The impact of a change in the maximum park home sale commission: executive summary - GOV.UK

2022-06-18 06:15:36 By : Mr. Barret Chou

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This report outlines the findings of a research study which the Department commissioned from Liverpool and Sheffield Hallam Universities to examine the potential impact on the park homes sector of a change to the maximum commission paid on park home sales in England.

Under the Mobile Homes Act 1983, when a resident sells their park home, the site owner will be entitled to a commission of up to 10% of the sale price. Site owners and residents have different views about the payment and there has been substantial debate in the past about whether the commission rate should be maintained, reduced or abolished. What is clear is that there are likely to be impacts on both residents and site owners if changes are made to the rate of commission payable.

There has however been no data available to accurately assess any of the impacts. The government therefore committed to commissioning research to gather relevant data and evidence to ensure that any on-going discussions, debates or decisions are based on facts and an accurate assessment of any impacts on the sector.

The resulting study – the findings of which are set out in this report – used a multi-methods approach to assess the potential impact of any proposed changes in the sector. This included looking at previous work undertaken by Niner et al and using updated techniques to identify residential park homes sites and to estimate the number of homes and households in the sector[footnote 1]. This was followed up with postal and on-line surveys of park home owners and site owners, and a series of focus groups with key stakeholders in the sector in order to understand the demographic make-up and economic operation of the sector, and hence the potential impacts of any changes on residents, site owners and the sector more generally.

I would like to thank the research team from Liverpool and Sheffield Hallam Universities, led by Dr Richard Dunning and Mr Ian Wilson, for their efforts.

I would also like to thank the park and home owners who gave up time to participate in focus groups and complete a survey; the industry representatives, surveyors and legal representatives who responded to the request to be interviewed at two stages in the project and who provided their support and valued perspectives at regular intervals; and the policy and analysis teams in the department, who provided consistent feedback and insights throughout this project.

The department will continues to develop its evidence base in this area with a view to informing future policy and improving outcomes for park home residents.

Stephen Aldridge Chief Economist & Director for Analysis and Data Department for Levelling Up, Housing and Communities

1. The University of Liverpool with Sheffield Hallam University were contracted to gather data about the park homes sector in England and undertake an assessment of the impact of a change to the maximum commission on park home sales, by the Department for Levelling Up, Housing and Communities (DLUHC) in February 2021. This contract was separate from, but followed, a scoping study conducted in 2020 for the Department. The scoping study reviewed the literature on park homes. Relevant insights from this study have been included in this report.

2. The maximum commission on park homes sales is a unique form of payment in the park homes sector, whereby site owners can levy a maximum 10% charge on sales. As such, its operation and impact require bespoke analysis.

3. This independent assessment considers “whether a Commission Rate remains appropriate and, if so, at what level that rate should be set” (MHCLG, 2020). Thus, it was necessary to explore the impact of the current commission rate on park home owners and park businesses, and the likely impacts that would occur under various permutations of the commission rate.

4. Park homes, which are legally defined as caravans, were first developed after the second world war as a distinct type of occupation of caravans that could not be categorised according to traditional rental tenancies, leasehold or freehold (CLG Committee, 2012, p.5)[footnote 2]. They are a unique form of housing in England, although they can also be found elsewhere in the UK and internationally. A park home, also known as a mobile home, is a caravan, situated on a caravan site (a “park”) with planning permission for residential use.

5. Park home owners purchase their home and the right to station their caravan on a “pitch” on the park. The park home owner therefore owns the physical structure (the park home or caravan) and has the right to keep a park home on that pitch for the duration of their agreement with the site owner. They normally purchase the home in situ on a park home site. In addition to the purchase cost, they are required to pay a “pitch fee”, essentially a service charge for the use of the pitch and the common parts of the park home site, such as roads and open spaces.

6. The government estimated that there were 85,000 households living on 2,000 parks in England (Wilson, 2019).

7. The unique nature of park homes has required bespoke legislation for the sector and operates in combination with other planning and consumer rights legislation.

8. One of the key dissimilarities between residential park homes and other permanent tenures in England, is the commission on sale. Under the Mobile Homes Act 1983 (as amended) when a home owner sells their mobile home they pay a commission to the site owner. The rate is constrained by an upper threshold, set in legislation at a current maximum level of 10% of the sale price. The commission is usually justified in relation to the new home owner purchasing the joint attributes of the physical structure of the home and the pitch on which it is located.

9. This report focusses exclusively on park homes, it does not consider holiday caravans, holiday parks or designated Gypsy, Roma and Traveller sites[footnote 3].

10. Throughout the history of the commission, there has been regular debate about the level that the commission is set at, its equity and the efficiency of the market. This debate has continued since the level was last amended in 1983, when it was reduced from 15%. There have been several reviews of the commission charge in England, most recently in 2006, after which the government announced that the commission would remain at 10%, but additional information was required to enhance transparency regarding the commission. In Scotland and Wales (where the commission charge is set independently) both governments have consulted on changes, in 2013 and 2017 respectively.

11. In the 2018 response to the review of park homes legislation, the government identified the need for new evidence to underpin discussions about the maximum 10% commission and any decision to change it[footnote 4]. It is in response to this commitment, that this research has been commissioned. As such, this report sets out evidence of the scale and geography of park homes in England, before outlining a conceptual model of park home site finances and evidence of both park home owners and site owners’ perceptions of the 10% commission.

12. Evidence for this report was collected during February to November of 2021. The investigation was conducted during a period of change in England, with the United Kingdom having left the European Union in January of 2021 and during a year when COVID-19 impacted on residents and park operations.

13. To provide a robust evidence base for consideration of the 10% commission, data was initially collected from a range of existing secondary sources, such as the Ordnance Survey. This was followed with the collection of new evidence in 3 phases. First, online focus groups with park home owners, site owners, trade bodies, national resident organisations and intermediaries (e.g. surveyors and lawyers) took place at the start of the project to understand perceptions of the commission and scope the breadth of impact on both residents and businesses. Second, 2 national postal surveys were conducted to provide evidence of park home owner and site owner perceptions of parks, homes, finances and the maximum commission. These surveys represent the largest research data sets on park homes in England. Third, a second round of on-line focus groups with residents and site owners were undertaken at the end of the project to explore participant perceptions of the analysis and modelling.

14. This research identified 1,832 separate park home sites and 100,406 park home residential addresses (proxy for pitches) across England. The research also estimated that there were 159,000 park home residents in owner occupation in 2021.

15. Whilst each region of England contains park home sites, the South East and South West accommodate a disproportionally high number of both park home sites and pitches, accounting for some 45% of sites in England, whilst the North West, North East and Yorkshire & Humber collectively accommodate only 15%.

16. There is a wide variety in the number of pitches on parks, with some sites having fewer than 10 pitches whilst others have hundreds. There are many more smaller sites than large ones, with over 50% of all sites having less than 60% of the average number of pitches.

17. Parks are frequently found in areas classified in the ONS area typology as retirement, rural or agricultural (from the 2011 census), though some sites may be found in urban and mixed communities. The vast majority of park home household members are 65 years or older, with only 20% under 65. There is significant variation in the level of area-assessed deprivation for park home locations; nearly 60% of sites are in affluent or relatively affluent areas, whilst 11% are in deprived or very deprived locations (according to the Index of Multiple Deprivation). As such, whilst park homes are often situated in rural settings, with a higher than average age profile, and in affluent areas, they also operate across the deprivation spectrum and in different types of community context.

18. Parks are typically private businesses, most frequently operating as private limited companies. 60% of the parks surveyed operated as a single park, with only 5% operating as part of a group of 20 or more parks.

19. The decision to purchase a park home was largely driven by the value for money that park homes represent in contrast to bricks and mortar owner-occupation, and the feeling of peace and security of a park. Whilst over 85% of park home owners were satisfied overall with their park home, almost half were dissatisfied with the pitch fee, over 40% were dissatisfied with the park operator and a similar proportion dissatisfied with the park facilities.

20. There was little agreement about the purpose of the commission on park home resales. Park owners, industry representatives and home owners gave diverse explanations for the commission, revealing a lack of shared understanding about the role of the commission across the sector. This presents a difficulty for those seeking to justify the commission’s existence to park home owners and simultaneously for those who wish to see it removed or reduced.

21. The majority of park home owners were aware of the commission before purchasing their park home. Park home owners argued that the commission prevented some of them from moving, as the commission meant they were financially trapped.

22. Park home owners were asked about their perceptions of alternatives to the maximum commission on sale, for example having to pay the same amount upon purchase or defrayed on to the pitch fee. In response, nearly 85% of home owners would prefer to pay the commission (on sale or purchase) rather than pay the equivalent cost as a regular contribution (e.g. as part of an increased pitch fee). This highlights the significance, to home owners, of not increasing regular costs.

23. Almost all park operators charged the full commission rate of 10% on every sale. 70% of parks had one or more commissions in 2020, but only 25% had more than 3 commissions per annum recently. Thus, there is a relatively small number of commissions being charged annually. However, park owners suggested that this income was significant for their businesses, and most frequently used to fund maintenance, repairs or capital investments in the park. Accordingly, park owners indicated that they would need to reduce costs such as maintenance, repairs and staffing should their commission receipts decrease without being offset by an alternative proportionate income.

24. The following options were considered in the analysis. These options have now been repeatedly tested in studies across England and Wales, they are:

25. The authors used the financial data and findings from the postal/ on-line surveys and focus groups to model these scenarios and the likely impacts on park home and site owners. In line with the majority of scientific research, not all of the data was provided and as is routine in social science research, the modelling was predicated upon the data volunteered by park operators and home owners. This volunteered data was checked for inconsistencies and obvious errors, but forensic analysis of accounts would be needed to prove the veracity of this information this volunteered information. Based on this information being accurate, it enabled the following modelled outcomes for each of the 4 alternatives to the current commission.

26. Residential mobility refers to a household’s purchase of a park home. The household’s previous home is not accounted for here, so they may have moved from another park home or from a non-park home. Residential mobility is measured here as the total number of households purchasing a park home annually.

27. Reduction of the maximum commission to 7.5% when modelled, resulted in a very marginal increase in residential mobility (+1.4% per annum) and an increase in the proportion of parks recording a financial loss from 27% to 29% per annum.

28. Reduction of the maximum commission to 5% when modelled, resulted in an increase in residential mobility (+4.6% per annum) and an increase in the proportion of parks recording a financial loss to 31% per annum.

29. Reduction of the maximum commission to 2.5% when modelled, resulted in an increase in residential mobility (+12.1% per annum) and an increase in the proportion of parks recording a financial loss to 33% per annum.

30. Removal of the commission (reduction to a maximum of 0%) when modelled, resulted in a significant increase in residential mobility (+30.0% per annum) and an increase in the proportion of parks recording a financial loss to 40% per annum.

31. Reduction or removal of the commission will have the biggest impact on smaller sites (those with fewer pitches). This is for 2 reasons. First, they are operating with lower overall profits and thus changes are more likely to tip the balance from profit to loss, and second, the commission represents a greater proportion of their income.

32. Based on the analysis and modelling undertaken of park home owners’ and park owners’ perceptions and evidence through this investigation, the authors recommend:

33. Justification for the maximum commission – Work is needed to explore the rationale of the commission and to clarify this rationale for park owners and home owners. The current lack of a shared understanding in the purpose of the maximum commission leads to highly subjective arguments about the commission’s role and impact. A change to the commission would therefore currently be predicated upon the impacts of the commission rather than the commission’s justified role in the park home sector.

34. Strengthening the professionalism of park operatives – There is a high level of dissatisfaction with some operatives’ behaviour in managing parks. Poor quality practice was repeatedly identified by home owners regarding a small number of operators. These concerns about specific operators’ practice outweighed concerns about the role of the maximum commission for home owners across the sector. Recent changes to the requirements of park operators were considered a positive step towards an appropriately regulated sector, but further improvements are needed to ensure that the sector works fairly for both operators and residents.

35. National enforcement on parks – Much of the enforcement of parks is currently distributed across a large number of local authorities, including against park operators that have sites in multiple authorities. Further work should explore the efficacy of local authorities in undertaking this enforcement and consider whether a national enforcement body could ensure a more consistent and higher quality of park operation.

36. No reduction to the maximum commission on park home re-sales without financial support for smaller parks – Whilst a reduction in the maximum commission would support residents’ mobility, it would need to be significant to effect a major change (i.e. a maximum commission of 5% or less). Such a reduction in the commission would result in an increase in the proportion of parks that make a loss in any year; this will disproportionally have a negative impact on smaller parks. As the majority of park home owners do not intend to move, it is not in their interest to increase regular costs (such as pitch fees) in order to compensate park owners for a reduction in the commission. As such, a reduction in the commission remains desirable for park home owners, but only if park owners (in particular smaller site owners) are supported financially through mechanisms independent of the home owner to retain the viability of parks.

Niner, P. & Hedges, A. (1992) DoE Mobile Homes Survey, London: HMSO. ↩

In the 2008 joint DCLG and Welsh Assembly consultation on amendments to the Mobile Homes Act 1983, the consultation defined “park homes” as any mobile home, including caravans. “Park home sites” were therefore defined as any mobile home site, including caravan sites or parks in the same consultation (DCLG & Welsh Assembly, 2008). As ‘mobile structures’ the home is classified as a caravan and thus falls under the legal definition of a caravan (under The Caravan Sites and Control of Development Act 1960 and then modified under section 13 of The Caravan Sites Act 1968). As such the structure must be capable of being moved: “in one or two pieces, either on its own wheels or by being towed or transported by another vehicle. It must not be more than 20 metres in length, 6.8 metres in width, and 3.05 metres from floor to the ceiling internally.” (Age UK, 2020, p.3). ↩

Whilst all include caravans, able to be relocated and used to live in (and hence fall under legislation regarding caravans) there are distinctions. This distinction is in the planning permission and site licence provided by a local authority, which will stipulate whether the caravans may be situated on the site all-year round. There is also a distinction in the standards required of holiday homes (built to EN1647 standards) and the higher British Standard (BS3632) for residential park homes (although many holiday caravans may also conform to the BS3262 standard). Gypsy, Roma and Traveller sites are included in the definition of ‘protected’ sites that also covers Park Homes in the Mobile Homes Act 1983, which can include both permanent and temporary (or transit) sites. Park home sites and Traveller sites tend to be considered separately by local authorities, which have a legal obligation to assess and provide for the needs of Gypsy, Roma and Travellers, but not as a separate classification of housing need for Park Homes. Holiday parks are not covered by the Mobile Homes Act 1983. ↩

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