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House price falls and unrentable homes: building owners block flats from better broadband

·5-min read
illustration of tower with internet
illustration of tower with internet

Homes could fall in value by £32,000 and become almost unsellable because of poor broadband speeds.

Some 1.5 million households may never be connected to the latest technology because freeholders are blocking access to Britain’s broadband upgrade.

These properties, which are largely flats, will soon become broadband blackspots and residents will have internet speeds 33 times slower than the rest of the country.

Hundreds of thousands of landlords will struggle to find tenants and may have to accept lower rents as a result.

Owners of these badly-connected homes face price falls of 6pc because of low speeds, equal to £31,800 in London. These properties will increasingly lose value as more of the country is hooked up to high-speed internet while they are stuck far behind.

Clive Betts, Labour MP and chair of the housing select committee, said: “A good internet connection is not a luxury. In the modern age, it’s like running water. This is a real issue for the Government. It is another example of unfairness that needs addressing as a matter of urgency.”

Millions of blackspots

Openreach, which manages the cables that connect most of Britain to the internet, has planned to upgrade 25 million homes to "full fibre broadband" by the end of 2026. Households will see internet speeds soar from a typical 30Mbps to 1,000Mbps.

But it has faced major issues upgrading to flats in large blocks as it cannot get permission from building owners. Of the 2.5 million flats it hopes to upgrade, it estimated 60pc, or 1.5 million homes, will be unreachable.

Openreach needs permission from building owners to run a "fibre optic" cable to the property and connect it to a box inside. But renters and leaseholders are being denied upgrades because landlords and freeholders cannot be reached.

Matt Bateman of Openreach said 60pc to 70pc of properties cannot be upgraded because the owners are small-scale buy-to-let landlords. These investors risk missing out on free internet improvements worth up to £550 per property.

He said: “The first issue is finding out who the landlord or freeholder is. There is no central register, these properties change hands at an extraordinarily fast rate and a lot of them are held by offshore companies.”

Even if Openreach can identify the owner, it then faces a struggle to contact them and get permission. “Often we have got the right person but just don’t get a response. Even if we do, they have no obligation to say yes.” It is urging the Government to solve the absent freeholder crisis and introduce a new law that will grant flats automatic upgrade rights.

Openreach said it has tried to contact owners of 600,000 flats and hit a wall for nearly half.

'I'll only be able to let to people who don't use the internet'

 Tracey Knott - Mark Bickerdyke/Guzelian
Tracey Knott - Mark Bickerdyke/Guzelian

Tracey Knott, 54, is a small-scale landlord with a leasehold buy-to-let flat in Birmingham that has internet speeds slower than the average. “It’s not much better than dial-up and has been an absolute nightmare,” she said.

In July last year her tenant tried to get the internet upgraded but Openreach could not install full fibre without permission from the freeholder, Persimmon, the housebuilder. Ms Knott stepped in in January and has chased the building’s managing agent, Gateway, every fortnight.

Ms Knott is now worried that she will struggle to find new tenants because of the low internet speed when her tenant leaves this later this year. “I’d probably have to take £50 off the rent,” she said.

She is worried the property could be unletable as more and more properties get faster internet. “If everyone else has 1,000Mbps, I'll only be able to let to people who don’t use the internet. And I’ve yet to meet anybody who doesn’t,” she added.

House price falls will come

Once Openreach has upgraded the majority of homes to full fibre, the gulf between properties will be extreme. Mr Bateman said: "Speeds of 30Mbps are sufficient for people’s needs today. But the way we live and work will accelerate as 1,000Mbps becomes normal."

This is likely to prompt house price falls. Research by the London School of Economics suggested an upgrade from 30Mbps to 1,000Mbps would bring a price premium of 3pc – an uptick of £8,310 on a typical home.

Gabriel Ahlfeldt from the LSE said this premium would be higher in urban areas that rely heavily on internet-based services. In London he estimated the premium at 6pc, equivalent to an extra £31,800 on the value of an average home in the capital.

However, once Openreach’s rollout is complete the situation would flip and homes without full fibre would be discounted "A fast and reliable connection will be universally expected and if it can't be offered, sellers and landlords will have to be willing to accept significant discounts,” Mr Ahlfeldt said. This could amount to a drop of between 3pc and 6pc.

Vanessa Hale of Strutt & Parker estate agents said the shift to homeworking meant broadband was more integral.

"Nearly half of homeowners wouldn’t consider moving to a house without good broadband,” she said. “Homes that don’t have a first-rate broadband connection will be undesirable."

More punishment for leaseholders

Mr Betts added that many of those who will be deprived of upgrades are in the same blocks that have been hit by the building safety crisis that emerged in the wake of the 2017 Grenfell fire.

“It is another injustice of the leasehold system. It is totally unfair, particularly as flats very often have problems with ordinary reception, meaning the importance of having better internet is even higher. This is a very, very big issue,” said Mr Betts.

A Government spokesman said: “We agree that unresponsive landowners should not prevent residents from accessing fast, reliable broadband. That’s why we introduced a bill to encourage faster and more collaborative negotiations between landowners and telecoms firms and last year we passed new laws to fast-track companies’ access to blocks of flats where the landowner is not responding to requests.”

A Persimmon spokesman apologised for the difficulties at its property. “Given the unacceptable delay, we have contacted both Openreach and Gateway to try to resolve any outstanding issues and will work with them to ensure the necessary approvals are granted as soon as possible,” he added.

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