potential customers. It does little or nothing to affect the overall size of the market.

And it really does the pub trade no favours for people to insist on peddling a narrative for their decline which at best is exaggerated and at worst utterly delusional.

14 comments:

  1. The pubcos borrowed up to the hilt to bet the farm on a projected outcome that just didn’t happen, and are now counting the cost.

    The pubcos bet the farm on rising demand, and are now sucking money out of their estates to recover from that mistake. The effect of the pubcos sweating their assets is separate from, and additional to, the effect of falling demand - assuming for the moment that underlying demand is falling - and may have a bigger impact on the health of pubs.

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  2. But it's a moot point to what extent the policies of the pubcos exacerbated that falling demand - in my view not very much. And for people to claim it has been a chief cause is ridiculous. Nobody complained too much about pubcos when the trade was in relatively good health.

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  3. The problem with the Chesham Arms is one of greed and nothing to do with viability. I will accept that your description applies to many pubs but not this one. The pub was well used, well patronised and supported by the locals. It is a densely populated area. Plenty of people treated it as their local. Takings were most impressive for a back street pub and the tenant paid a healthy rent to the longstanding freeholder. The rent had been reviewed upwards during the last three years. The freeholder decided to sell to a developer PURELY because the developer was able to pay more than TWICE the market value. Pure greed. The freeholder was earning 10% yield against the London pub estate average of 8%. He has killed the goose laying golden eggs. A developer with no knowledge of pubs called Mukund Patel bought it for silly money. He clearly thought turning to shoddy flats would be an easy buck. He had not realised that he had shut down a very popular and historic pub in a conservation area, with a very progressive and now rather pro-pub local authority. Bad mistake. We hope you are wrong about delaying the conversion to flats. We hope he realises the mistake, cuts his losses and moves on. Hackney wants its Chesham Arms back! Please support us at www.savethechesham.org

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  4. There are just too many reasons for the decline of the pub; blatant greed by developers; ditto by pub landlords/pubcos; smoking ban; Beer Orders and the law of unintended consequences, etc, etc. They don't all apply in every case, and in the case of the Chesham Arms greed is the main driver, both on the part of the previous freeholder and the new owner. The fact that so many support the campaign is at least an indicator that the place is a valued community asset.

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  5. The evil and tyranny of socialism lives on in beardy beer enthusiasm creating poverty and misery in its wake.

    Capitalism maximises the value of assets. It would be nice if this place stayed a pub but it's worth twice as much as flats. It is just as selfish and greedy to try and steal that asset from its legal owner and value it at a fraction of its market worth.

    The reason it's worth more as flats is due to consumer demand for flats. Seems the actual people want flats. All except a minority of vocal beardy socialists that want to nationalise the pub.

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  6. You can never take Socialism too far!

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  7. I think we all understand the long term trends that mean we "need" less pubs in 2013 than we needed in 1960. Pubs are going to shut, its generally going to be the bad ones that go first, and from a supply and demand POV, that's all fine. The problem is when it is the good pubs that start shutting along with or even instead of the bad ones, because the pub co is woefully mismanaging it.
    Once you have shut a historic or community pub, its hard to get it open again even if it was eminently viable.

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  8. "the name of the owner"? What? Should we have heard of him? Or did you mean something else?

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  9. What is a good or bad pub is little more than a subjective argument. Any trading pub must be meeting someone’s need, even the blood of the step ragged shite holes.

    The price and value of anything changes over time. For many reasons the value of housing in an area can rise or fall, as can the value of other retail space. Some places are desirable places to live, some are less so. Small flats can cost a fortune in some areas and in others the council give away houses for a £1 (google it, it’s in the Liverpool Echo)

    This can make a pub unviable overnight for no fault of the hard working people running it. It could be making a decent return on investment for a £300k asset but the same return looks poor once the market values that asset at £600K

    You can claim pubs as special sacrosanct places, once a pub it must always be a pub and accuse people of greed should they attempt to utilise an asset at its market value. That has knock on effects to the wider economy and acts as a disincentive to building new pubs. God forbid I use this land as a new pub for then some beardies will try and rob me of my ownership rights by transferring them to “the community”

    Likewise it is easy enough to force a hand. Imagine I’m one of these rapricious developers. Don’t want me to change the use of my pub? Fine, I’ll run the roughest pub you’ve ever seen which over the next 2 years will have you, the community and the police begging for it to be closed. Then I’ll let the vandals have a go by not boarding it up properly, and if they don’t a dodgy guy will torch it for me. When I get round to building the new flats, you’ll thank god the shit hole bringing the area down has gone.

    If you want a successful pub market, you need to make it easy to set one up, and let the ones that go, go. Either you accept the market does its job of delivering what you want or you ask the government to tax you and give you what it thinks you need. It will be a strange government that thinks you need more pubs.

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  10. "Either you accept the market does its job of delivering what you want or you ask the government to tax you and give you what it thinks you need."

    A very Manichean view of the economy, Cookie. Perhaps government could solicit the peoples opinion before making decisions. There is a broad spectrum between unfettered free market capitalism and a total command economy; neither of which deliver a great deal of happiness to the majority of people subject to them.

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  11. @Cookie, "It would be nice if this place stayed a pub but it's worth twice as much as flats." Perhaps, at one given point in time. I'm thinking of a pub in South Bristol, which vanished almost overnight to be replaced with a sign announcing "an exciting development of new flats." This was pre-recession, smoking ban etc What's there now? A hole in the ground, that's what. In the long run, it was probably worth more as a pub.

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  12. Firstly, I don't know who all these "beards" are that some people insist on referring to. I know CAMRA members in several branches and I'd estimate that the percentage of beards is comparable to the population as a whole. Ditto sandals and Aran sweaters.

    Secondly, I'd be surprised if most people commenting here didn't have some understanding of how the capitalist system works, whether or not they approve of it, so constantly explaining it really isn't necessary.

    We have planning controls because the market cannot be trusted to do everything right in every situation. In a completely free-for-all capitalist country with no controls, we'd have no green belt, national parks or other protected areas. We also apply controls to buildings with the listing system and communities. Like it or not, Cooking Lager, our country does place controls on capitalist companies: some people like me would regard them as inadequate, while I judge by many of your comments that you'd regard them as excessive. Whatever our outlook, we don't have the complete free-for-all that you seem to favour.

    Consequently we have a way of trying to protect local businesses, including pubs, that are assets of community value. Just stating that a pub is an AVC doesn't hinder anything, as our local Branch of CAMRA has discovered: you have to provide convincing evidence to support the contention. The owner can quite easily provide evidence of economic unviability, and in most cases that tips the balance in their favour. The fact that an owner may have deliberately run the pub into the ground isn't considered.

    Even the most pub-friendly council in the country won't tolerate a load of decaying, boarded-up buildings for long; councils are, for the most part, not as stupid as people think, but they do have to abide by their guidelines.

    In recent years, the capitalist system has brought us the banking crisis, the phone hacking scandal and rocketing fuel prices despite massive profits. Regulation and controls are not such a bad thing after all: the market isn't all.

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  13. Shadow minister Sadiq Khan reckons (IMV reasonably enough) that ACVs are not a realistic option for London pubs.

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  14. If you fancied owning a few pubs would you buy a heritage boozer with lots of restrictions on what you could do with it or would you buy and old bed shop / bank and covert it to a boozer ?

    Your heritage boozer of community value is only a pub. If you fail you have to sell it as a pub, maybe 2 or 3 owners down the line might get the chance to realise the market value of the property.

    Your old bed shop is just retail space. You can flog it on as whatever you like, without complaints from leftie types with or without beards.

    Restricting the use of assets has a cost, that cost is reducing the number of entrants interesting in buying an asset the community wishes to preserve. When that number falls to none, you have boarded up buildings.

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