Street Bids: How compulsory rent auctions could save Britain’s high streets

A week rarely passes without more headlines about high street decline. In recent years a string of big retailers have exited the high street and the number of vacant units creeps ever higher.

This economic problem brings with it serious social problems. Thriving local high streets are closely linked to civic pride and vacant store fronts are a visible sign of a community in decline.

Nationally, 14% of high street shops are vacant –  twice the average seen before the 2008 financial crisis. But in some towns, vacancy is much higher. In Rotherham, for example, three in ten units are vacant and two thirds of these vacant units have been empty for more than 3 years. 

And high street vacancy rates are rising fastest in poorer regions. Between 2020 and 2021, vacancy rates rose fastest in the West Midlands (8.8%), North East (7.2%) and East Midlands (7.8%). This compares to a just 1.9% rise in London and falls in high street vacancy rates in Wales and Scotland.

In Barnstaple, the number of shops lying vacant for more than three years rose by 63% between 2015 and 2022, while Stoke-upon-Trent (54%), Kettering (52%) and Rotherham (51%) have seen rises of more than half. In Slough, the number of persistently vacant units has nearly quadrupled, from 1.7% to 6.1% of all units.

The Government has set out the beginnings of a plan to address this challenge. It wants to force landlords of long-term vacant units to lease them via a compulsory rental auction. The associated regulations are set to be introduced in the Levelling Up and Regeneration Bill.

This new analysis finds that there could be benefits to this idea: It could bring 58,000 empty high street units back into use, including thousands in strugglng towns in the North and Midlands that need levelling up.

This is because high street vacancy is closely link to who owns the building. Vacancy rates for shops owned by investment management schemes and financial companies are nearly nearly ten times higher as those for shops owned by private individuals. The former also accounts for 46% of all empty shops.

The paper sets out how the use of compulsory rent auctions would work by forcing landlords to bring empty high street shops into use:

1. Local authorities would be given the power to require a compulsory rent auction on any high street or shopping centre unit that has been vacant for 12 months or more. 
2. The owner of a property subject to a compulsory rent auction would be legally required to auction a temporary (2-5 year) lease for the premises. 
3. Prospective tenants would then offer competitive bids for the level of rent they are prepared to pay, with no reserve price in the compulsory rent auction. Theoretically a property could be leased for £1 a month.
4. If a landlord does not respond or refuses to engage with the compulsory rent auction, the local authority would have the power to let the property on their behalf and hold rental receipts in escrow until claimed.  

There are currently around 58,000 vacant high street units nationally, This report estimates that compulsory rent auctions could bring as many as 13,200 back into use in Northern England and nearly 9,000 in the Midlands, if all empty units were leased at auction or sold to someone would could bring them into use.

You can read about Onward’s wider research on repairing the social fabric of communities here.